LEGISLATIVE BUDGET BOARD
                                   Austin, Texas
         
                                   FISCAL NOTE
                               75th Regular Session
         
                                  April 17, 1997
         
         
      TO: Honorable David Sibley, Chair            IN RE:  Senate Bill No. 1565, Committee Report 1st House, Substituted
          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-Committee Report 1st House, Substituted
         
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.  Current law 
requires insurers to directly pay TDI-hired consultants for 
examination services.  Therefore, TDI would not experience a 
decrease in consultant costs due to hiring the 12 FTEs, or an 
increase in consultant costs due to the bill's requirement that 
contract examiners be paid 120% of state classification plan 
pay group 21, step 4.

The net cost to TDI General Revenue 
Dedicated Fund 036 to hire twelve additional FTEs with associated 
travel and overhead costs would be $879,521 in FY 1998 and $829,061 
per year thereafter.  These costs 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 
recoverable 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 assumption that the bill's expanded qualifications for 
TDI contract examiners would reduce the number of consultants 
that would be qualified to contract with TDI to perform examinations. 
 Accordingly, TDI would be required to hire 12 FTEs to handle 
the examination workload currently being conducted by consultants 
who would no longer be eligible to perform examinations for 
TDI under the provisions of the bill.
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        ($879,521)          $879,521              12.0                                    
       1998         (829,061)           829,061              12.0                                    
       2000         (829,061)           829,061              12.0                                    
       2001         (829,061)           829,061              12.0                                    
       2002         (829,061)           829,061              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