LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
April 15, 1997
TO: Honorable David Sibley, Chair IN RE: Senate Bill No. 1565
Committee on Economic Development By: Cain
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on SB1565 ( Relating
to the qualifications and compensation of persons performing
examinations of insurance organizations.) this office has detemined
the following:
Biennial Net Impact to General Revenue Funds by SB1565-As Introduced
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
This bill would amend the Insurance Code to require the Texas
Department of Insurance (TDI) to use only TDI salaried examiners
or the services of examiners that possess expanded qualifications
as outlined in the bill. According to TDI, these expanded
qualifications would reduce the number of consultants that would
be qualified to contract with TDI to perform examinations and
TDI would be required to hire 12 FTEs to handle the examination
workload currently being conducted by consultants: two exempt
Actuaries, and ten classified Financial Examiners. Since current
law requires insurers, not TDI, to pay TDI-hired consultants
directly for examination services, there would not be a related
savings to TDI from reduced consultant fees to offset the cost
of the 12 FTEs.
This bill would also require TDI to compensate
examiners at 120% of the step 4, group 21 annual salary rate
under the State Classification plan, or $54,504 per year. According
to TDI, if the agency were required to pay all examiners $54,504
per year, there would be both increases and decreases in the
salaries of existing examinations staff, which would net a total
cost to TDI of $2,200,171 per year. The bill also states that
examiners would not be paid for days away from work, which could
possibly impact leave benefits.
The net cost to TDI General
Revenue Dedicated Fund 036 to hire twelve additional FTEs with
associated travel and overhead costs and to pay the existing
135 classified examiners $54,505 per year would be $3,248,486
in FY 1998 and $3,196,544 per year thereafter. Of these amounts,
$2,070,552 in FY 1998 and $2,018,610 per year thereafter would
be recovered through Overhead Assessment and Examinations charges
paid to TDI by insurers for direct examination costs. Currently,
Overhead, Assessment and Examinations billings paid by insurers
to consultants are deducted from premium taxes due; the provisions
of the bill would not alter these premium tax deductions.
In
addition, through an interagency contract with the Department
of Health, TDI is currently conducting HMO Quality of Care examinations
via contracts with medical professionals. If this arrangement
continues, due to the provisions of the bill there may be additional
costs to TDI to hire medical professionals to conduct HMO Quality
of Care inspections and consultations. This analysis does not
include additional costs for this contingency.
Methodolgy
Costs to TDI to implement the provisions of the bill were based
on the following assumptions:
(1) All examiners would be
paid 20% of the step 4, group 21 annual salary rate under the
State Classification plan, or $54,504 per year.
(2) Since
current law requires insurers, not TDI, to pay TDI-hired consultants
directly for examination services, there would not be a related
savings to TDI from reduced consultant fees.
(3) Currently,
Overhead, Assessment and Examinations billings paid by insurers
to consultants are deducted from premium taxes due; the provisions
of the bill would not alter these premium tax deductions.
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 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 ($3,248,486) $2,070,552 12.0
1998 (3,196,544) 2,018,610 12.0
2000 (3,196,544) 2,018,610 12.0
2001 (3,196,544) 2,018,610 12.0
2002 (3,196,544) 2,018,610 12.0
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 $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: 454 Department of Insurance
LBB Staff: JK ,TH ,BK