By Gallego                                             H.B. No. 326
         77R1211 PB-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to a statewide group insurance program for employees and
 1-3     retirees of school districts.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1. Sections 2(2) and (5), Article 3.50-4, Insurance
 1-6     Code, are amended to read as follows:
 1-7                 (2)  "Carrier" means:
 1-8                       (A)  an [any] insurance company authorized to do
 1-9     business in this state;
1-10                       (B)  a group [or] hospital service corporation
1-11     operating under Chapter 20 of this code; [authorized by the State
1-12     Board of Insurance to provide any of the insurance coverages,
1-13     benefits,] or
1-14                       (C)  a health maintenance organization regulated
1-15     under the Texas Health Maintenance Organization Act (Chapter 20A,
1-16     Vernon's Texas Insurance Code) [services provided by this article
1-17     under the insurance laws of this state].
1-18                 (5)  "Health benefit plan" or "plan" means a group
1-19     insurance policy, contract, or certificate, medical or hospital
1-20     service agreement, membership or subscription contract, salary
1-21     continuation plan, or similar group arrangement, including coverage
1-22     through a health maintenance organization regulated under the Texas
1-23     Health Maintenance Organization Act (Chapter 20A, Vernon's Texas
1-24     Insurance Code), to provide, pay for, or reimburse expenses for
 2-1     health care services.
 2-2           SECTION 2. Section 3(a), Article 3.50-4, Insurance Code, is
 2-3     amended to read as follows:
 2-4           (a)  The Texas Public School Employees Group Insurance
 2-5     Program is established to provide for a health benefit [an
 2-6     insurance] plan or plans under this article and may provide other
 2-7     insurance coverages as provided by this article.
 2-8           SECTION 3. Section 5(a), Article 3.50-4, Insurance Code, is
 2-9     amended to read as follows:
2-10           (a)  The trustee may adopt rules, plans, procedures, and
2-11     orders reasonably necessary to implement this article, including:
2-12                 (1)  establishment of minimum benefit and financing
2-13     standards for group health benefits [insurance] coverage and other
2-14     coverage to be provided to all retirees, active employees,
2-15     dependents, surviving spouses, and surviving dependent children;
2-16                 (2)  establishment of basic and optional group coverage
2-17     to be provided to retirees, active employees, dependents, surviving
2-18     spouses, and surviving dependent children;
2-19                 (3)  establishment of the procedures for contributions
2-20     and deductions;
2-21                 (4)  establishment of periods for enrollment and
2-22     selection of optional coverage and procedures for enrolling and
2-23     exercising options under the plan;
2-24                 (5)  determination of methods and procedures for claims
2-25     administration;
2-26                 (6)  study of the operation of all [insurance] coverage
2-27     provided under this article;
 3-1                 (7)  administration of the fund;
 3-2                 (8)  adoption of a timetable for the development of
 3-3     minimum benefit and financial standards for group [insurance]
 3-4     coverage, establishment of group health benefit plans and other
 3-5     insurance plans, and the taking of bids for and awarding of
 3-6     contracts for group health benefit plans and other insurance plans;
 3-7     and
 3-8                 (9)  contracting with an independent and experienced
 3-9     group insurance consultant or actuary, who does not receive
3-10     [insurance] commissions from any carrier [insurance company], for
3-11     advice and counsel in implementing and administering this program.
3-12           SECTION 4. Section 6, Article 3.50-4, Insurance Code, is
3-13     amended by amending Subsections (a), (c), and (f) and adding
3-14     Subsection (h) to read as follows:
3-15           (a)  There is created a Health Benefit [Retirees] Advisory
3-16     Committee composed of nine members appointed by the trustee.  One
3-17     member shall be an active school administrator.  One member shall
3-18     be a retired school administrator.  Two members shall be active
3-19     teachers.  Three members shall be retired teachers.  One member
3-20     shall be an active member of the auxiliary personnel of a school
3-21     district.  One member shall be a retired member of the auxiliary
3-22     personnel.
3-23           (c)  The committee shall:
3-24                 (1)  hold public hearings on group health and other
3-25     insurance benefits;
3-26                 (2)  recommend to the trustee minimum standards and
3-27     features of the plan or plans that it considers appropriate; and
 4-1                 (3)  recommend to the trustee desirable changes in
 4-2     rules and legislation affecting the program.
 4-3           (f)  A person is not eligible for appointment as a member of
 4-4     the advisory committee if the person is required to register [with
 4-5     the secretary of state] under Chapter 305, Government Code [422,
 4-6     Acts of the 63rd Legislature, Regular Session, 1973 (Article
 4-7     6252-9c, Vernon's Texas Civil Statutes)].
 4-8           (h)  The advisory committee is not subject to Section
 4-9     2110.008, Government Code.
4-10           SECTION 5. The heading to Section 7, Article 3.50-4,
4-11     Insurance Code, is amended to read as follows:
4-12           Sec. 7.  PARTICIPATION BY RETIREE.
4-13           SECTION 6. Section 7A, Article 3.50-4, Insurance Code, is
4-14     amended to read as follows:
4-15           Sec. 7A.  PARTICIPATION BY ACTIVE EMPLOYEES. (a)  A public
4-16     school district may elect to participate in the program provided
4-17     under this article.  A district that elects to participate must
4-18     accept the schedule of costs adopted by the trustee.  A district
4-19     may not offer an alternative health benefit plan to its active
4-20     employees during the period of its participation in the program [if
4-21     the trustee approves the plan as providing contributions,
4-22     participation, and a design that are in accordance with sound group
4-23     benefit underwriting principles].  A district that does not elect
4-24     to participate in the program is not eligible to receive state
4-25     contributions for the funding of a group health benefit plan for
4-26     district employees.
4-27           (b)  The trustee by rule shall establish [provide]:
 5-1                 (1)  minimum benefit standards for the program
 5-2     [eligibility requirements for participation by a school district,
 5-3     which may include criteria based on size];
 5-4                 (2)  other participation requirements for school
 5-5     districts as determined by the trustee to be necessary for the
 5-6     operation of the program, including restrictions on the ability of
 5-7     a school district to begin or discontinue participation, which may
 5-8     include a minimum period of participation and limited periods for
 5-9     elections to begin or discontinue participation;
5-10                 (3)  administrative fees to be paid by participating
5-11     school districts to cover the trustee's administrative costs in
5-12     administering [extending] the program [to active employees]; and
5-13                 (4)  requirements to minimize the effects of adverse
5-14     selection on the program.
5-15           (c)  The trustee shall provide basic group health benefits
5-16     coverage for each active employee and may provide optional group
5-17     coverages for active employees participating in the program.  The
5-18     coverages must be equivalent to the coverages provided for state
5-19     employees by the Employees Retirement System of Texas under the
5-20     Texas Employees Uniform Group Insurance Benefits Act (Article
5-21     3.50-2, Vernon's Texas Insurance Code) and may be combined with or
5-22     similar to, but separate from, coverages provided to retirees.  The
5-23     trustee by rule shall define the requirements of the basic coverage
5-24     [sum of premiums and administrative fees received from
5-25     participating school districts and active employees must cover all
5-26     expenses of school district employee participation in the program].
5-27           (d)  Each [Participation by an] active employee of a
 6-1     participating school district shall participate in the basic
 6-2     coverage unless [is optional with] the employee specifically waives
 6-3     participation in writing.  A school district may not offer a
 6-4     financial incentive to an active employee for declining to
 6-5     participate in the program.  An active employee is entitled to
 6-6     obtain coverage for dependents in the same manner as a
 6-7     participating retiree.
 6-8           (e)  Each participating school district shall contribute for
 6-9     each district employee covered by the program an amount not to
6-10     exceed 65 [equal to not less than 75] percent of the cost for the
6-11     employee only of the plans of group coverages authorized by the
6-12     trustee for active employees, and may contribute additional amounts
6-13     for the cost of optional or dependent coverages selected by the
6-14     employee.  Not later than September 1 of each year, the [The]
6-15     district shall certify to the trustee the amount the district will
6-16     contribute monthly toward the cost of coverage.  The trustee shall
6-17     determine if the amount is sufficient to underwrite the plan for
6-18     the district based on sound group benefit underwriting principles.
6-19     A determination by the trustee under this subsection is final.
6-20           (f)  Each active employee covered by the program shall pay,
6-21     through a deduction from the employee's compensation, that portion
6-22     of the cost of employee-only coverage and optional coverage or
6-23     dependent coverage selected by the employee that exceeds the amount
6-24     of [employer] contributions for those coverages paid by the state
6-25     and the employing school district.
6-26           (g)  The trustee shall pay, from [deposit in] the fund, the
6-27     administrative costs incurred in extending the program to active
 7-1     employees and may use for that purpose any unexpended balance of
 7-2     the [all] fees collected under Section 44(d), Chapter 812, Acts of
 7-3     the 73rd Legislature, 1993[, except that portion used to conduct
 7-4     the survey required by Section 44.  The trustee shall continue to
 7-5     collect the fee through the 1996-1997 school year, after which time
 7-6     the fee expires].
 7-7           (h)  The state shall, for each active employee covered by the
 7-8     program, contribute in the manner provided by Section 16 of this
 7-9     article an amount equal to 35 percent of the cost for employee-only
7-10     coverage under the plan of basic coverage authorized by the trustee
7-11     for active employees.  The state may also make contributions to the
7-12     fund in addition to those required by Section 16(b) of this article
7-13     for the purpose of assisting in the expansion of the program to
7-14     active employees.
7-15           [(i)  The trustee shall begin enrollment in the program for
7-16     active employees to be effective beginning with the 1996-1997
7-17     school year.]
7-18           SECTION 7. Sections 8(e) and (h), Article 3.50-4, Insurance
7-19     Code, are amended to read as follows:
7-20           (e)  The trustee may contract for and make available to all
7-21     retirees, active employees, dependents, surviving spouses, and
7-22     surviving dependent children optional group health benefit plans in
7-23     addition to the basic plans.  The optional coverage may include a
7-24     smaller deductible, lower coinsurance, or additional categories of
7-25     benefits permitted under Subsection (b) of this section to provide
7-26     additional levels of coverages and benefits.  The trustee may
7-27     utilize a portion of the funds received for the Texas Public School
 8-1     Employees Group Insurance Program to offset some portion of costs
 8-2     paid by the retiree or active employee for optional coverage if
 8-3     such utilization does not reduce the period the program is
 8-4     projected to remain financially solvent by more than one year in a
 8-5     biennium.  Any additional contributions for these optional plans
 8-6     shall be paid for by the retiree, active employee, surviving
 8-7     spouse, or surviving dependent children.
 8-8           (h)  The coverage provided by the plan or plans may be
 8-9     secondary to all other benefit coverage to which the retiree,
8-10     active employee, surviving spouse, dependent, or surviving
8-11     dependent child is entitled.  If a [In the event the] retiree or
8-12     a[,] surviving spouse, dependent, or surviving dependent child is
8-13     entitled to receive medicare hospital insurance benefits at no
8-14     charge, then the coverage provided by the plan or plans shall be
8-15     secondary to medicare hospital and medical insurance to the extent
8-16     permitted by federal law.
8-17           SECTION 8. Section 9, Article 3.50-4, Insurance Code, is
8-18     amended to read as follows:
8-19           Sec. 9.  BENEFIT CERTIFICATES. At such times, or upon such
8-20     events, as designated by the trustee, each insurance carrier shall
8-21     issue to each retiree, active employee, surviving spouse, or
8-22     surviving dependent child covered [insured] under this article a
8-23     certificate of benefits [insurance] that:
8-24                 (1)  states the benefits to which the person is
8-25     entitled;
8-26                 (2)  states to whom the benefits are payable;
8-27                 (3)  states to whom the claims must be submitted; and
 9-1                 (4)  summarizes the provisions of the health benefit
 9-2     plan or other plan [policy] principally affecting the person.
 9-3           SECTION 9. Sections 10(a) and (b), Article 3.50-4, Insurance
 9-4     Code, are amended to read as follows:
 9-5           (a)  Not later than the 180th day after the end of each state
 9-6     fiscal year, the trustee shall make a written report to the
 9-7     commissioner [State Board of Insurance] concerning the [insurance]
 9-8     coverages provided and the benefits and services being received by
 9-9     persons covered [insured] under this article.
9-10           (b)  Coverage [Insurance coverage] purchased under this
9-11     article shall provide for an accounting to the trustee by each
9-12     carrier providing coverage not later than the 90th day after the
9-13     end of each plan [policy] year.  The accounting shall be on a form
9-14     approved by the trustee.  Other reports shall be prepared by each
9-15     carrier if considered necessary by the trustee.  An extra charge
9-16     may not be assessed by the carrier for the accounting reports.
9-17           SECTION 10. Section 13, Article 3.50-4, Insurance Code, is
9-18     amended to read as follows:
9-19           Sec. 13.  AUTOMATIC COVERAGE. A retiree or active employee
9-20     who applies during an enrollment period may not be denied any of
9-21     the [group insurance] basic coverage provided under this article
9-22     unless the person has been found under Section 18A of this article
9-23     to have defrauded or attempted to defraud the Texas Public School
9-24     Employees Group Insurance Program.
9-25           SECTION 11. Section 15(a), Article 3.50-4, Insurance Code, is
9-26     amended to read as follows:
9-27           (a)  The school employees group insurance fund is created.
 10-1    The comptroller is the custodian of the fund, and the trustee shall
 10-2    administer the fund.  All contributions from active employees,
 10-3    retirees, school districts, and the state, contributions for
 10-4    optional coverages, investment income, appropriations for
 10-5    implementation of this program, and other money required or
 10-6    authorized to be paid into the fund shall be paid into the fund.
 10-7    From the fund shall be paid, without state fiscal year limitation,
 10-8    the appropriate premiums to the carrier or carriers providing group
 10-9    coverage under the plan or plans under this article, claims for
10-10    benefits under the group coverage, and the amounts expended by the
10-11    trustee for administration of the program.  The appropriate portion
10-12    of the contributions to the fund to provide for incurred but
10-13    unreported claim reserves and contingency reserves, as determined
10-14    by the trustee, shall be retained in the fund.
10-15           SECTION 12. Sections 16(a), (b), (c), (f), (g), (h), and
10-16    (i), Article 3.50-4, Insurance Code, are amended to read as
10-17    follows:
10-18          (a)  For [the state fiscal year beginning September 1, 1985,
10-19    and for] each [subsequent] state fiscal year, each active employee,
10-20    as a condition of employment, shall contribute to the fund an
10-21    amount equal to .25 percent of the employee's salary.  Each month
10-22    the employer of an active employee shall deduct the contributions
10-23    from the employee's salary and shall remit the contributions to the
10-24    trustee as provided by any procedures that the trustee may require.
10-25    In lieu of deducting the contributions from salaries, an employer
10-26    may assume and pay the total contributions due from its active
10-27    employees for any month.
 11-1          (b)  The state shall contribute as the state's contribution
 11-2    for coverage for retirees to the fund each fiscal year an amount
 11-3    equal to .50 percent of the salary of each active employee.  The
 11-4    state may contribute amounts in addition to the contribution
 11-5    required by this subsection.
 11-6          (c)  If [after the state fiscal year beginning September 1,
 11-7    1990,] the amount of state and active employee contributions to the
 11-8    fund is raised by the legislature above the percentages provided by
 11-9    Subsections (a)  and (b) of this section to provide adequate
11-10    funding for the program, the ratio between the state's contribution
11-11    and the active employees' contributions must be maintained at two
11-12    to one.
11-13          (f)  Before the first day of November preceding each regular
11-14    session of the legislature, the trustee shall certify, for
11-15    information and review, to the Legislative Budget Board and the
11-16    budget division of the governor's office the amounts necessary to
11-17    pay the contributions of the state to the fund for the basic group
11-18    health benefit plans for active employees and retirees under this
11-19    article [for information and review].  Not later than August 31 of
11-20    each year, the trustee shall certify to the comptroller of public
11-21    accounts the estimated amount of state contributions to be received
11-22    by the fund for the next fiscal year under the appropriations
11-23    authorized by this article.
11-24          (g)  Contributions allocated and appropriated under this
11-25    article [section] shall be paid from the General Revenue Fund in
11-26    equal monthly installments, based on the annual estimate certified
11-27    by the trustee to the comptroller of public accounts for that year,
 12-1    and subject to any express limitations specified in the Act making
 12-2    the appropriation.  Variations between the certified amount and the
 12-3    actual amount due for the year shall be reconciled at the close of
 12-4    the fiscal year and proper adjustments in the annual contributions
 12-5    to the fund shall be made.
 12-6          (h)  An employing district that fails to remit, before the
 12-7    11th day after the last day of the month, all [member] deposits
 12-8    required by this article [section] to be remitted by the district
 12-9    for the month shall pay to the [Texas public school retired
12-10    employees group insurance] fund, in addition to the deposits,
12-11    interest on the unpaid amounts at the annual rate of six percent
12-12    compounded monthly.
12-13          (i)  An employing district and its trustees hold amounts due
12-14    to the [Texas public school retired employees group insurance] fund
12-15    under this article in trust for the fund and its participants and
12-16    may not divert the amounts for any other purpose.
12-17          SECTION 13. Section 17(a), Article 3.50-4, Insurance Code, is
12-18    amended to read as follows:
12-19          (a)  The trustee shall study the operation and administration
12-20    of this article, including surveys and reports on financing group
12-21    insurance coverages and health benefit [benefits] plans available
12-22    to active employees and retirees, and the experience and projected
12-23    cost of coverage and  benefits.  The trustee shall make a report to
12-24    the legislature at each regular legislative session relating to the
12-25    operation and administration of this article.
12-26          SECTION 14. Section 19, Article 3.50-4, Insurance Code, is
12-27    amended to read as follows:
 13-1          Sec. 19.  ASSISTANCE. In implementing and administering this
 13-2    article, the commissioner [State Board of Insurance], as requested
 13-3    by the trustee, shall assist the trustee in carrying out this
 13-4    article.
 13-5          SECTION 15. Section 22.004, Education Code, is amended to
 13-6    read as follows:
 13-7          Sec. 22.004.  GROUP HEALTH BENEFITS FOR SCHOOL EMPLOYEES. (a)
 13-8    Each district may participate in the group health benefits program
 13-9    provided under Article 3.50-4, Insurance Code.
13-10          (b)  A district that does not elect to participate in the
13-11    program described by Subsection (a) shall make available to its
13-12    employees group health coverage provided by a risk pool established
13-13    by one or more school districts under Chapter 172, Local Government
13-14    Code, or under a policy of insurance or group contract issued by an
13-15    insurer, a company subject to Chapter 20, Insurance Code, or a
13-16    health maintenance organization under the Texas Health Maintenance
13-17    Organization Act (Chapter 20A, Vernon's Texas Insurance Code).  The
13-18    coverage must meet the substantive coverage requirements of Article
13-19    3.51-6, Insurance Code, and any other law applicable to group
13-20    health insurance policies or contracts issued in this state.  The
13-21    coverage must include major medical treatment but may exclude
13-22    experimental procedures.  In this subsection, "major medical
13-23    treatment" means a medical, surgical, or diagnostic procedure for
13-24    illness or injury. The coverage may include managed care or
13-25    preventive care and must be comparable to the basic health coverage
13-26    provided under the Texas Employees Uniform Group Insurance Benefits
13-27    Act (Article 3.50-2, Vernon's Texas Insurance Code).  The board of
 14-1    trustees of the Teacher Retirement System of Texas shall adopt
 14-2    rules to determine whether a school district's group health
 14-3    coverage is comparable to the basic health coverage specified by
 14-4    this subsection.  The rules must provide for consideration of the
 14-5    following factors concerning the district's coverage in determining
 14-6    whether the district's coverage is comparable to the basic health
 14-7    coverage specified by this subsection:
 14-8                (1)  the deductible amount for service provided inside
 14-9    and outside of the network;
14-10                (2)  the coinsurance percentages for service provided
14-11    inside and outside of the network;
14-12                (3)  the maximum amount of coinsurance payments a
14-13    covered person is required to pay;
14-14                (4)  the amount of the copayment for an office visit;
14-15                (5)  the schedule of benefits and the scope of
14-16    coverage;
14-17                (6)  the lifetime maximum benefit amount; and
14-18                (7)  verification that the coverage is issued by a
14-19    provider licensed to do business in this state by the Texas
14-20    Department of Insurance or is provided by a risk pool authorized
14-21    under Chapter 172, Local Government Code, or that a district is
14-22    capable of covering the assumed liabilities in the case of coverage
14-23    provided through district self-insurance.
14-24          (c) [(b)]  The cost of the coverage provided under the
14-25    program described by Subsection (a)  shall be paid by the state,
14-26    the district, and the employees in the manner provided by Section
14-27    7A, Article 3.50-4, Insurance Code.  The cost of coverage provided
 15-1    under a plan adopted under Subsection (b) shall [may] be shared by
 15-2    the employees and the district without contribution by the state.
 15-3          (d) [(c)]  Each district shall report the district's
 15-4    compliance with this section [subsection] to the executive director
 15-5    of the Teacher Retirement System of Texas not later than March 1 of
 15-6    each even-numbered year in the manner required by the board of
 15-7    trustees of the Teacher Retirement System of Texas.  For a district
 15-8    that does not elect to participate in the program described by
 15-9    Subsection (a), the [The] report must be based on the district
15-10    group health coverage plan in effect during the current plan year
15-11    and must include:
15-12                (1)  appropriate documentation of:
15-13                      (A)  the district's contract for group health
15-14    coverage with a provider licensed to do business in this state by
15-15    the Texas Department of Insurance or a risk pool authorized under
15-16    Chapter 172, Local Government Code;  or
15-17                      (B)  a resolution of the board of trustees of the
15-18    district authorizing a self-insurance plan for district employees
15-19    and of the district's review of district ability to cover the
15-20    liability assumed;
15-21                (2)  the schedule of benefits;
15-22                (3)  the premium rate sheet, including the amount paid
15-23    by the district and employee;
15-24                (4)  the number of employees covered by the [each]
15-25    health coverage plan offered by the district; and
15-26                (5)  any other information considered appropriate by
15-27    the executive director of the Teacher Retirement System of Texas.
 16-1          (e)  For each district that does not elect to participate in
 16-2    the program described by Subsection (a), and based [(d)  Based] on
 16-3    the criteria prescribed by Subsection (b) [(a)], the executive
 16-4    director of the Teacher Retirement System of Texas shall certify
 16-5    whether a district's coverage is comparable to the basic health
 16-6    coverage provided under the Texas Employees Uniform Group Insurance
 16-7    Benefits Act (Article 3.50-2, Vernon's Texas Insurance Code).  If
 16-8    the executive director of the Teacher Retirement System of Texas
 16-9    determines that the group health coverage offered by a district is
16-10    not comparable, the executive director shall report that
16-11    information to the district and to the Legislative Budget Board.
16-12    The executive director shall submit a report to the legislature not
16-13    later than September 1 of each even-numbered year describing the
16-14    status of each district's group health coverage program based on
16-15    the information contained in the report required by Subsection (d)
16-16    [(c)] and the certification required by this subsection.
16-17          (f) [(e)]  A school district that does not elect to
16-18    participate in the program described by Subsection (a) may not
16-19    contract with an insurer, a company subject to Chapter 20,
16-20    Insurance Code, or a health maintenance organization to issue a
16-21    policy or contract under this section, or with any person to assist
16-22    the school district in obtaining or managing the policy or contract
16-23    unless, before the contract is entered into, the insurer, company,
16-24    organization, or person provides the district with an audited
16-25    financial statement showing the financial condition of the insurer,
16-26    company, organization, or person.
16-27          (g) [(f)]  An insurer, a company subject to Chapter 20,
 17-1    Insurance Code, or a health maintenance organization that issues a
 17-2    policy or contract under this section and any person that assists
 17-3    the school district in obtaining or managing the policy or contract
 17-4    for compensation shall provide an annual audited financial
 17-5    statement to the school district showing the financial condition of
 17-6    the insurer, company, organization, or person.
 17-7          (h) [(g)]  An audited financial statement provided under this
 17-8    section must be made in accordance with rules adopted by the
 17-9    commissioner of insurance or state auditor, as applicable.
17-10          SECTION 16. Sections 20 and 21, Article 3.50-4, Insurance
17-11    Code, are repealed.
17-12          SECTION 17. The Teacher Retirement System of Texas shall
17-13    begin enrollment in the group health benefits program for active
17-14    employees as provided under Article 3.50-4, Insurance Code, as
17-15    amended by this Act, to be effective beginning with the 2002-2003
17-16    school year.
17-17          SECTION 18. This Act takes effect September 1, 2001.