By Green                                               H.B. No. 575
         77R743 PB-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the creation and operation of a statewide risk pool to
 1-3     provide health benefits coverage to active employees of school
 1-4     districts.
 1-5           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-6           SECTION 1. The Insurance Code is amended by adding Chapter 3B
 1-7     to read as follows:
 1-8           CHAPTER 3B.  SCHOOL DISTRICTS HEALTH BENEFITS RISK POOL
 1-9                      SUBCHAPTER A.  GENERAL PROVISIONS
1-10           Art. 3B.001.  POOL PURPOSE.  The purpose of this chapter is
1-11     to create a statewide pool to provide school district employees
1-12     access to quality group health benefits coverage at minimum cost to
1-13     school districts and their active employees.
1-14           Art. 3B.002.  DEFINITIONS.  In this chapter:
1-15                 (1)  "Board" means the board of directors of the pool.
1-16                 (2)  "Employee" means an individual who is employed to
1-17     work at least 20 hours a week for a school district during the
1-18     school district's school year.
1-19                 (3)  "Health benefit plan provider" means an entity
1-20     that provides health benefit plan coverage in this state, including
1-21     stop-loss or excess loss insurance.  The term includes:
1-22                       (A)  an insurance company;
1-23                       (B)  a group hospital service corporation
1-24     operating under Chapter 20 of this code;
 2-1                       (C)  a stipulated premium insurance company
 2-2     operating under Chapter 22 of this code;
 2-3                       (D)  a health maintenance organization;
 2-4                       (E)  a multiple employer welfare arrangement
 2-5     subject to Subchapter I, Chapter 3, of this code;
 2-6                       (F)  an approved nonprofit health corporation
 2-7     that holds a certificate of authority under Article 21.52F of this
 2-8     code; and
 2-9                       (G)  any other entity providing a plan of health
2-10     insurance or health benefits subject to state insurance regulation.
2-11                 (4)  "Health maintenance organization" means an entity
2-12     that holds a certificate of authority to operate under the Texas
2-13     Health Maintenance Organization Act (Chapter 20A, Vernon's Texas
2-14     Insurance Code).
2-15                 (5)  "Hospital" means a hospital for which a license is
2-16     issued under Chapter 241, Health and Safety Code, or that is owned
2-17     or operated by the federal or state government.
2-18                 (6)  "Physician" means a person licensed to practice
2-19     medicine in this state under Subtitle B, Title 3, Occupations Code.
2-20                 (7)  "Pool" means the Texas School Districts Health
2-21     Benefits Risk Pool.
2-22           Art. 3B.003.  HEALTH BENEFIT PLAN DEFINED. (a)  In this
2-23     chapter, "health benefit plan" means a group health benefit plan
2-24     that provides benefits for medical or surgical expenses incurred as
2-25     a result of a health condition, accident, or sickness, including a
2-26     group insurance policy, a group hospital service contract, or a
2-27     group evidence of coverage or similar coverage document that is
 3-1     offered by a health benefit plan provider.
 3-2           (b)  "Health benefit plan" does not include:
 3-3                 (1)  a plan that provides coverage:
 3-4                       (A)  only for benefits for a specified disease or
 3-5     for another limited benefit;
 3-6                       (B)  only for accidental death or dismemberment;
 3-7                       (C)  for wages or payments in lieu of wages for a
 3-8     period during which an employee is absent from work because of
 3-9     sickness or injury;
3-10                       (D)  as a supplement to a liability insurance
3-11     policy;
3-12                       (E)  for credit insurance;
3-13                       (F)  only for dental or vision care;
3-14                       (G)  only for hospital expenses; or
3-15                       (H)  only for indemnity for hospital confinement;
3-16                 (2)  a small employer health benefit plan written under
3-17     Chapter 26 of this code;
3-18                 (3)  a Medicare supplemental policy as defined by
3-19     Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss),
3-20     as amended;
3-21                 (4)  a workers' compensation insurance policy;
3-22                 (5)  medical payment insurance coverage provided under
3-23     a motor vehicle insurance policy; or
3-24                 (6)  a long-term care insurance policy, including a
3-25     nursing home fixed indemnity policy, unless the commissioner
3-26     determines that the policy provides benefit coverage so
3-27     comprehensive that the policy is a health benefit plan as described
 4-1     by Subsection (a)  of this article.
 4-2           Art. 3B.004.  DEPENDENT DEFINED.  For purposes of this
 4-3     chapter, an individual is a dependent of another if the individual
 4-4     is the other individual's:
 4-5                 (1)  resident spouse or unmarried child under 18 years
 4-6     of age; or
 4-7                 (2)  child and:
 4-8                       (A)  is a full-time student under 23 years of age
 4-9     who is financially dependent on the other individual;
4-10                       (B)  is over 18 years of age and is an individual
4-11     for whom the other individual may be obligated to pay child
4-12     support; or
4-13                       (C)  regardless of the age of the child, is
4-14     disabled and dependent on the other individual.
4-15           Art. 3B.005.  STATE AUDIT OF POOL. (a)  The state auditor
4-16     shall annually conduct a special audit of the pool under Chapter
4-17     321, Government Code.  The special audit must include a financial
4-18     audit and an economy and efficiency audit.
4-19           (b)  The state auditor shall report the cost of each audit
4-20     conducted under this section to the board and the comptroller.  The
4-21     board shall remit that amount to the comptroller.
4-22           Art. 3B.006.  RULES.  The commissioner may adopt rules
4-23     necessary to implement this chapter.
4-24           Art. 3B.007.  COMPLAINT PROCEDURES. (a)  An applicant for or
4-25     participant in coverage from the pool is entitled to have
4-26     complaints against the pool reviewed by a grievance committee
4-27     appointed by the board.
 5-1           (b)  The grievance committee shall report to the board after
 5-2     completion of the review of each complaint.
 5-3           (c)  The board shall retain each written complaint concerning
 5-4     the pool at least until the third anniversary of the date the pool
 5-5     received the complaint.
 5-6                (Arts. 3B.008-3B.050 reserved for expansion
 5-7                      SUBCHAPTER B.  BOARD OF DIRECTORS
 5-8           Art. 3B.051.  GOVERNANCE OF POOL; BOARD MEMBERSHIP. (a)  The
 5-9     pool is governed by a board of directors.
5-10           (b)  The board consists of nine members appointed by the
5-11     commissioner as follows:
5-12                 (1)  two members must be individuals who are affiliated
5-13     with a health benefit plan provider authorized to write health
5-14     benefit plans in this state;
5-15                 (2)  three members must be school district employees;
5-16                 (3)  three members must be school district
5-17     administrators; and
5-18                 (4)  one member must be a physician.
5-19           Art. 3B.052.  PRESIDING OFFICER.  The commissioner shall
5-20     designate one member of the board to serve as presiding officer who
5-21     serves in that capacity at the pleasure of the commissioner.
5-22           Art. 3B.053.  TERMS; VACANCY. (a)  Members of the board serve
5-23     staggered six-year terms with the terms of three members expiring
5-24     February 1 of each odd-numbered year.
5-25           (b)  The commissioner shall fill a vacancy on the board by
5-26     appointing, for the unexpired term, an individual who has the
5-27     appropriate qualifications to fill that position.
 6-1           Art. 3B.054.  PER DIEM; REIMBURSEMENT.  A member of the board
 6-2     is entitled to:
 6-3                 (1)  a per diem in the amount provided by the General
 6-4     Appropriations Act for state officials for each day the member
 6-5     performs duties as a board member; and
 6-6                 (2)  reimbursement of expenses incurred while
 6-7     performing duties as a board member as provided by Chapter 660,
 6-8     Government Code, and the General Appropriations Act.
 6-9           Art. 3B.055.  MEMBER'S IMMUNITY. (a)  A member of the board
6-10     is not liable for an act or omission made in good faith in the
6-11     performance of powers and duties under this chapter.
6-12           (b)  A cause of action does not arise against a member of the
6-13     board for an act or omission described by Subsection (a) of this
6-14     article.
6-15           Art. 3B.056.  ADJUSTMENTS. (a)  The board may adjust
6-16     deductibles, the amounts of excess loss coverage, and the periods
6-17     governing preexisting conditions under Article 3B.154 of this code
6-18     to preserve the financial integrity of the pool.
6-19           (b)  Not later than the 30th day after the date the board
6-20     makes an adjustment under this section, the board shall submit to
6-21     the commissioner a written report containing a description of and
6-22     the reasons for the adjustment.
6-23           Art. 3B.057.  ANNUAL REPORT OF POOL'S ACTIVITIES. (a)  Not
6-24     later than June 1 of each year, the board shall submit a report to
6-25     the governor, the lieutenant governor, the speaker of the house of
6-26     representatives, and the commissioner.
6-27           (b)  The report must summarize the activities of the pool in
 7-1     the calendar year preceding the year in which the report is
 7-2     submitted and must include information relating to net written and
 7-3     earned premiums, plan enrollment, administration expenses, and paid
 7-4     and incurred losses.
 7-5           Art. 3B.058.  ADDITIONAL POWERS AND DUTIES.  The commissioner
 7-6     by rule may establish powers and duties of the board in addition to
 7-7     those provided by this chapter.
 7-8                (Arts. 3B.059-3B.100 reserved for expansion
 7-9                  SUBCHAPTER C.  POWERS AND DUTIES OF POOL
7-10           Art. 3B.101.  REQUIRED PARTICIPATION BY SCHOOL DISTRICTS;
7-11     INFORMATION ABOUT POOL. (a)  Each school district shall provide its
7-12     employees access to health benefit plan coverage.
7-13           (b)  A school district shall provide to each employee notice
7-14     as prescribed by the commissioner relating to the existence of the
7-15     pool that contains the address from which an employee may obtain
7-16     information about:
7-17                 (1)  the coverage offered by the pool;
7-18                 (2)  the eligibility for and cost of that coverage; and
7-19                 (3)  other information that allows the employee to
7-20     compare the coverage offered by the pool with any other coverage
7-21     for which the employee may be eligible.
7-22           Art. 3B.102. STAFF; COMMITTEES. (a)  The pool may employ and
7-23     set the compensation of any staff necessary to assist the pool in
7-24     carrying out its responsibilities and functions.
7-25           (b)  The pool may appoint appropriate legal, actuarial, and
7-26     other committees necessary to provide technical assistance in
7-27     operating the pool and performing any of the functions of the pool.
 8-1           Art. 3B.103.  PROVIDING COVERAGE. The pool shall provide
 8-2     health benefit plan coverage to an employee who is eligible for
 8-3     that coverage under this chapter and to that employee's
 8-4     dependents.  The pool coverage is subject to this chapter and the
 8-5     pool's plan of operation adopted under Article 3B.201 of this code.
 8-6           Art. 3B.104.  CHARGES, FORMULAS, AND FORMS. (a)  The pool may
 8-7     establish appropriate rates, rate schedules, rate adjustments,
 8-8     expense allowances, agents' referral fees, and claim reserve
 8-9     formulas and perform actuarial functions appropriate to the
8-10     operation of the pool.
8-11           (b)  The pool shall adopt policy forms, endorsements, and
8-12     riders and applications for coverage as necessary to implement this
8-13     chapter.
8-14           Art. 3B.105.  PREMIUM RATES. (a)  The pool may not charge
8-15     premium rates that are unreasonable in relation to the benefits
8-16     provided, the risk experience, and the reasonable expenses of
8-17     providing the coverage.
8-18           (b)  The pool may adjust premium rates and premium rate
8-19     schedules for appropriate risk factors, including age and variation
8-20     in claim costs.  The board may consider appropriate risk factors in
8-21     accordance with established actuarial and underwriting practices.
8-22           (c)  The pool shall establish the rates used by the pool.  In
8-23     establishing the rates, the pool shall use reasonable actuarial
8-24     techniques and consider the premium rates charged by other health
8-25     benefit plan providers offering health benefit plan coverage to
8-26     individuals.  The rate must reflect anticipated experience and
8-27     expenses for health benefit coverage.
 9-1           (d)  The pool shall submit each rate and rate schedule to the
 9-2     commissioner for approval.  The pool may not use a rate or rate
 9-3     schedule before the rate or schedule is approved by the
 9-4     commissioner.  In evaluating a rate or rate schedule of the pool,
 9-5     the commissioner shall consider the factors provided by this
 9-6     article.
 9-7           Art. 3B.106.  EXCESS LOSS COVERAGE; REINSURANCE.  The pool
 9-8     may purchase excess loss coverage or reinsurance to insure the pool
 9-9     against financial losses that the pool determines might place the
9-10     solvency of the pool in financial jeopardy.
9-11           Art. 3B.107.  CONTRACTS.  The pool may enter into  contracts
9-12     as necessary to implement this chapter.
9-13           Art. 3B.108.  LEGAL ACTION. (a)  The pool may sue or be sued.
9-14           (b)  The pool may take any legal action necessary to:
9-15                 (1)  avoid payment of improper claims against the pool
9-16     or the coverage provided by or through the pool; or
9-17                 (2)  recover or collect amounts due the pool,
9-18     including:
9-19                       (A)  assessments due the pool;
9-20                       (B)  amounts erroneously or improperly paid by
9-21     the pool; and
9-22                       (C)  amounts paid by the pool as a mistake of
9-23     fact or law.
9-24           Art. 3B.109.  COST CONTAINMENT. (a)  The pool may provide for
9-25     and use cost containment measures and requirements, including
9-26     preadmission screening, the requirement of a second surgical
9-27     opinion, and concurrent utilization review subject to Article
 10-1    21.58A of this code.
 10-2          (b)  The pool may design, use, contract for, or otherwise
 10-3    arrange for the delivery of cost-effective health care services,
 10-4    including establishing or contracting with preferred provider
 10-5    organizations and health maintenance organizations.
 10-6          Art. 3B.110.  BORROWING.  The pool may borrow money as
 10-7    necessary to implement the purposes of the pool.
 10-8          Art. 3B.111.  ADDITIONAL AUTHORITY.  In addition to the other
 10-9    powers granted to the pool under this chapter, the pool may
10-10    exercise any of the authority that a health benefit plan provider
10-11    authorized to write health benefit plans in this state may exercise
10-12    under the law of this state.
10-13               (Arts. 3B.112-3B.150 reserved for expansion
10-14                 SUBCHAPTER D.  POOL COVERAGE AND BENEFITS
10-15          Art. 3B.151.  MINIMUM POOL COVERAGE. (a)  The pool shall
10-16    offer coverage that provides benefits at least consistent with
10-17    major medical expense coverage to each eligible employee.
10-18          (b)  The board, with the approval of the commissioner, shall
10-19    establish:
10-20                (1)  the coverages to be provided by the pool;
10-21                (2)  the applicable schedules of benefits; and
10-22                (3)  any exclusions or other limitations to coverage.
10-23          (c)  The benefits provisions of the pool's coverage must
10-24    include:
10-25                (1)  all required or applicable definitions;
10-26                (2)  a description of covered services;
10-27                (3)  a list of any exclusions or limitations to
 11-1    coverage; and
 11-2                (4)  the deductibles, coinsurance options, and
 11-3    copayment options that are required or permitted.
 11-4          Art. 3B.152.  ELIGIBILITY FOR COVERAGE; PREMIUMS. (a)  Each
 11-5    employee shall be covered by the pool unless the employee rejects
 11-6    the coverage in a signed written statement made to the governing
 11-7    body of the school district.
 11-8          (b)  A dependent of an employee who is eligible for coverage
 11-9    from the pool is also eligible for coverage from the pool.
11-10          (c)  Except as provided by Subsection (d) of this article, a
11-11    covered employee shall pay 100 percent of the premiums assessed by
11-12    the pool for coverage through the pool.
11-13          (d)  A school district may make contributions to the pool to
11-14    cover all or part of the premiums for its employees.  The employees
11-15    shall pay 100 percent of the cost of any coverage not paid by the
11-16    school district.
11-17          Art. 3B.153.  INELIGIBILITY FOR COVERAGE.  Notwithstanding
11-18    Article 3B.152 of this code, an employee is not eligible for
11-19    coverage from the pool if  the employee's prior coverage with the
11-20    pool was terminated for nonpayment of premiums or fraud.
11-21          Art. 3B.154.  PREEXISTING CONDITIONS. (a)  Except as provided
11-22    by this article and Article 3B.056 of this code, pool coverage
11-23    excludes charges or expenses incurred before the first anniversary
11-24    of the effective date of coverage with regard to any condition for
11-25    which medical advice, care, or treatment was recommended or
11-26    received during the six-month period preceding the effective date
11-27    of coverage.
 12-1          (b)  The exclusion provided by Subsection (a) of this article
 12-2    does not apply to an individual who:
 12-3                (1)  was continuously covered for a period of at least
 12-4    12 months, excluding any waiting period, by health benefit plan
 12-5    coverage that terminated after the 64th day before the effective
 12-6    date of coverage under the pool; and
 12-7                (2)  applied for pool coverage not later than the 63rd
 12-8    day after the date the health benefit plan coverage described by
 12-9    Subdivision (1) of this subsection terminated.
12-10          (c)  If an individual was covered by health benefit plan
12-11    coverage that was in effect at any time during the 12-month period
12-12    preceding the effective date of the individual's coverage under the
12-13    pool, the pool shall subtract from the exclusion period required
12-14    under Subsection (a) of this article the period that the individual
12-15    was covered under that health benefit plan and any waiting period
12-16    that applied before that health benefit plan coverage became
12-17    effective.
12-18          Art. 3B.155.  BENEFIT REDUCTION. (a)  The pool may reduce
12-19    benefits otherwise payable under pool coverage by the total amount
12-20    paid or payable through any other health benefit plan.
12-21          (b)  The pool shall reduce benefits otherwise payable under
12-22    pool coverage by the total amount of hospital or medical expense
12-23    benefits paid or payable under:
12-24                (1)  workers' compensation coverage;
12-25                (2)  automobile insurance coverage; or
12-26                (3)  a state or federal law or program.
12-27          Art. 3B.156.  RECOVERY OF CERTAIN AMOUNTS. (a)  The pool has
 13-1    a cause of action against an employee for the recovery of the
 13-2    amount of benefits paid that are not for covered expenses.
 13-3          (b)  Benefits due from the pool may be reduced or refused as
 13-4    an offset against an amount recoverable under this section.
 13-5          Art. 3B.157.  TERMINATION OF POOL COVERAGE. (a)  An
 13-6    employee's pool coverage ends:
 13-7                (1)  on the date the employee ceases to be an employee
 13-8    of a school district in this state;
 13-9                (2)  on the date the employee requests coverage to end;
13-10                (3)  on the date the employee covered by the pool dies;
13-11                (4)  at the option of the pool, on the 31st day after
13-12    the date the pool sends to the individual covered by the pool any
13-13    inquiry concerning the individual's eligibility to which the
13-14    individual does not reply;
13-15                (5)  on the 31st day after the date a premium payment
13-16    for pool coverage becomes due if the payment is not made before
13-17    that day; or
13-18                (6)  on the date the individual covered by the pool
13-19    ceases to meet the eligibility requirements for coverage.
13-20          (b)  A dependent's pool coverage ends on the date the
13-21    dependent becomes 21 years of age, unless the individual:
13-22                (1)  is the spouse of the employee; or
13-23                (2)  is a child of the employee:
13-24                      (A)  who is a student under 23 years of age who
13-25    is financially dependent on the employee and who is covered by the
13-26    pool;
13-27                      (B)  for whom an employee covered by the pool may
 14-1    be obligated to pay child support; or
 14-2                      (C)  who is disabled and dependent on a parent
 14-3    covered by the pool, regardless of the age of the child.
 14-4          (c)  Any covered individual's coverage through the pool
 14-5    expires on the date state law requires cancellation of the
 14-6    coverage.
 14-7          (d)  Notwithstanding Subsection (a) of this article, an
 14-8    employee who ceases to meet the eligibility requirements for
 14-9    coverage may have the individual's coverage terminated at the
14-10    scheduled end of the coverage period.
14-11          (e)  An individual may maintain pool coverage for the period
14-12    the individual is satisfying a preexisting condition period or
14-13    waiting period under another health benefit plan intended to
14-14    replace the pool coverage.
14-15               (Arts. 3B.158-3B.200 reserved for expansion
14-16                     SUBCHAPTER E.  OPERATION OF POOL
14-17          Art. 3B.201.  PLAN OF OPERATION. (a)  Operation and
14-18    management of the pool is governed by a plan of operation adopted
14-19    by the board and approved by the commissioner.  The plan of
14-20    operation includes the articles, bylaws, and operating rules of the
14-21    pool that are adopted by the board.
14-22          (b)  The plan of operation must ensure the fair, reasonable,
14-23    and equitable administration of the pool.
14-24          (c)  In addition to complying with the other requirements of
14-25    this chapter, the plan of operation must include procedures for:
14-26                (1)  operation of the pool;
14-27                (2)  selection of an administrator as provided by
 15-1    Article 3B.202 of this code;
 15-2                (3)  creation of a fund, under management of the board,
 15-3    for administrative expenses;
 15-4                (4)  handling, accounting, and auditing of money and
 15-5    other assets of the pool;
 15-6                (5)  development and implementation of a program to:
 15-7                      (A)  publicize the existence of the pool, the
 15-8    eligibility requirements for coverage under the pool, and
 15-9    enrollment procedures; and
15-10                      (B)  foster public awareness of the pool;
15-11                (6)  creation of a grievance committee to review
15-12    complaints presented by applicants for coverage from the pool and
15-13    persons who are covered by the pool; and
15-14                (7)  other matters as may be necessary for the
15-15    execution of the board's powers, duties, and obligations under this
15-16    chapter.
15-17          (d)  The board shall amend the plan of operation as necessary
15-18    to carry out this chapter.  An amendment to the plan of operation
15-19    must be approved by the commissioner before it becomes a part of
15-20    the plan.
15-21          Art. 3B.202.  POOL ADMINISTRATOR. (a)  The board may select
15-22    one or more health benefit plan providers or a third party
15-23    administrator certified by the department to administer the pool.
15-24    The selection must be made under a competitive bidding process in
15-25    accordance with the plan of operation.
15-26          (b)  The board shall establish criteria for evaluating the
15-27    bids submitted under this section.  The criteria must include:
 16-1                (1)  the bidder's proven ability to handle individual
 16-2    health benefit plans;
 16-3                (2)  the bidder's efficiency of claims paying
 16-4    procedures;
 16-5                (3)  an estimate of total charges for administering the
 16-6    pool;
 16-7                (4)  the bidder's ability to administer the pool in a
 16-8    cost-efficient manner; and
 16-9                (5)  the bidder's financial condition and stability.
16-10          Art. 3B.203.  ADMINISTRATOR'S TERM; SUCCEEDING TERM. (a)  A
16-11    person selected as a pool administrator serves in that capacity for
16-12    a three-year term beginning on the date the board issues its order
16-13    making the selection.
16-14          (b)  Not later than one year before the expiration of a pool
16-15    administrator's term, the board shall invite all health benefit
16-16    plan providers, including the pool administrator, to submit bids to
16-17    serve as a pool administrator for the succeeding administration
16-18    period.  The selection of the succeeding pool administrator must be
16-19    made not later than the sixth calendar month preceding the month in
16-20    which the pool administrator's term expires.
16-21          Art. 3B.204.  ADMINISTRATOR'S FUNCTIONS. (a)  A pool
16-22    administrator shall perform the functions relating to the pool that
16-23    are assigned to the administrator.
16-24          (b)  The assigned functions may include:
16-25                (1)  performing eligibility and administrative claims
16-26    payment functions for the pool;
16-27                (2)  establishing a billing procedure for collection of
 17-1    premiums from individuals covered by the pool;
 17-2                (3)  performing functions necessary to ensure timely
 17-3    payment of benefits to individuals covered by the pool, including:
 17-4                      (A)  providing information relating to the proper
 17-5    manner of submitting a claim for benefits to the pool and
 17-6    distributing claim forms; and
 17-7                      (B)  evaluating the eligibility of each claim for
 17-8    payment by the pool;
 17-9                (4)  submitting regular reports to the board relating
17-10    to the operation of the pool; and
17-11                (5)  determining after each calendar year the net
17-12    written and earned premiums, expenses of administration, and paid
17-13    and incurred losses of the pool for that calendar year and
17-14    reporting that information to the board and the commissioner.
17-15          (c)  The board shall determine the form, content, and time of
17-16    submission of the reports required under Subsection (b)(4) of this
17-17    article.
17-18          (d)  The commissioner shall prescribe the forms to be used to
17-19    report the information under Subsection (b)(5) of this article.
17-20          (e)  The board shall determine the times at which a pool
17-21    administrator is to perform the billing functions for the pool.
17-22          Art. 3B.205.  PAYMENTS TO ADMINISTRATOR.  The pool shall pay
17-23    a pool administrator for the administrator's expenses incurred in
17-24    performing duties and functions as provided by the plan of
17-25    operation.
17-26                          SUBCHAPTER F.  FUNDING
17-27          Art. 3B.251. FUND; AUDIT. (a)  The Texas school districts
 18-1    health benefits risk pool fund is created on the creation of the
 18-2    pool.
 18-3          (b)  The fund is a trust fund outside the state treasury and
 18-4    is composed of:
 18-5                (1)  premiums paid by school district employees for
 18-6    coverage by the pool;
 18-7                (2)  contributions and other money received by the pool
 18-8    from school districts and the state;
 18-9                (3)  investments and money earned from investments of
18-10    the fund; and
18-11                (4)  any other money received by the pool.
18-12          (c)  Money in the fund shall be paid from the fund, without
18-13    legislative appropriation, on vouchers approved by the board.  That
18-14    money shall be held exclusively for the purposes stated in this
18-15    chapter and may not be used or appropriated for any other purpose.
18-16          (d)  The pool administrator shall manage the fund under the
18-17    general supervision of the board. Administrative expenses of the
18-18    pool may be paid from the fund.  Payments for administrative
18-19    expenses in any fiscal year may not exceed 10 percent of the total
18-20    amount of money in the fund during that fiscal year.
18-21          (e)  The fund may not be used to pay punitive damages, fines,
18-22    or penalties for violation of a civil or criminal statute, or fines
18-23    or penalties imposed for the violation of a rule of a state agency
18-24    or an ordinance or order of a local government.
18-25          (f)  The board may select one or more banks to serve as
18-26    depository for the fund.  Before the deposit of fund money in a
18-27    depository bank in an amount that exceeds the maximum secured by
 19-1    the Federal Deposit Insurance Corporation, the bank must provide
 19-2    security in an amount sufficient to secure from loss the fund money
 19-3    that exceeds the amount secured by the Federal Deposit Insurance
 19-4    Corporation.
 19-5          (g)  The board shall require an annual audit of the capital,
 19-6    surplus, and reserves of the pool to be conducted by an actuary who
 19-7    is a member of the American Academy of Actuaries or a similar
 19-8    national organization of actuaries recognized by the board.
 19-9          Art. 3B.252.  INVESTMENTS. (a)  The pool administrator shall
19-10    manage and invest the fund in the manner provided by the plan of
19-11    operation.
19-12          (b)  Money earned by the investment of the fund shall be
19-13    deposited in the fund or reinvested for the fund.
19-14          Art. 3B.253.  INITIAL CONTRIBUTIONS. (a)  Each school
19-15    district shall pay an assessment as provided by this article for
19-16    the initial expenses of the pool.
19-17          (b)  The board shall determine the amount of assessments
19-18    necessary to meet the initial expenses of the pool from information
19-19    provided in the plan of operation.
19-20          (c)  This article expires September 1, 2003.
19-21          SECTION 2.  Effective September 1, 2002, Article 3.51,
19-22    Insurance Code, is amended to read as follows:
19-23          Art. 3.51.  GROUP INSURANCE FOR EMPLOYEES OF STATE AND ITS
19-24    SUBDIVISIONS AND COLLEGES [COLLEGE AND SCHOOL EMPLOYEES]
19-25          Sec. 1. (a)  The State of Texas and each of its political,
19-26    governmental and administrative subdivisions, departments,
19-27    agencies, associations of public employees, and the governing
 20-1    boards and authorities of each state university or college[,
 20-2    colleges, common and independent school districts or of any other
 20-3    agency or subdivision of the public school system of the State of
 20-4    Texas] are authorized to procure contracts with any insurance
 20-5    company authorized to do business in this state insuring their
 20-6    respective employees, or if an association of public employees is
 20-7    the policyholder, insuring its respective members, or any class or
 20-8    classes thereof under a policy or policies of group health,
 20-9    accident, accidental death and dismemberment, disability income
20-10    replacement and hospital, surgical and/or medical expense insurance
20-11    or a group contract providing for annuities.  The dependents of any
20-12    such employees or association members, as the case may be, may be
20-13    insured under group policies which provide hospital, surgical
20-14    and/or medical expense insurance.  The insureds' contributions to
20-15    the premiums for such insurance or annuities issued to the employer
20-16    or to an association of public employees as the policyholder may be
20-17    deducted by the employer from the insureds' salaries when
20-18    authorized in writing by the respective employees so to do.  The
20-19    premium for the policy or contract may be paid in whole or in part
20-20    from funds contributed by the employer or in whole or in part from
20-21    funds contributed by the insured employees.  When an association of
20-22    public employees is the holder of such a policy of insurance or
20-23    contract, the premium for employees that are members of such
20-24    association may be paid in whole or in part by the State of Texas
20-25    or other agency authorized to procure contracts or policies of
20-26    insurance under this section, or in whole or in part from funds
20-27    contributed by the insured employees that are members of such
 21-1    association; provided, however, that any monies or credits received
 21-2    by or allowed to the policyholder or contract holder pursuant to
 21-3    any participation agreement contained in or issued in connection
 21-4    with the policy or contract shall be applied to the payment of
 21-5    future premiums and to the pro rata abatement of the insured
 21-6    employee's contribution therefor.
 21-7          (b)  The term employees as used herein in addition to its
 21-8    usual meaning shall include elective and appointive officials of
 21-9    the state.
21-10          [(b)  Independent School Districts procuring policies
21-11    insuring their employees under this Section may pay all or any
21-12    portion of the premiums on such policies from the local funds of
21-13    such Independent School District, but in no event shall any part of
21-14    such premiums be paid from funds paid such districts by the State
21-15    of Texas.]
21-16          Sec. 2. All group insurance contracts effected pursuant
21-17    hereto shall conform and be subject to all the provisions of any
21-18    existing or future laws concerning group insurance.
21-19          SECTION 3.  Effective September 1, 2002, Section 1, Article
21-20    3.50-4, Insurance Code, is amended to read as follows:
21-21          Sec. 1.  SHORT TITLE. This article may be cited as the Texas
21-22    Public School Retired Employees Group Insurance Act.
21-23          SECTION 4.  Effective September 1, 2002, Sections 2(3) and
21-24    (4), Article 3.50-4, Insurance Code, are amended to read as
21-25    follows:
21-26                (3)  "Dependent" means:
21-27                      (A)  a spouse of a retiree [or active member];
 22-1                      (B)  a retiree's[, an active member's,] or a
 22-2    deceased active member's unmarried child who is younger than 25
 22-3    years of age including:
 22-4                            (i)  an adopted child;
 22-5                            (ii)  a foster child, a stepchild, or other
 22-6    child who is in a regular parent-child relationship; and
 22-7                            (iii)  a recognized natural child; and
 22-8                      (C)  a retiree's [or active member's] recognized
 22-9    natural child, adopted child, foster child, stepchild, or other
22-10    child who is in a regular parent-child relationship and who lives
22-11    with or whose care is provided by the retiree[, active member,] or
22-12    surviving spouse on a regular basis, regardless of the child's age,
22-13    if the child is mentally retarded or physically incapacitated to
22-14    such an extent as to be dependent on the retiree[, active member,]
22-15    or surviving spouse for care or support, as determined by the
22-16    trustee, or in the case of a deceased active member, a recognized
22-17    natural child, adopted child, foster child, stepchild, or other
22-18    child who was in a regular parent-child relationship and who lived
22-19    with or whose care was provided by the deceased active member on a
22-20    regular basis, regardless of the child's age, if the child is
22-21    mentally retarded or physically incapacitated to such an extent as
22-22    to have been dependent on the deceased active member or surviving
22-23    spouse for care or support, as determined by the trustee.
22-24                (4)  "Fund" means the Texas retired public school
22-25    employees group insurance fund.
22-26          SECTION 5.  Effective September 1, 2002, Section 3(a),
22-27    Article 3.50-4, Insurance Code, is amended to read as follows:
 23-1          (a)  The Texas Public School Retired Employees Group
 23-2    Insurance Program is established to provide for an insurance plan
 23-3    or plans under this article.
 23-4          SECTION 6.  Effective September 1, 2002, Section 5(a),
 23-5    Article 3.50-4, Insurance Code, is amended to read as follows:
 23-6          (a)  The trustee may adopt rules, plans, procedures, and
 23-7    orders reasonably necessary to implement this article, including:
 23-8                (1)  establishment of minimum benefit and financing
 23-9    standards for group insurance coverage to be provided to all
23-10    retirees, [active employees,] dependents, surviving spouses, and
23-11    surviving dependent children;
23-12                (2)  establishment of basic and optional group coverage
23-13    to be provided to retirees, [active employees,] dependents,
23-14    surviving spouses, and surviving dependent children;
23-15                (3)  establishment of the procedures for contributions
23-16    and deductions;
23-17                (4)  establishment of periods for enrollment and
23-18    selection of optional coverage and procedures for enrolling and
23-19    exercising options under the plan;
23-20                (5)  determination of methods and procedures for claims
23-21    administration;
23-22                (6)  study of the operation of all insurance coverage
23-23    provided under this article;
23-24                (7)  administration of the fund;
23-25                (8)  adoption of a timetable for the development of
23-26    minimum benefit and financial standards for group insurance
23-27    coverage, establishment of group insurance plans, and the taking of
 24-1    bids for and awarding of contracts for insurance plans; and
 24-2                (9)  contracting with an independent and experienced
 24-3    group insurance consultant or actuary, who does not receive
 24-4    insurance commissions from any insurance company, for advice and
 24-5    counsel in implementing and administering this program.
 24-6          SECTION 7.  Effective September 1, 2002, Section 8(e),
 24-7    Article 3.50-4, Insurance Code, is amended to read as follows:
 24-8          (e)  The trustee may contract for and make available to all
 24-9    retirees, dependents, surviving spouses, and surviving dependent
24-10    children optional group health benefit plans in addition to the
24-11    basic plans.  The optional coverage may include a smaller
24-12    deductible, lower coinsurance, or additional categories of benefits
24-13    permitted under Subsection (b) of this section to provide
24-14    additional levels of coverages and benefits.  The trustee may
24-15    utilize a portion of the funds received for the Texas Public School
24-16    Retired Employees Group Insurance Program to offset some portion of
24-17    costs paid by the retiree for optional coverage if such utilization
24-18    does not reduce the period the program is projected to remain
24-19    financially solvent by more than one year in a biennium.  Any
24-20    additional contributions for these optional plans shall be paid for
24-21    by the retiree, surviving spouse, or surviving dependent children.
24-22          SECTION 8.  Effective September 1, 2002, Section 9, Article
24-23    3.50-4, Insurance Code, is amended to read as follows:
24-24          Sec. 9.  BENEFIT CERTIFICATES. At such times, or upon such
24-25    events, as designated by the trustee, each insurance carrier shall
24-26    issue to each retiree, [active employee,] surviving spouse, or
24-27    surviving dependent child insured under this article a certificate
 25-1    of insurance that:
 25-2                (1)  states the benefits to which the person is
 25-3    entitled;
 25-4                (2)  states to whom the benefits are payable;
 25-5                (3)  states to whom the claims must be submitted; and
 25-6                (4)  summarizes the provisions of the policy
 25-7    principally affecting the person.
 25-8          SECTION 9.  Effective September 1, 2002, Section 12, Article
 25-9    3.50-4, Insurance Code, is amended to read as follows:
25-10          Sec. 12.  DEATH CLAIMS:  BENEFICIARIES. The amount of group
25-11    life insurance and group accidental death and dismemberment
25-12    insurance covering a retiree, [active employee,] surviving spouse,
25-13    dependent, or surviving dependent child at the date of death shall
25-14    be paid, on the establishment of a valid claim, only:
25-15                (1)  to the beneficiary or beneficiaries designated by
25-16    the person in a signed and witnessed written document received
25-17    before death in the trustee's office; or
25-18                (2)  if no beneficiary is properly designated or in
25-19    existence, to persons in accordance with the trustee's death
25-20    benefit provisions in Subsection (b), Section 824.103, Government
25-21    Code.
25-22          SECTION 10.  Effective September 1, 2002, Section 13, Article
25-23    3.50-4, Insurance Code, is amended to read as follows:
25-24          Sec. 13.  AUTOMATIC COVERAGE. A retiree [or active employee]
25-25    who applies during an enrollment period may not be denied any of
25-26    the group insurance basic coverage provided under this article
25-27    unless the person has been found under Section 18A of this article
 26-1    to have defrauded or attempted to defraud the Texas Public School
 26-2    Retired Employees Group Insurance Program.
 26-3          SECTION 11.  Effective September 1, 2002, Section 15, Article
 26-4    3.50-4, Insurance Code, is amended to read as follows:
 26-5          Sec. 15.  RETIRED SCHOOL EMPLOYERS GROUP INSURANCE FUND. (a)
 26-6    The retired school employees group insurance fund is created.  The
 26-7    comptroller is the custodian of the fund, and the trustee shall
 26-8    administer the fund.  All contributions from active employees,
 26-9    retirees, and the state, contributions for optional coverages,
26-10    investment income, appropriations for implementation of this
26-11    program, and other money required or authorized to be paid into the
26-12    fund shall be paid into the fund.  From the fund shall be paid,
26-13    without state fiscal year limitation, the appropriate premiums to
26-14    the carrier or carriers providing group coverage under the plan or
26-15    plans under this article, claims for benefits under the group
26-16    coverage, and the amounts expended by the trustee for
26-17    administration of the program.  The appropriate portion of the
26-18    contributions to the fund to provide for incurred but unreported
26-19    claim reserves and contingency reserves, as determined by the
26-20    trustee, shall be retained in the fund.
26-21          (b)  The trustee shall transfer the amounts deducted from
26-22    annuities for contributions into the fund.
26-23          (c)  Expenses for the development and administration of the
26-24    program shall be spent as provided by a budget adopted by the
26-25    trustee.
26-26          (d)  The trustee may invest and reinvest the money in the
26-27    fund as provided by Subchapter D, Chapter 825, Government Code, for
 27-1    assets of the Teacher Retirement System of Texas.
 27-2          SECTION 12.  Effective September 1, 2002, Section 18A,
 27-3    Article 3.50-4, Insurance Code, is amended to read as follows:
 27-4          Sec. 18A.  EXPULSION FROM PROGRAM FOR FRAUD. (a)  After
 27-5    notice and hearing as provided by this section, the trustee may
 27-6    expel from participation in the Texas Public School Retired
 27-7    Employees Group Insurance Program any retiree, [active employee,]
 27-8    surviving spouse, dependent, or surviving dependent child who
 27-9    submits a fraudulent claim under, or has defrauded or attempted to
27-10    defraud, any health benefits plan offered under the program.
27-11          (b)  On its motion or on the receipt of a complaint, the
27-12    trustee may call and hold a hearing to determine whether a person
27-13    has submitted a fraudulent claim under, or has defrauded or
27-14    attempted to defraud, any health benefits plan offered under the
27-15    Texas Public School Retired Employees Group Insurance Program.
27-16          (c)  A proceeding under this section is a contested case
27-17    under Chapter 2001, Government Code [the Administrative Procedure
27-18    and Texas Register Act (Article 6252-13a, Vernon's Texas Civil
27-19    Statutes)].
27-20          (d)  If the trustee, at the conclusion of the hearing, issues
27-21    a decision that finds that the accused submitted a fraudulent claim
27-22    or has defrauded or attempted to defraud any health benefits plan
27-23    offered under the Texas Public School Retired Employees Group
27-24    Insurance Program, the trustee shall expel the person from
27-25    participation in the program.
27-26          (e)  The substantial evidence rule shall be used on any
27-27    appeal of a decision of the trustee under this section.
 28-1          (f)  A person expelled from the Texas Public School Retired
 28-2    Employees Group Insurance Program may not be insured by any health
 28-3    insurance plan offered by the program for a period, to be
 28-4    determined by the trustee, of up to five years from the date the
 28-5    expulsion takes effect.
 28-6          SECTION 13.  Effective September 1, 2002, Section 18B(a),
 28-7    Article 3.50-4, Insurance Code, is amended to read as follows:
 28-8          (a)  Section 825.507, Government Code, concerning the
 28-9    confidentiality of information in records that are in the custody
28-10    of the Teacher Retirement System of Texas, applies to information
28-11    in records that are in the custody of the retirement system
28-12    regarding retirees, active employees, annuitants, or beneficiaries
28-13    under the Texas Public School Retired Employees Group Insurance
28-14    Program.
28-15          SECTION 14.  Effective September 1, 2002, Sections 18C(c),
28-16    (d), and (i), Article 3.50-4, Insurance Code, are amended to read
28-17    as follows:
28-18          (c)  The trustee, the Texas public school retired employees
28-19    group insurance program, the retired school employees group
28-20    insurance fund, and the board of trustees, officers, advisory
28-21    committee members, and employees of the trustee are not liable for
28-22    damages arising from the acts or omissions of health care providers
28-23    who are participating health care providers in the coordinated care
28-24    network established by the trustee.  Those health care providers
28-25    are independent contractors and are responsible for their own acts
28-26    and omissions.
28-27          (d)  The trustee, the Texas public school retired employees
 29-1    group insurance program, the retired school employees group
 29-2    insurance fund, or a member of a credentialing committee, or the
 29-3    board of trustees, officers, advisory committee members, or
 29-4    employees of the trustee are not liable for damages arising from
 29-5    any act, statement, determination, recommendation made, or act
 29-6    reported, without malice, in the course of the evaluation of the
 29-7    qualifications of health care providers or of the patient care
 29-8    rendered by those providers.
 29-9          (i)  A credentialing committee, a person participating in a
29-10    credentialing review, a health care provider, the trustee, the
29-11    Texas public school retired employees group insurance program, or
29-12    the board of trustees, officers, advisory committee members, or
29-13    employees of the trustee that are named as defendants in any civil
29-14    action filed as a result of participation in the credentialing
29-15    process may use otherwise confidential information obtained for
29-16    legitimate internal business and professional purposes, including
29-17    use in their own defense.  Use of information under this subsection
29-18    does not constitute a waiver of the confidential and privileged
29-19    nature of the information.
29-20          SECTION 15.  Effective September 1, 2002, Section 172.003(2),
29-21    Local Government Code, is amended to read as follows:
29-22          (2)  "Political subdivision" means a county, municipality,
29-23    special district, [school district,] junior college district,
29-24    housing authority, or other political subdivision of the state.
29-25          SECTION 16.  Effective September 1, 2002, the following laws
29-26    are repealed:
29-27                (1)  Sections 22.004 and 22.005, Education Code;
 30-1                (2)  Section 7A, Article 3.50-4, Insurance Code; and
 30-2                (3)  Article 26.036, Insurance Code.
 30-3          SECTION 17.  (a)  Not later than December 1, 2001, the
 30-4    commissioner of insurance shall appoint the initial board of
 30-5    directors of the Texas School Districts Health Benefits Risk Pool
 30-6    established under Chapter 3B, Insurance Code, as added by this Act.
 30-7    In making initial appointments to the board of directors, the
 30-8    commissioner of insurance shall appoint three members for terms
 30-9    expiring February 1, 2003, three members for terms expiring
30-10    February 1, 2005, and three members for terms expiring February 1,
30-11    2007.
30-12          (b)  The initial board of directors shall adopt the plan of
30-13    operation for management of the pool as required by Article 3B.201,
30-14    Insurance Code, as added by this Act, not later than March 1, 2002.
30-15          (c)  Coverage under the plan or plans authorized by Chapter
30-16    3B, Insurance Code, as added by this Act, shall begin with the
30-17    2002-2003 school year but not later than September 1, 2002.
30-18          SECTION 18.  (a)  The Teacher Retirement System of Texas
30-19    shall, not later than September 1, 2002, transfer from the program
30-20    established under Article 3.50-4, Insurance Code, all coverages
30-21    provided under the program for active employees and all records
30-22    relating to coverage of active employees under the program to the
30-23    board of directors of the Texas School Districts Health Benefits
30-24    Risk Pool established under Chapter 3B, Insurance Code, as added by
30-25    this Act.
30-26          (b)  The comptroller shall, not later than September 1, 2002,
30-27    transfer from the fund established under Section 15, Article
 31-1    3.50-4, Insurance Code, all assets and liabilities of that fund
 31-2    relating to coverage for active employees to the fund established
 31-3    under Subchapter F, Chapter 3B, Insurance Code, as added by this
 31-4    Act.
 31-5          (c)  On the transfer of property described by this section,
 31-6    the program provided by Section 7A, Article 3.50-4, Insurance Code,
 31-7    is terminated.
 31-8          SECTION 19.  (a)  A school district that, before September 1,
 31-9    2002, established a health care fund under Section 22.005,
31-10    Education Code, shall abolish the fund not later than September 1,
31-11    2002.  Any unexpended balance in the fund attributable to
31-12    deductions made from the salary of district employees shall be
31-13    distributed to those employees in shares proportionate to the
31-14    amount contributed by each employee not later than December 1,
31-15    2002.
31-16          (b)  A school district that, before September 1, 2002,
31-17    participated in a risk pool established under Chapter 172, Local
31-18    Government Code, shall terminate that participation on the
31-19    expiration of the term of the existing benefits contract, but not
31-20    later than September 1, 2002.
31-21          SECTION 20.  (a)  Except as provided by this Act, this Act
31-22    takes effect September 1, 2001.
31-23          (b)  The commissioner of insurance shall adopt rules as
31-24    necessary to implement this Act not later than December 31, 2001.