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