HBA-JEK H.B. 3343 77(R)BILL ANALYSIS


Office of House Bill AnalysisH.B. 3343
By: Sadler
Teacher Health Insurance, Select
8/8/2001
Enrolled



BACKGROUND AND PURPOSE 

Since 1991, school districts have been required to provide health insurance
to school district employees that is comparable to the insurance offered
under the Texas Employees Uniform Group Insurance Program.  Health
insurance costs for public school employees vary from district to district,
and small and rural districts, in particular, struggle with rising premium
costs and limited access.  School districts that pay little to none of the
coverage costs may find it more difficult to attract and retain qualified
employees.  Individually, school districts, employees, and the state have
limited resources with which to fund the rising costs of health insurance
for school employees; however, contributions from a combination of these
sources may lead to a stronger health insurance plan.  House Bill 3343
establishes a uniform group coverage program for school district employees
with funds from state, district, and employee contributions. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Teacher Retirement System of Texas
in SECTION 1.01 (Sections 3-7, Article 3.50-7, Insurance Code) and SECTION
1.02 (Sections 4 and 5, Article 3.50-8, Insurance Code) and to the
commissioner of education in SECTION 1.03 (Section 6, Article 3.50-9,
Insurance Code), SECTION 2.04 (Section 42.2513, Education Code), SECTION
2.05 (Section 42.2514, Education Code), SECTION 2.06 (Section 42.253,
Education Code), SECTION 2.07 (Section 42.2591, Education Code), and
SECTION 2.08 (Section 42.260, Education Code) of this bill. 

ANALYSIS

House Bill 3343 amends the Insurance, Education, Tax, Health and Safety,
and Government codes to create the Texas School Employees Uniform Group
Health Coverage Act and to establish the uniform group coverage program
(program) for Texas school district employees to be funded by state,
district, and employee contributions. 

Uniform Group Coverage Program

H.B. 3343 amends the Insurance Code to require the Teacher Retirement
System of Texas (TRS), as trustee, to implement and administer the program.
The bill requires TRS to develop enrollment requirements for the program
during the 2001-2002 school year, with coverage beginning September 1,
2002.  The bill authorizes TRS to adopt rules relating to the
administration of the program.  The bill authorizes TRS to hire and
compensate employees as necessary to implement the program, contract with
an independent and experienced group insurance consultant or actuary
through competitive bidding under rules adopted by TRS, and enter into
interagency contracts with any agency of the state (SECTION 1.01, Sec. 3,
Art. 3.50-7 and SECTION 5.01). 

Group Coverages

H.B. 3343 requires TRS by rule to establish plans of group coverages for
employees participating in the program and their dependents beginning
September 1, 2001.  The bill provides that the plans must include  at least
two tiers of group coverage, ranging from the catastrophic care coverage
plan to the primary care coverage plan.  The bill requires TRS by rule to
define the requirements of each coverage plan and tier of coverage and to
prescribe by rule the coverage provided under the catastrophic care
coverage plan.  The bill provides that the coverage under the catastrophic
care plan must be at least as extensive as the coverage provided under the
TRS-Care 2 plan and that the primary care coverage plan must be comparable
in scope and, to the greatest extent possible, in cost to the coverage
provided by ERS to state employees.  The bill provides that comparable
coverage plans of each tier of coverage must be offered to employees of all
participating entities.  The bill prohibits coverage under the program from
being made subject to a preexisting condition limitation during the initial
period of eligibility.  The bill authorizes TRS to offer optional coverages
to employees participating in the program, and authorizes TRS by rule to
define the types of optional coverages offered (SECTION 1.01, Sec. 4, Art.
3.50-7 and SECTION 5.01). 

Participation

H.B. 3343 requires each school district with 500 or fewer employees and
each regional education service center to participate in the program as of
September 1, 2002.  The bill authorizes a school district that has more
than 500 but not more than 1,000 employees, on January 1, 2001, to elect to
participate in the program as of September 1, 2002.  Such a district must
notify TRS of the election not later than September 30, 2001.  The bill
authorizes any school district with more than 500 employees to elect to
participate in the program as of September 1, 2005.  A school district that
becomes eligible and elects to participate in the program beginning
September 1, 2005, must notify TRS of the election not later than January
1, 2005. The bill authorizes school districts with more than 500 employees
to elect to participate before September 1, 2005, if TRS determines that
participation by such districts would be administratively feasible and
costeffective (SECTION 1.01, Sec. 5, Art. 3.50-7 and SECTION 5.04). 

H.B. 3343 authorizes school districts that were members of a risk pool, on
January 1, 2001, to elect to be treated as a single unit in determining the
number of employees of the district and sets forth provisions for this
determination.  The bill authorizes a school district with 500 or fewer
employees that was individually self-funded for the provision of health
coverage to its employees, on January 1, 2001, to elect to not participate
in the program.  The bill does not require such a district that is a party
to a contract for the provision of insurance coverage, on September 1,
2002, to participate in the program until the expiration of the contract
period.  The bill authorizes an educational district that is not a school
district but whose employees are members of TRS that, on January 1, 2001,
has 500 or fewer employees to elect not to participate in the program
(SECTION 1.01, Sec. 5, Art. 3.50-7). 

The bill provides that a charter school is eligible to participate in the
program if the school agrees to the open records requirements regarding the
program and to an audit of its accounts relating to the program. A charter
school must notify TRS of its intent to participate in the program in the
manner and within the time required by TRS rule (SECTION 1.01, Sec. 6, Art.
3.50-7).   

H.B. 3343 provides that participation in the program is limited to
employees of participating entities who are full-time employees and to
part-time employees who are participating members in TRS.  An employee who
applies for coverage during an open enrollment period prescribed by TRS is
automatically covered by the catastrophic care coverage plan unless the
employee specifically waives coverage, selects a higher tier coverage plan,
or is expelled from the program. The bill authorizes a participating
employee to select coverage in any coverage plan offered by TRS and to
select a higher or lower tier coverage plan than the plan initially
selected by the employee in the manner provided by TRS rule.  If the
combined contributions received from the state and the employing
participating entity exceed the cost of the coverage plan selected by the
employee, the employee is authorized to use the excess amount of
contributions to obtain a coverage under a higher tier coverage plan, or to
pay toward the cost of covering the employee's dependents.  The bill
authorizes a married couple, both of whom are eligible for coverage under
the program, to pool the amount of contributions to which the couple are
entitled to obtain coverage for themselves and their dependents.  The bill
provides that a part-time employee of a participating entity who is not a
participating member in TRS is eligible to participate in the program only
if the employee pays all of the premiums and other costs associated with
the health coverage plan the employee selects (SECTION 1.01, Sec. 7, Art.
3.50-7).  

Fund

H.B. 3343 establishes the Texas school employees uniform group coverage
trust fund (fund) with the comptroller of public accounts.  The fund
consists of all contributions made from employees, participating entities,
and the state for coverage under the program, as well as contributions made
by employees or participating entities for optional coverages, investment
income, any additional amounts appropriated by the legislature, and any
other money required or authorized to be paid into the fund.  The bill
authorizes TRS to invest assets of the fund as assets are invested for each
statewide benefit system, and authorizes TRS to use amounts in the fund
only to provide group coverages and to pay the administrative expenses of
the program (SECTION 1.01, Sec. 8, Art. 3.50-7).  

Health Coverage Contributions

H.B. 3343 requires the state to provide $900 each state fiscal year or a
greater amount as provided by the General Appropriations Act for each
employee of participating school districts and charter schools, and for
each covered employee of regional education service centers and educational
districts.  The bill requires the state contribution to be distributed to
school districts and charter schools through the equalized wealth and
foundation school formulas and deposited to the fund or another fund
established for the payment of employee health coverage for distribution to
school districts and participating charter schools in monthly installments.
The bill requires an employee to pay the portion of the cost of coverage
selected by the employee that exceeds the state contribution from the
active employee health coverage or compensation supplementation (SECTION
1.01, Sec. 9, Art. 3.50-7). 

H.B. 3343 requires a school district, other educational district,
participating charter school, or regional education service center to make
health coverage contributions, for each fiscal year, in an amount that is
equal to $1,800 for each of its participating employees.  The bill
authorizes a school district or a participating charter school to use
specified funds received under the foundation school program to meet the
district's or school's contribution requirements (SECTION 1.03, Sec. 3,
Art. 3.50-9). 

The bill requires a school district or other educational district,
participating charter school, or regional education service center that
shared with its employees the cost of coverage under a group benefits plan
for the 2000-2001 school year to deposit in the appropriate fund for each
of its employees, for each fiscal year, an amount at least equal to the
average amount that the district paid for each employee during the
2001-2002 school year (SECTION 1.03, Sec. 2, Art. 3.50-9).  The bill
provides that, for any state fiscal year beginning with the fiscal year
ending August 31, 2003, a school district that imposes maintenance and
operations taxes at the maximum rate permitted is entitled to state funds
in an amount equal to the difference between $1,800 per employee and the
amount based on the average amount per employee the district paid in
2001-2002 plus specified additional state aid received for school employee
benefits, if applicable.  For the state fiscal years beginning September 1,
2002, through September 1, 2007, school districts and participating charter
schools are entitled to state assistance to meet contribution requirements
in the amounts set forth in the bill.  The bill specifies that the amount
of state assistance that a district receives may not exceed the amount of
state assistance the district received in the year preceding the year in
which the district first receives the assistance.  The bill authorizes TRS
to adopt rules to provide for additional state support through 2008 for
school districts that paid old-age, survivor, and disability insurance for
employees covered by the social security retirement program and that
covered all employees under that program prior to January 1, 2001.  If the
amount a school district, other educational district, or participating
charter school is required to use to provide health coverage for a fiscal
year exceeds the $1,800 minimum for each employee, the bill authorizes the
district or school to use the excess difference only to provide employee
compensation at a rate greater than the rate of compensation that the
district or school paid an employee in the 2000-2001 school year, benefits,
or both (SECTION 1.03, Secs. 4-6, Art. 3.50-9). 

Health Coverage or Compensation Supplementation 

 H.B. 3343 requires TRS to deliver annually to each school district, other
educational district, participating charter school, and regional education
service center state funds in an amount equal to the product of the number
of active employees multiplied by $1,000 or a greater amount as provided by
the General Appropriations Act.  These supplemental funds are to be held in
trust and distributed in equal monthly installments for the benefit of each
active employee (SECTION 1.02, Sec. 2, Art. 3.50-8).   

The bill requires the state contribution to be deposited to the employer's
cafeteria plan if an active employee is covered by such a plan.  The bill
authorizes each employee to elect among the options provided by the
cafeteria plan and sets forth the options the cafeteria plan is to include
(SECTION 1.02, Sec. 3, Art. 3.50-8).  The bill requires TRS by rule to
specify the requirements for a medical savings account and to modify the
rules, plans, and procedures adopted as necessary to ensure the
qualification of medical savings accounts for any appropriate federal tax
exemptions.  The bill authorizes an employee that has state funds placed in
a medical savings account to use the money in the account only for a
qualified health care expense (SECTION 1.02, Sec. 5, Art. 3.50-8). 

The bill requires the state contribution to an active employee who is not
covered by a cafeteria plan to be paid to the employee as supplemental
compensation.  The bill provides that supplemental compensation must be in
addition to the rate of compensation that the employer paid the employee
the preceding school year or would have paid the employee in the preceding
school year if the employee had been employed in the same capacity (SECTION
1.02, Sec. 3, Art. 3.50-8). 

Each state fiscal year, the bill requires a school district, other
educational district, participating charter school, or regional education
service center to prepare and distribute to each active employee a written
explanation in English and Spanish of the options the employee may elect.
The bill sets forth deadlines for the distribution of the written
explanation and election form and for the election by an active employee.
The bill authorizes TRS to adopt rules to implement the provisions
regarding supplementation (SECTION 1.02, Secs. 3 and 4, Art. 3.50-8).   

The bill amends the Government Code to provide that funds the employee
elects to receive as supplemental compensation are excluded from salary and
wages for the purposes of determining a TRS member's contribution and
benefits (SECTION 3.19, Sec. 822.201). 

CHIP Coverage

H.B. 3343 amends the Health and Safety Code to authorize a child of an
employee of a charter school, school district, other educational district,
or regional education service center to be enrolled in health benefits
coverage under CHIP, and to require the cost of health benefits coverage
for such children to be paid by the state as provided in the General
Appropriations Act.  The bill prohibits expenditures made to provide health
benefits coverage for such children under CHIP from being included for the
purpose of determining the state CHIP expenditures as defined by federal
law unless the Health and Human Services Commission (HHSC), after
consultation with the appropriate federal agencies, determines that the
expenditures may be included without adversely affecting federal matching
funds.  The bill requires HHSC to consult with the appropriate federal
agencies as soon as practicable after September 1, 2001 (SECTION 1.04, Sec.
62.1015 and SECTION 5.06). 

School Finance

H.B. 3343 amends the Education Code to increase from $24.99 to $25.81 the
guaranteed yield of state and local funds per weighted student per cent of
tax effort, effective September 1, 2001 and to $27.14 effective September
1, 2002 (SECTIONS 2.09 and 2.10, Sec. 42.302).  The bill provides that the
amount of state and local funds used to calculate the minimum monthly
salary of school district employees does not include the amount
attributable to the increase in the guaranteed yield made by this bill
(SECTION 2.01, Sec. 21.402).  The bill increases the equalized wealth level
from $295,000 to $300,000 effective September 1, 2001, and to $305,000,
effective September 1, 2002 (SECTIONS 2.02 and 2.03, Sec. 41.002).  The
bill provides formulas for additional state aid for school districts
because of increases in  funding elements under the Foundation School
Program made by this bill. The bill prohibits the commissioner of education
(commissioner) from using more than $37 million to provide this additional
assistance through the Foundation School Program for the state fiscal
biennium ending August 31, 2003. The bill entitles school districts and
participating charter schools to additional state aid to pay contributions
under a group health coverage plan for employees and sets forth a formula
for calculating the amount of additional aid.  The bill authorizes the
commissioner to adopt rules to provide the additional state aid (SECTION
2.04, Sec. 42.2513, and SECTION 2.05, Sec. 42.2514). 

The bill amends the Education Code to authorize a school district, for any
school year beginning with the 2003-2004 school year and ending with the
2008-2009 school year, to increase its maintenance and operations tax rate
above the cap as necessary to comply with the contribution requirements of
the bill. The bill authorizes the commissioner to adopt rules necessary to
administer this provision and specifies that the provision expires
September 1, 2009 (SECTION 2.06, Sec. 42.253).  The bill requires the
commissioner to certify additional funds to which school districts and
participating charter schools are entitled to as a result of this bill
(SECTION 2.07, Sec. 42.2591 and SECTION 2.08, Sec. 42.260).  

The bill amends the Tax Code to set forth provisions regarding the rollback
tax rate for the 2003-2008 tax years for a school district that is entitled
to receive additional state assistance (SECTION 2.11, Sec. 26.08). 

Transition Provisions

H.B. 3343 amends the Insurance and Education codes to prohibit entities
participating in the program from procuring or renewing health insurance
contracts, participating in the small employer market, or purchasing
additional group health coverage other than optional insurance coverages
for employees (SECTION 3.16, Sec. 3, Art. 3.51, SECTION 3.17, Art. 26.036,
Insurance Code, and SECTION 3.18, Sec. 22.004, Education Code).  The bill
authorizes TRS to amend or extend any agreement or contract in effect on
September 1, 2001, under the Texas Public School Employees Group Insurance
Act as necessary (SECTION 5.05).  The bill requires TRS to provide written
information no later than July 31, 2001, to school districts that had more
than 500 employees but not more than 1,000 employees on January 1, 2001
(SECTION 5.03). 

H.B. 3343 amends the Insurance Code to repeal provisions authorizing
participation by active employees in the Texas Public School Employees
Group Insurance Program for retirees (group program).  The bill provides
for the transfer of money to the fund and the transfer of records relating
to active employees from the group program for retirees to the program
established under the bill (SECTION 3.20, SECTION 3.01, Sec. 3A, Art.
3.50-4, SECTION 3.20, and SECTION 5.02).  The bill provides for
appropriation transfers (SECTION 4.01-4.04).  

EFFECTIVE DATE

September 1, 2001.  SECTIONS 1.02, 2.03, 2.05, 2.08, 2.10, 3.02-3.14, 3.19,
and 3.20 take effect September 1, 2002.