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.