LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
February 17, 1997
TO: Honorable David Sibley, Chair IN RE: Senate Bill No. 385
Committee on Economic Development By: Sibley/et al.
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-As Introduced
Implementing the provisions of the bill would result in a net
negative impact of $(504,355) 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 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. This article would be amended
to allow HMOs a credit on the amount of premium taxes to be
paid that taxable year.
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. Because these amounts are creditable
toward premium taxes due, there will be a reduction in the amount
of premium taxes that would go into General Revenue. TDI assumes
that there will be a one-year lag before companies take their
premium deductions. For example, exam billings paid by insurers
in 1998 will be deducted from their premium tax due on March
1, 1999.
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.
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. Because these amounts are creditable
toward premium taxes due, there will be a reduction in the amount
of premium taxes that would go into General Revenue. TDI assumes
that there will be a one-year lag before companies take their
premium deductions. For example, exam billings paid by insurers
in 1998 will be deducted from their premium tax due on March
1, 1999.
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 Probable Revenue Probable Revenue Change in Number
Savings/(Cost) Savings/(Cost) Gain/(Loss) from Gain/(Loss) from of State
from Texas from General Texas Department General Revenue Employees from
Department of Revenue Fund of Insurance Fund FY 1997
Insurance Operating
Operating Account/
Account/ GR-Dedicated
GR-Dedicated
0036 0001 0036 0001
1998 ($627,859) $61,752 $627,859 $0 5.0
1998 (562,609) 61,752 562,609 (627,859) 5.0
2000 (533,809) 61,752 533,809 (562,609) 5.0
2001 (645,409) 61,752 645,409 (533,809) 5.0
2002 (722,209) 61,752 722,209 (645,409) 5.0
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
Funds
1998 $61,752
1999 (566,107)
2000 (500,857)
2001 (472,057)
2002 (583,657)
Similar annual fiscal implications would continue as long as
the provisions of the bill are in effect.
Source: Agencies: 323 Teacher Retirement System and Optional Retirement Program
454 Department of Insurance
501 Department of Health
304 Comptroller of Public Accounts
LBB Staff: JK ,TH ,BK