1-1     By:  Sadler, et al. (Senate Sponsor - Bivins)         H.B. No. 3343
 1-2           (In the Senate - Received from the House May 1, 2001;
 1-3     May 1, 2001, read first time and referred to Committee on
 1-4     Education; May 3, 2001, reported adversely, with favorable
 1-5     Committee Substitute by the following vote:  Yeas 8, Nays 0;
 1-6     May 3, 2001, sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR H.B. No. 3343                  By:  Bivins
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to benefits, including group benefits coverage, for
1-11     certain participants of the Teacher Retirement System of Texas and
1-12     employees of certain charter schools.
1-13           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-14                                  ARTICLE 1
1-15           SECTION 1.01.  Subchapter E, Chapter 3, Insurance Code, is
1-16     amended by adding Article 3.50-7 to read as follows:
1-17           Art. 3.50-7.  TEXAS ACTIVE SCHOOL EMPLOYEES UNIFORM GROUP
1-18     BENEFITS ACT
1-19           Sec. 1.  SHORT TITLE.  This article may be cited as the Texas
1-20     Active School Employees Uniform Group Benefits Act.
1-21           Sec. 2.  DEFINITIONS.  In this article:
1-22                 (1)  "Administering firm" means any firm designated by
1-23     the trustee to administer any coverages, services, benefits, or
1-24     requirements under this article and the trustee's rules adopted
1-25     under this article.
1-26                 (2)  "Charter school" means an open-enrollment charter
1-27     school established under Subchapter D, Chapter 12, Education Code.
1-28                 (3)  "Employee" means a participating member of the
1-29     Teacher Retirement System of Texas who is employed by a school
1-30     district or a regional education service center and who is not
1-31     covered by a group insurance program under the Texas Employees
1-32     Uniform Group Insurance Benefits Act (Article 3.50-2, Vernon's
1-33     Texas Insurance Code) or the Texas State College and University
1-34     Employees Uniform Insurance Benefits Act (Article 3.50-3, Vernon's
1-35     Texas Insurance Code).  The term does not include a person
1-36     performing personal services for a participating entity as an
1-37     independent contractor.
1-38                 (4)  "Health benefits plan" means any group policy or
1-39     contract, medical, dental, or hospital service agreement,
1-40     membership or subscription contract, salary continuation plan,
1-41     health maintenance organization agreement, preferred provider
1-42     arrangement, or any similar group arrangement or any combination of
1-43     those policies, plans, contracts, agreements, or arrangements
1-44     provided for the purpose of providing, paying for, or reimbursing
1-45     expenses for health care services.
1-46                 (5)  "Participating employee" means an employee who is
1-47     participating in the program.
1-48                 (6)  "Participating entity" means an entity
1-49     participating in the group benefits program established under this
1-50     article.  The term includes:
1-51                       (A)  a school district;
1-52                       (B)  a regional education service center; and
1-53                       (C)  a charter school.
1-54                 (7)  "Program" means the group benefits program
1-55     established under this article.
1-56                 (8)  "Regional education service center" means a
1-57     regional education service center established under Chapter 8,
1-58     Education Code.
1-59                 (9)  "Trustee" means the Teacher Retirement System of
1-60     Texas.
1-61                 (10)  "School district" means a public school district
1-62     of this state.
1-63           Sec. 3.  ADMINISTRATION BY TRUSTEE.  The Teacher Retirement
1-64     System of Texas, as trustee, shall implement and administer the
 2-1     program.
 2-2           Sec. 4.  POWERS AND DUTIES OF TRUSTEE.  (a)  The trustee may
 2-3     take the actions it considers necessary to devise, administer, and
 2-4     implement the program.
 2-5           (b)  The trustee may hire and compensate employees as
 2-6     necessary to implement the program.  The trustee may contract with
 2-7     an independent and experienced group insurance consultant or
 2-8     actuary for advice and counsel in implementing and administering
 2-9     the program.
2-10           (c)  The trustee may adopt rules relating to the program as
2-11     considered necessary by the trustee.
2-12           (d)  In contracting for any benefits under this article,
2-13     competitive bidding shall be required under rules adopted by the
2-14     trustee.  The trustee is not required to select the lowest bid but
2-15     may consider also ability to service contracts, past experiences,
2-16     financial stability, and other relevant criteria.  If the trustee
2-17     awards a contract to an entity whose bid deviates from that
2-18     advertised, the deviation shall be recorded and the reasons for the
2-19     deviation shall be fully justified in the minutes of the next
2-20     meeting of the trustee.
2-21           (e)  The trustee may enter into interagency contracts with
2-22     any agency of the state, including the Employees Retirement System
2-23     of Texas and the Texas Department of Insurance, for the purpose of
2-24     assistance in implementing the program.
2-25           (f)  The trustee has the same powers with regard to the
2-26     program that the Employees Retirement System of Texas has in
2-27     administering the Texas Employees Uniform Group Insurance Benefits
2-28     Act (Article 3.50-2, Vernon's Texas Insurance Code), including the
2-29     power to adjudicate claims and to expel participants from the
2-30     program for cause.
2-31           Sec. 5.  GROUP COVERAGE PLANS.  (a)  The trustee shall
2-32     establish plans of group coverages for employees of participating
2-33     entities and their dependents.  The plans of group benefits must
2-34     include at least five tiers of group coverage, with benefits at
2-35     different levels in each tier, ranging from the first tier basic
2-36     coverage plan to the standard plan.  Each tier must contain a
2-37     health benefits plan.  The standard plan of group benefits shall be
2-38     comparable in scope and, to the greatest extent possible, in cost
2-39     to the health benefit plan coverages provided under the Texas
2-40     Employees Uniform Group Insurance Benefits Act (Article 3.50-2,
2-41     Vernon's Texas Insurance Code).
2-42           (b)  In addition to health benefit plans, the coverages may
2-43     include accidental death and dismemberment coverages, coverages
2-44     against short-term or long-term loss of salary, and other coverages
2-45     considered advisable by the trustee.
2-46           Sec. 6.  PARTICIPATION IN PROGRAM BY ENTITY.  (a)  Beginning
2-47     September 1, 2002, a school district, regional education service
2-48     center, or charter school may elect to participate in the program
2-49     provided by this article.
2-50           (b)  A school district, regional education service center, or
2-51     charter school that elects to participate in the program is
2-52     required to participate for a minimum of three years.  The
2-53     beginning of the entity's participation in the program must
2-54     coincide with the beginning of a school year in an odd-numbered
2-55     year.
2-56           (c)  The trustee by rule shall establish a biennial deadline
2-57     for notification of the trustee of an election to begin
2-58     participation.  The rule must require notification by the school
2-59     district, regional education service center, or charter school to
2-60     the trustee at least three months before the entity begins
2-61     participation.
2-62           (d)  A participating entity may elect to discontinue
2-63     participation by notifying the trustee in the manner prescribed by
2-64     the trustee at least three months before the entity discontinues
2-65     participation.
2-66           (e)  Only a participating entity is eligible to receive the
2-67     state contribution described under Section 9 of this article.
2-68           Sec. 7.  PARTICIPATION IN PROGRAM BY EMPLOYEE.  (a)  In this
2-69     section, "full-time employee" and "part-time employee" have the
 3-1     meanings defined by trustee rules.
 3-2           (b)  Each full-time employee of a participating entity is
 3-3     automatically covered by the first tier basic coverage plan unless
 3-4     the employee:
 3-5                 (1)  specifically waives coverage under this article in
 3-6     the manner prescribed by trustee rule;
 3-7                 (2)  selects a higher tier coverage plan; or
 3-8                 (3)  is expelled from the program.
 3-9           (c)  Each part-time employee of a participating entity is
3-10     eligible to participate in the program on application in the manner
3-11     provided by the trustee, unless the employee has been expelled from
3-12     the program.  A participating entity shall notify each of its
3-13     part-time employees of the employee's eligibility to participate in
3-14     the program.
3-15           (d)  A participating employee may select coverage in any
3-16     coverage plan offered by the trustee under this article.  The
3-17     employee is required to participate in the selected coverage plan
3-18     for one year.  An employee who selects coverage in a coverage plan
3-19     other than the first tier basic coverage plan is not required to
3-20     maintain participation in that coverage plan and, after the
3-21     expiration of the one-year term, may waive coverage or select
3-22     coverage in a lower tier coverage plan.
3-23           (e)  A participating entity is not entitled to a state
3-24     contribution under Section 9 of this article as to an employee who
3-25     waives coverage under Subsection (b)(1) of this section.  After a
3-26     waiver of coverage, an employee may elect to participate in the
3-27     coverage based only on a change in status or another reason
3-28     approved by the trustee.
3-29           Sec. 8.  FUND.  (a)  The Texas school employees uniform group
3-30     benefits trust fund is created as a trust fund with the comptroller
3-31     and shall be administered by the trustee on behalf of the
3-32     participants in the program.
3-33           (b)  All contributions from employees, amounts paid by
3-34     participating entities, contributions for optional coverages,
3-35     investment income, appropriations for implementation of the
3-36     program, and other money required or authorized to be paid into the
3-37     fund shall be paid into the fund.
3-38           (c)  Except as provided by Subsection (e) of this section,
3-39     the trustee may use amounts in the fund only to provide group
3-40     coverages under this article and to pay the expenses of
3-41     administering the program.
3-42           (d)  The trustee may invest assets of the fund in the manner
3-43     provided by Section 67(a)(3), Article XVI, Texas Constitution.
3-44           (e)  Notwithstanding any other provision of this article, the
3-45     trustee may use amounts in the fund to perform the comparability
3-46     study required under Section 22.004(e), Education Code.
3-47           Sec. 9.  STATE CONTRIBUTION.  (a)  The state shall assist
3-48     employees of participating school districts in the purchase of
3-49     health benefits plan coverages under this article by providing the
3-50     amount specified for a covered employee in the General
3-51     Appropriations Act.  The state contribution shall be distributed
3-52     through the school finance formulas under Chapters 41 and 42,
3-53     Education Code, and used by school districts as provided by
3-54     Sections 42.2514 and 42.260, Education Code.
3-55           (b)  The state shall assist employees of participating
3-56     regional education service centers and charter schools in the
3-57     purchase of health benefits plan coverages under this article by
3-58     providing to the employing service center or charter school the
3-59     amount specified for a covered employee in the General
3-60     Appropriations Act.
3-61           Sec. 10.  PARTICIPATING ENTITY CONTRIBUTION.  (a)  Except as
3-62     otherwise provided by this section, effective September 1, 2002, a
3-63     participating entity shall contribute to the fund a sum certain
3-64     multiplied by the number of persons employed by the entity.  The
3-65     sum certain must be set at a level that, in combination with the
3-66     amount the participating entity receives from the state as provided
3-67     by Section 9 of this article, is adequate to provide, at a minimum,
3-68     100 percent of the cost of employee-only coverage under the first
3-69     tier basic coverage plan.
 4-1           (b)  Effective September 1, 2002, a participating entity
 4-2     that, for the 2000-2001 school year, paid amounts to share with
 4-3     employees the cost of coverage under a group health benefits plan
 4-4     shall contribute, for each fiscal year, an amount computed as
 4-5     provided by this subsection.  The participating entity shall divide
 4-6     the amount that the entity paid during the 2000-2001 school year
 4-7     for the prior group health benefits plan by the total number of
 4-8     employees of the participating entity during the 2000-2001 school
 4-9     year and multiply the result by the number of participating
4-10     employees employed by the entity in the fiscal year for which the
4-11     computation is made.  The required contribution is 80 percent of
4-12     the resulting amount.
4-13           (c)  If the amount contributed by a participating entity
4-14     subject to Subsection (b) of this section, when combined with the
4-15     state contribution described by Section 9 of this article, exceeds
4-16     the amount necessary to provide 100 percent of the cost of
4-17     employee-only coverage under the standard plan, the entity may use
4-18     the excess amount only to provide employee benefits, which may
4-19     include contributions to cover the cost of dependent and optional
4-20     coverages and increased employee compensation.
4-21           Sec. 11.  EMPLOYEE CONTRIBUTION.  Each participating employee
4-22     shall pay 100 percent of the cost of optional coverage or dependent
4-23     coverage selected by the employee unless the participating entity
4-24     employing the employee:
4-25                 (1)  pays all or part of the cost of that coverage
4-26     under Section 10 of this article; or
4-27                 (2)  elects to pay all or part of the cost of that
4-28     coverage under Section 22.004, Education Code.
4-29           SECTION 1.02.  Article 3.50-4, Insurance Code, is amended by
4-30     adding Section 5A to read as follows:
4-31           Sec. 5A.  TIERS OF COVERAGE.  The trustee shall offer to each
4-32     retiree participating in the program at least five tiers of group
4-33     coverage.  The coverage plans offered under this section must be
4-34     comparable to the coverage plans offered by the trustee to active
4-35     employees under Section 5, Article 3.50-7, of this code.
4-36           SECTION 1.03.  (a)  The Teacher Retirement System of Texas
4-37     shall begin enrollment in the program provided under Article
4-38     3.50-7, Insurance Code, as added by this Act, to begin with the
4-39     2002-2003 school year.
4-40           (b)  A school district, regional education service center, or
4-41     charter school that elects to participate in the program provided
4-42     under Article 3.50-7, Insurance Code, as added by this Act,
4-43     beginning with the 2002-2003 school year, shall notify the Teacher
4-44     Retirement System of Texas of the election not later than March 1,
4-45     2002.  An employee of a participating school district, regional
4-46     education service center, or charter school who waives coverage
4-47     under the program shall give notice of the waiver in the manner
4-48     prescribed by Article 3.50-7, Insurance Code, as added by this Act,
4-49     or rules adopted under that article not later than September 1,
4-50     2002.
4-51           (c)  The Teacher Retirement System of Texas shall adopt rules
4-52     establishing coverage plans under Article 3.50-7, Insurance Code,
4-53     as added by this Act, not later than June 1, 2002.
4-54           SECTION 1.04.  The Teacher Retirement System of Texas shall
4-55     transfer to the fund established under Section 8, Article 3.50-7,
4-56     Insurance Code, as added by this Act, any outstanding balance held
4-57     by the Teacher Retirement System of Texas as of December 31, 2001,
4-58     in the school employees group insurance fund established under
4-59     Section 15, Article 3.50-4, Insurance Code, that was designated for
4-60     use in programs relating to active school district employees.
4-61           SECTION 1.05.  Except as provided by Section 7.01 of this
4-62     Act, this article takes effect January 1, 2002.
4-63                         ARTICLE 2.  SCHOOL FINANCE
4-64           SECTION 2.01.  Effective September 1, 2001, Section
4-65     21.402(a), Education Code, is amended to read as follows:
4-66           (a)  Except as provided by Subsection (d), (e), or (f), a
4-67     school district must pay each classroom teacher, full-time
4-68     librarian, full-time counselor certified under Subchapter B, or
4-69     full-time school nurse not less than the minimum monthly salary,
 5-1     based on the employee's level of experience, determined by the
 5-2     following formula:
 5-3                                MS = SF X FS
 5-4     where:
 5-5           "MS" is the minimum monthly salary;
 5-6           "SF" is the applicable salary factor specified by Subsection
 5-7     (c); and
 5-8           "FS" is the amount, as determined by the commissioner under
 5-9     Subsection (b), of state and local funds per weighted student
5-10     available to a district eligible to receive state assistance under
5-11     Section 42.302 with an enrichment tax rate, as defined by Section
5-12     42.302, equal to the maximum rate authorized under Section 42.303,
5-13     except that the amount of state and local funds per weighted
5-14     student does not include the amount attributable to 80 percent of
5-15     the increase in the guaranteed level made by H.B. No. 3343, Acts of
5-16     the 77th Legislature, Regular Session, 2001.
5-17           SECTION 2.02.  Effective September 1, 2001, Section
5-18     41.002(a), Education Code, is amended to read as follows:
5-19           (a)  A school district may not have a wealth per student that
5-20     exceeds ________ or a greater amount for any year provided by
5-21     appropriation [$295,000].
5-22           SECTION 2.03.  Effective September 1, 2002, Section
5-23     41.002(a), Education Code, is amended to read as follows:
5-24           (a)  Subject to Section 41.0021, a [A] school district may
5-25     not have a wealth per student that exceeds ________ or a greater
5-26     amount for any year provided by appropriation [$295,000].
5-27           SECTION 2.04.  Subchapter A, Chapter 41, Education Code, is
5-28     amended by adding Section 41.0021 to read as follows:
5-29           Sec. 41.0021.   EQUALIZED WEALTH LEVEL FOR SCHOOL DISTRICTS
5-30     NOT PARTICIPATING IN GROUP BENEFITS PROGRAM.  Notwithstanding
5-31     Section 41.002, for a school district that does not participate in
5-32     the group benefits program established under Article 3.50-7,
5-33     Insurance Code, the wealth per student to which the district is
5-34     entitled is the wealth per student to which the district was
5-35     entitled for the 2000-2001 school year or a greater amount for any
5-36     year provided by appropriation.
5-37           SECTION 2.05.  Effective September 1, 2001, Subchapter E,
5-38     Chapter 42, Education Code, is amended by adding Section 42.2513 to
5-39     read as follows:
5-40           Sec. 42.2513.  ADDITIONAL STATE AID FOR CERTAIN SCHOOL
5-41     DISTRICTS.  (a)  This section applies only to a school district
5-42     that participates in the group benefits program established under
5-43     Article 3.50-7, Insurance Code.
5-44           (a-1)  Notwithstanding Subsection (a), for the 2001-2002
5-45     school year, any school district is eligible for state aid under
5-46     this section.  This subsection expires September 1, 2002.
5-47           (b)  A school district to which this section applies is
5-48     entitled to state aid in an amount, as determined by the
5-49     commissioner, according to the formula:
5-50                    ASA = (IGL X WADA X DTR X 100) - AIFE
5-51     where:
5-52           "ASA" is the amount of additional state aid to which the
5-53     district is entitled;
5-54           "IGL" is the increase made by H.B. No. 3343, Acts of the 77th
5-55     Legislature, Regular Session, 2001, to the guaranteed level of
5-56     state and local funds per weighted student per cent of tax effort
5-57     under Section 42.302;
5-58           "WADA" is the number of students in weighted average daily
5-59     attendance, as determined under Section 42.302;
5-60           "DTR" is the district enrichment tax rate of the school
5-61     district, as determined under Section 42.302; and
5-62           "AIFE" is the amount of:
5-63                 (1)  additional state aid allocated to the district
5-64     because of increases in funding elements under this chapter made by
5-65     H.B. No. 3343, Acts of the 77th Legislature, Regular Session, 2001;
5-66     or
5-67                 (2)  reductions in payments required under Chapter 41
5-68     because of the increase made by H.B. No. 3343, Acts of the 77th
5-69     Legislature, Regular Session, 2001, to the equalized wealth level.
 6-1           (c)  For purposes of Subsection (b), additional state aid
 6-2     allocated to a school district because of increases in funding
 6-3     elements ("AIFE") does not include additional state aid allocated
 6-4     to the district under Section 42.2514.
 6-5           (d)  A determination by the commissioner under this section
 6-6     is final and may not be appealed.
 6-7           (e)  The commissioner may adopt rules to implement this
 6-8     section.
 6-9           SECTION 2.06.  Subchapter E, Chapter 42, Education Code, is
6-10     amended by adding Section 42.2514 to read as follows:
6-11           Sec. 42.2514.  ADDITIONAL STATE AID FOR SCHOOL EMPLOYEE
6-12     BENEFITS.  (a)  For each school year, a school district, including
6-13     a school district that is otherwise ineligible for state aid under
6-14     this chapter, that participates in the group benefits program
6-15     established under Article 3.50-7, Insurance Code, is entitled to
6-16     state aid in an amount, as determined by the commissioner, equal to
6-17     the difference, if any, between:
6-18                 (1)  the amount determined by multiplying the amount
6-19     specified in the General Appropriations Act for that year for
6-20     purposes of the state contribution under Section 9, Article 3.50-7,
6-21     Insurance Code, by the number of district employees participating
6-22     in the group benefits program under that article; and
6-23                 (2)  an amount equal to 80 percent of the amount of:
6-24                       (A)  additional funds to which the district is
6-25     entitled due to the increase made by H.B. No. 3343, Acts of the
6-26     77th Legislature, Regular Session, 2001, to:
6-27                             (i)  the equalized wealth level under
6-28     Section 41.002; and
6-29                             (ii)  the guaranteed level of state and
6-30     local funds per weighted student per cent of tax effort under
6-31     Section 42.302; or
6-32                       (B)  additional state aid to which the district
6-33     is entitled under Section 42.2513.
6-34           (b)  A school district may use state aid received under this
6-35     section only to pay contributions as required by Article 3.50-7,
6-36     Insurance Code.
6-37           (c)  A determination by the commissioner under this section
6-38     is final and may not be appealed.
6-39           (d)  The commissioner may adopt rules to implement this
6-40     section.
6-41           SECTION 2.07.  Section 42.253(a), Education Code, is amended
6-42     to read as follows:
6-43           (a)  Subject to Section 42.2531, for [For] each school year
6-44     the commissioner shall determine:
6-45                 (1)  the amount of money to which a school district is
6-46     entitled under Subchapters B and C;
6-47                 (2)  the amount of money to which a school district is
6-48     entitled under Subchapter F;
6-49                 (3)  the amount of money allocated to the district from
6-50     the available school fund;
6-51                 (4)  the amount of each district's tier one local share
6-52     under Section 42.252; and
6-53                 (5)  the amount of each district's tier two local share
6-54     under Section 42.302.
6-55           SECTION 2.08.  Subchapter E, Chapter 42, Education Code, is
6-56     amended by adding Section 42.2531 to read as follows:
6-57           Sec. 42.2531.  FUNDING FOR SCHOOL DISTRICTS NOT PARTICIPATING
6-58     IN GROUP BENEFITS PROGRAM.  Notwithstanding Section 42.253, for a
6-59     school district that does not participate in the group benefits
6-60     program established under Article 3.50-7, Insurance Code, the
6-61     amount of money to which the district is entitled under Subchapter
6-62     F is computed using the guaranteed level of state and local funds
6-63     per weighted student per cent of tax effort under Section 42.302
6-64     for the 2000-2001 school year or a greater amount for any year
6-65     provided by appropriation.
6-66           SECTION 2.09.  Effective September 1, 2001, Subchapter E,
6-67     Chapter 42, Education Code, is amended by adding Section 42.2591 to
6-68     read as follows:
6-69           Sec. 42.2591.  USE OF CERTAIN FUNDS.  (a)  For the 2001-2002
 7-1     school year, the commissioner shall certify to each school district
 7-2     the amount of:
 7-3                 (1)  additional funds to which the district is entitled
 7-4     due to the increase made by H.B. No. 3343, Acts of the 77th
 7-5     Legislature, Regular Session, 2001, to:
 7-6                       (A)  the equalized wealth level under Section
 7-7     41.002; or
 7-8                       (B)  the guaranteed level of state and local
 7-9     funds per weighted student per cent of tax effort under Section
7-10     42.302; or
7-11                 (2)  additional state aid to which the district is
7-12     entitled under Section 42.2513.
7-13           (b)  Notwithstanding any other provision of this code, a
7-14     school district may use an amount of funds equal to 80 percent of
7-15     the amount certified for the district under Subsection (a) only to
7-16     pay:
7-17                 (1)  a nonrecurring expense, including a capital
7-18     outlay; or
7-19                 (2)  debt service.
7-20           (c)  A determination by the commissioner under this section
7-21     is final and may not be appealed.
7-22           (d)  The commissioner may adopt rules to implement this
7-23     section.
7-24           (e)  This section expires September 1, 2002.
7-25           SECTION 2.10.  Subchapter E, Chapter 42, Education Code, is
7-26     amended by adding Section 42.260 to read as follows:
7-27           Sec. 42.260.  USE OF CERTAIN FUNDS.  (a)  For each year, the
7-28     commissioner shall certify to each school district that
7-29     participates in the group benefits program established under
7-30     Article 3.50-7, Insurance Code, the amount of:
7-31                 (1)  additional funds to which the district is entitled
7-32     due to the increase made by H.B. No. 3343, Acts of the 77th
7-33     Legislature, Regular Session, 2001, to:
7-34                       (A)  the equalized wealth level under Section
7-35     41.002; or
7-36                       (B)  the guaranteed level of state and local
7-37     funds per weighted student per cent of tax effort under Section
7-38     42.302; or
7-39                 (2)  additional state aid to which the district is
7-40     entitled under Section 42.2513.
7-41           (b)  Notwithstanding any other provision of this code, a
7-42     school district may use an amount of funds equal to 80 percent of
7-43     the amount certified for the district under Subsection (a) only to
7-44     provide coverages authorized under Article 3.50-7, Insurance Code.
7-45           (c)  A determination by the commissioner under this section
7-46     is final and may not be appealed.
7-47           (d)  The commissioner may adopt rules to implement this
7-48     section.
7-49           SECTION 2.11.  Effective September 1, 2001, Section
7-50     42.302(a), Education Code, is amended to read as follows:
7-51           (a)  Each school district is guaranteed a specified amount
7-52     per weighted student in state and local funds for each cent of tax
7-53     effort over that required for the district's local fund assignment
7-54     up to the maximum level specified in this subchapter.  The amount
7-55     of state support, subject only to the maximum amount under Section
7-56     42.303, is determined by the formula:
7-57                     GYA = (GL X WADA X DTR X 100) - LR
7-58     where:
7-59           "GYA" is the guaranteed yield amount of state funds to be
7-60     allocated to the district;
7-61           "GL" is the dollar amount guaranteed level of state and local
7-62     funds per weighted student per cent of tax effort, which is ______
7-63     [$24.99] or a greater amount for any year provided by
7-64     appropriation;
7-65           "WADA" is the number of students in weighted average daily
7-66     attendance, which is calculated by dividing the sum of the school
7-67     district's allotments under Subchapters B and C, less any allotment
7-68     to the district for transportation, any allotment under Section
7-69     42.158, and 50 percent of the adjustment under Section 42.102, by
 8-1     the basic allotment for the applicable year;
 8-2           "DTR" is the district enrichment tax rate of the school
 8-3     district, which is determined by subtracting the amounts specified
 8-4     by Subsection (b) from the total amount of maintenance and
 8-5     operations taxes collected by the school district for the
 8-6     applicable school year and dividing the difference by the quotient
 8-7     of the district's taxable value of property as determined under
 8-8     Subchapter M, Chapter 403, Government Code, or, if applicable,
 8-9     under Section 42.2521, divided by 100; and
8-10           "LR" is the local revenue, which is determined by multiplying
8-11     "DTR" by the quotient of the district's taxable value of property
8-12     as determined under Subchapter M, Chapter 403, Government Code, or,
8-13     if applicable, under Section 42.2521, divided by 100.
8-14           SECTION 2.12.  Effective September 1, 2002, Section
8-15     42.302(a), Education Code, is amended to read as follows:
8-16           (a)  Each school district is guaranteed a specified amount
8-17     per weighted student in state and local funds for each cent of tax
8-18     effort over that required for the district's local fund assignment
8-19     up to the maximum level specified in this subchapter.  The amount
8-20     of state support, subject only to the maximum amount under Section
8-21     42.303, is determined by the formula:
8-22                     GYA = (GL X WADA X DTR X 100) - LR
8-23     where:
8-24           "GYA" is the guaranteed yield amount of state funds to be
8-25     allocated to the district;
8-26           "GL" is the dollar amount guaranteed level of state and local
8-27     funds per weighted student per cent of tax effort, which is ______
8-28     [$24.99] or a greater amount for any year provided by
8-29     appropriation;
8-30           "WADA" is the number of students in weighted average daily
8-31     attendance, which is calculated by dividing the sum of the school
8-32     district's allotments under Subchapters B and C, less any allotment
8-33     to the district for transportation, any allotment under Section
8-34     42.158, and 50 percent of the adjustment under Section 42.102, by
8-35     the basic allotment for the applicable year;
8-36           "DTR" is the district enrichment tax rate of the school
8-37     district, which is determined by subtracting the amounts specified
8-38     by Subsection (b) from the total amount of maintenance and
8-39     operations taxes collected by the school district for the
8-40     applicable school year and dividing the difference by the quotient
8-41     of the district's taxable value of property as determined under
8-42     Subchapter M, Chapter 403, Government Code, or, if applicable,
8-43     under Section 42.2521, divided by 100; and
8-44           "LR" is the local revenue, which is determined by multiplying
8-45     "DTR" by the quotient of the district's taxable value of property
8-46     as determined under Subchapter M, Chapter 403, Government Code, or,
8-47     if applicable, under Section 42.2521, divided by 100.
8-48           SECTION 2.13.  Except as otherwise provided by this article
8-49     or as provided by Section 7.01 of this Act, this article takes
8-50     effect September 1, 2002.
8-51                 ARTICLE 3.  COVERAGE FOR DEPENDENT CHILDREN
8-52                    OF CERTAIN SCHOOL DISTRICT EMPLOYEES
8-53           SECTION 3.01.  Subchapter E, Chapter 3, Insurance Code, is
8-54     amended by adding Article 3.50-8 to read as follows:
8-55           Art. 3.50-8.  HEALTH BENEFIT PLAN COVERAGE FOR DEPENDENT
8-56     CHILDREN OF CERTAIN SCHOOL DISTRICT EMPLOYEES
8-57           Sec. 1.  DEFINITIONS.  In this article:
8-58                 (1)  "Charter school" means an open-enrollment charter
8-59     school established under Subchapter D, Chapter 12, Education Code.
8-60                 (2)  "Employee" means a participating member of the
8-61     Teacher Retirement System of Texas who is employed by a school
8-62     district or a regional education service center, or a person
8-63     employed by a charter school.  The term does not include an
8-64     individual performing personal services for a school district,
8-65     regional education service center, or charter school as an
8-66     independent contractor.
8-67                 (3)  "Health coverage plan" means any group policy or
8-68     contract, medical, dental, or hospital service agreement,
8-69     membership or subscription contract, salary continuation plan,
 9-1     health maintenance organization agreement, preferred provider
 9-2     arrangement, or any similar group arrangement or any combination of
 9-3     those policies, plans, contracts, agreements, or arrangements that
 9-4     provides for, pays for, or reimburses expenses for health care
 9-5     services.
 9-6                 (4)  "Regional education service center" means a
 9-7     regional education service center established under Chapter 8,
 9-8     Education Code.
 9-9                 (5)  "Trustee" means the Teacher Retirement System of
9-10     Texas.
9-11           Sec. 2.  CONTRIBUTIONS FOR COVERAGE.  (a)  Subject to any
9-12     applicable limit in the General Appropriations Act, the trustee
9-13     shall use money appropriated for employer contributions to fund 80
9-14     percent of the cost of health coverage under this article for a
9-15     child who:
9-16                 (1)  is a dependent of an employee;
9-17                 (2)  would be eligible, if the child were not the
9-18     dependent of the employee, for benefits under the program
9-19     established by this state to implement Title XXI of the Social
9-20     Security Act (42 U.S.C. Section 1397aa et seq.), as amended; and
9-21                 (3)  is not eligible for the state Medicaid program.
9-22           (b)  The coverage provided under this article must provide
9-23     benefits equivalent to the benefits provided under the state child
9-24     health plan operated under Chapter 62, Health and Safety Code.
9-25           (c)  Notwithstanding Subsection (a) of this section, the
9-26     trustee may pay a higher percentage of the cost of coverage for a
9-27     child described by Subsection (a) of this section if money becomes
9-28     available for that purpose.
9-29           Sec.  3.  NOTIFICATION TO EMPLOYEES.  The trustee shall
9-30     notify employees that:
9-31                 (1)  the employee may be eligible for dependent child
9-32     coverage under Section 2 of this article; and
9-33                 (2)  the employee may apply for the coverage as
9-34     provided by Section 4 of this article.
9-35           Sec. 4.  APPLICATION FOR COVERAGE.  (a)  An employee who
9-36     desires dependent child coverage under this article shall apply to
9-37     the Texas Department of Human Services or other agency designated
9-38     by the Health and Human Services Commission to perform eligibility
9-39     screening under this article.
9-40           (b)  The eligibility screening shall be coordinated with
9-41     eligibility screening for the state Medicaid program.  The agency
9-42     that performs the eligibility screening shall certify to the
9-43     trustee in writing whether a child is eligible for dependent child
9-44     coverage under Section 2 of this article.
9-45           (c)  If an employee does not obtain dependent child coverage
9-46     under this article at the time the employee is initially employed,
9-47     the employee may apply for the coverage during any open enrollment
9-48     period applicable to the employee's coverage under Article 3.50-4
9-49     or 3.50-7 of this code or any other applicable state law.  The
9-50     trustee may:
9-51                 (1)  continue the coverage until the next open
9-52     enrollment period applicable to the employee's coverage, without
9-53     regard to any change in status of the child; or
9-54                 (2)  adopt rules requiring an employee, during the
9-55     period the coverage is in effect, to report a change in status that
9-56     would make the dependent child ineligible for coverage and may
9-57     terminate the coverage on receipt of the report of a change in
9-58     status.
9-59           (d)  The trustee may require an employee to reapply for
9-60     dependent child coverage under this article during each annual open
9-61     enrollment period applicable to the employee's coverage.  The
9-62     trustee and the Texas Department of Human Services or other agency
9-63     designated by the Health and Human Services Commission to perform
9-64     eligibility screening under this article shall cooperate to develop
9-65     a cost-effective method for annual reevaluation of eligibility
9-66     determinations for dependent child coverage under this article.
9-67           Sec.  5.  TERMINATION OF PROGRAM.  If the program established
9-68     under Chapter 62, Health and Safety Code, that uses federal funding
9-69     under Title XXI of the Social Security Act (42 U.S.C. Section
 10-1    1397aa et seq.), as amended, is terminated, state contributions for
 10-2    benefits for those eligible under Section 2 of this article end on
 10-3    the date of that termination.
 10-4          SECTION 3.02.  (a)  Except as provided by Section 7.01 of
 10-5    this Act, this article takes effect September 1, 2001.
 10-6          (b)  Article 3.50-8, Insurance Code, as added by this
 10-7    article, does not apply to the purchase of health benefit plan
 10-8    coverage for a dependent child by the Teacher Retirement System of
 10-9    Texas before fiscal year 2003.
10-10             ARTICLE 4.  RETIREMENT BENEFITS AND CONTRIBUTIONS
10-11          SECTION 4.01.  Section 824.001, Government Code, is amended
10-12    to read as follows:
10-13          Sec. 824.001.  TYPES OF BENEFITS.  The types of benefits
10-14    payable by the retirement system are:
10-15                (1)  service retirement benefits;
10-16                (2)  disability retirement benefits; [and]
10-17                (3)  death benefits; and
10-18                (4)  retiree health care benefits permitted under
10-19    Section 401(h), Internal Revenue Code of 1986, and its subsequent
10-20    amendments.
10-21          SECTION 4.02.  Sections 824.203(a) and (e), Government Code,
10-22    are amended to read as follows:
10-23          (a)  Except as provided by Subsections (c), (d), and (e), the
10-24    standard service retirement annuity is an amount computed on the
10-25    basis of the member's average annual compensation for the three
10-26    years of service, whether or not consecutive, in which the member
10-27    received the highest annual compensation, times 2.25 [2.2] percent
10-28    for each year of service credit in the retirement system.
10-29          (e)  The annual standard service retirement annuity for a
10-30    person who immediately before retirement holds a position as a
10-31    classroom teacher or full-time librarian, or the annual death
10-32    benefit annuity based on the service of a member who at the time of
10-33    death held a position as a classroom teacher or full-time
10-34    librarian, may not be less than an amount computed on the basis of
10-35    the minimum annual salary provided by the Education Code for a
10-36    classroom teacher or full-time librarian, multiplied by 2.25 [2.2]
10-37    percent for each year of service credit in the retirement system.
10-38          SECTION 4.03.  Chapter 824, Government Code, is amended by
10-39    adding Subchapter J to read as follows:
10-40                SUBCHAPTER J.  RETIREE HEALTH CARE BENEFITS
10-41          Sec. 824.851.  DEFINITIONS.  In this subchapter:
10-42                (1)  "401(h) account" means the 401(h) account
10-43    established under this subchapter.
10-44                (2)  "Active employee" means an employee who is a
10-45    member of the Teacher Retirement System of Texas and who is not
10-46    entitled to coverage under a health benefit plan provided under the
10-47    Texas Employees Uniform Group Insurance Benefits Act (Article
10-48    3.50-2, Vernon's Texas Insurance Code) or under the Texas State
10-49    College and University Employees Uniform Insurance Benefits Act
10-50    (Article 3.50-3, Vernon's Texas Insurance Code).
10-51                (3)  "Carrier" means any insurance company or hospital
10-52    service corporation authorized by the Texas Department of Insurance
10-53    to provide any of the insurance coverages, benefits, or services
10-54    provided by this subchapter under the insurance laws of this state.
10-55                (4)  "Dependent" means:
10-56                      (A)  a spouse of a retiree; or
10-57                      (B)  a retiree's unmarried child who is younger
10-58    than 25 years of age, including an adopted child, a foster child, a
10-59    stepchild, or other child who is in a regular parent-child
10-60    relationship, and a recognized natural child; and a retiree's
10-61    recognized natural child, adopted child, foster child, stepchild,
10-62    or other child who is in a regular parent-child relationship and
10-63    who lives with or whose care is provided by the retiree or
10-64    surviving spouse on a regular basis, regardless of the child's age,
10-65    if the child is mentally retarded or physically incapacitated to
10-66    such an extent as to be dependent on the retiree or surviving
10-67    spouse for care or support, as determined by the trustee.
10-68                (5)  "Health benefit plan" means a group insurance
10-69    policy, contract, or certificate, medical or hospital service
 11-1    agreement, membership or subscription contract, salary continuation
 11-2    plan, or similar group arrangement to provide, or pay for or
 11-3    reimburse expenses for, health care services.
 11-4                (6)  "Medicare" means the health insurance program for
 11-5    the aged and disabled that is provided by the United States
 11-6    government.
 11-7                (7)  "Minimum premium contract" means a contract
 11-8    entered into with the carrier by the board of trustees that
 11-9    provides that an appropriate amount will be paid to the carrier to
11-10    cover its cost of direct claims administration, cost of other
11-11    administration, risk charges with stop-loss provisions, and profit
11-12    and the remainder of the funds will be used to reimburse the
11-13    carrier to cover claims as they are paid, to pay the administrative
11-14    expenses, and to provide the assets to cover all reserves necessary
11-15    for the trustee to operate on a financially sound basis.
11-16                (8)  "Policy year" means the period beginning on
11-17    September 1 of one year and ending on August 31 of the following
11-18    year.
11-19                (9)  "Qualified retiree" means a person who is:
11-20                      (A)  a retiree with at least 10 years of service
11-21    credit in the retirement system for actual service in a public
11-22    school in this state and who is not eligible to be covered by a
11-23    health benefit plan provided under the Texas Employees Uniform
11-24    Group Insurance Benefits Act (Article 3.50-2, Vernon's Texas
11-25    Insurance Code) or under the Texas State College and University
11-26    Employees Uniform Insurance Benefits Act (Article 3.50-3, Vernon's
11-27    Texas Insurance Code); or
11-28                      (B)  a disability retiree entitled to receive
11-29    monthly benefits from the retirement system.
11-30                (10)  "Surviving dependent child" means the dependent
11-31    child of a deceased retiree who has survived the deceased retiree
11-32    and the deceased retiree's spouse.
11-33                (11)  "Surviving spouse" means the surviving spouse of
11-34    a deceased retiree.
11-35          Sec. 824.852.  APPLICABILITY OF OTHER LAWS.  Article 3.51,
11-36    Insurance Code, does not apply to insurance purchased under this
11-37    subchapter.
11-38          Sec. 824.853.  ACCOUNT.  (a)  The 401(h) account is
11-39    established to provide for medical benefits under this subchapter.
11-40          (b)  The board of trustees shall take the actions it
11-41    considers necessary to devise, administer, and implement the 401(h)
11-42    account.
11-43          (c)  The 401(h) account is created in the retirement system
11-44    and is part of the trust assets of the retirement system.
11-45          (d)  The comptroller is the custodian of the 401(h) account,
11-46    and the board of trustees shall administer the 401(h) account.
11-47          (e)  Money required to be paid into the 401(h) account,
11-48    including contributions from active employees, and the state and
11-49    investment income, shall be paid into the 401(h) account.
11-50          (f)  From the 401(h) account, the board of trustees may pay,
11-51    without state fiscal year limitation, appropriate premiums to the
11-52    carrier or carriers providing group coverage under this subchapter,
11-53    claims for benefits under the group coverage, and the amounts
11-54    expended by the board of trustees for administration.
11-55          (g)  The appropriate portion of the contributions to the
11-56    401(h) account to provide for incurred but unreported claim
11-57    reserves and contingency reserves, as determined by the board of
11-58    trustees, shall be retained in the 401(h) account.
11-59          (h)  Expenses for the development and administration of the
11-60    401(h) account shall be spent as provided by a budget adopted by
11-61    the board of trustees.
11-62          (i)  The board of trustees may invest and reinvest the money
11-63    in the 401(h) account as provided by Subchapter D, Chapter 825, for
11-64    assets of the retirement system.
11-65          Sec. 824.854.  BOARD POWERS AND DUTIES.  (a)  The board of
11-66    trustees may adopt rules, plans, and procedures that are reasonably
11-67    necessary to implement this subchapter, including:
11-68                (1)  establishing minimum benefit and financing
11-69    standards for group insurance coverage to be provided to all
 12-1    qualified retirees, dependents, surviving spouses, and surviving
 12-2    dependent children;
 12-3                (2)  establishing procedures for contributions and
 12-4    deductions;
 12-5                (3)  determining methods and procedures for claims
 12-6    administration;
 12-7                (4)  administering the 401(h) account;
 12-8                (5)  adopting a timetable for the development of
 12-9    minimum benefit and financial standards for group insurance
12-10    coverage;
12-11                (6)  establishing group insurance plans;
12-12                (7)  taking bids for and awarding contracts for
12-13    insurance;
12-14                (8)  contracting with an independent and experienced
12-15    group insurance consultant or actuary for advice and counsel in
12-16    implementing and administering the 401(h) account;
12-17                (9)  establishing the 401(h) account;
12-18                (10)  creating and adopting appropriate health benefit
12-19    plan documents; and
12-20                (11)  establishing appropriate accounts and reserves
12-21    within the 401(h) account.
12-22          (b)  The board of trustees may adopt other rules relating to
12-23    the 401(h) account as are considered necessary by the board of
12-24    trustees.
12-25          Sec. 824.855.  EMPLOYEES.  (a)  The board of trustees may
12-26    employ persons to assist the board in carrying out this subchapter.
12-27          (b)  The board of trustees shall determine the duties and
12-28    compensation of the employees.
12-29          Sec. 824.856.  PARTICIPATION.  Each qualified retiree must be
12-30    enrolled in the group insurance program authorized by Article
12-31    3.50-4, Insurance Code, to be eligible for benefits under this
12-32    subchapter.
12-33          Sec. 824.857.  BENEFITS.  (a)  The board of trustees shall be
12-34    designated as the group policyholder for any insurance purchased
12-35    under this subchapter.
12-36          (b)  The board of trustees may establish one or more health
12-37    benefit plans that are self-insured.
12-38          (c)  The coverages provided under the 401(h) account may
12-39    include hospital care and benefits, surgical care and treatment,
12-40    medical care and treatment, dental care, eye care, obstetrical
12-41    benefits, eligible long-term care as defined in Sections 213 and
12-42    7702B of the Internal Revenue Code of 1986, and its subsequent
12-43    amendments, prescribed drugs, medicines, and prosthetic devices,
12-44    and other supplemental benefits, supplies, and services as provided
12-45    by this subchapter.
12-46          (d)  Coverages under Subsection (c) are limited to benefits
12-47    permissible under Section 213 of the Internal Revenue Code of 1986,
12-48    and its subsequent amendments.
12-49          (e)  Benefits, if any, shall be paid only to the extent there
12-50    are assets available in the 401(h) account, taking into
12-51    consideration reserves established by the board of trustees.
12-52          (f)  A health care claim shall be processed under the 401(h)
12-53    account first, and, to the extent the claim is not covered under
12-54    this subchapter or funds are not available, the claim shall be sent
12-55    to the board of trustees for processing under the group insurance
12-56    program authorized under Article 3.50-4, Insurance Code.
12-57          (g)  The board of trustees may provide different benefits for
12-58    retirees and surviving spouses covered by Medicare than the
12-59    benefits provided for retirees and surviving spouses who are not
12-60    covered by Medicare.
12-61          (h)  New contracts for coverages under this subchapter shall
12-62    be submitted for competitive bidding at least every six years.
12-63          (i)  Any contract shall be based on the terms and conditions
12-64    agreed on between the board of trustees and the entity selected to
12-65    provide the coverage and benefits.
12-66          (j)  Any contract for group benefits awarded by the board of
12-67    trustees must meet the minimum benefit and financial standards
12-68    adopted by the board of trustees.
12-69          (k)  The coverage provided by this subchapter shall follow
 13-1    the coordination of benefit rules under Article 3.50-4, Insurance
 13-2    Code.
 13-3          (l)  In contracting for any benefits under this subchapter,
 13-4    competitive bidding shall be required under rules adopted by the
 13-5    board of trustees.  The board of trustees is not required to select
 13-6    the lowest bid but may consider also ability to service contracts,
 13-7    past experiences, financial stability, and other relevant criteria.
 13-8    If the board of trustees awards a contract to an entity whose bid
 13-9    deviates from that advertised, the deviation shall be recorded and
13-10    the reasons for the deviation shall be fully justified in the
13-11    minutes of the next meeting of the board of trustees.
13-12          (m)  Notwithstanding any other provision of this subchapter,
13-13    the board of trustees may:
13-14                (1)  self-insure any benefits available under this
13-15    subchapter; and
13-16                (2)  engage private entities to collect contributions
13-17    from or to settle claims in connection with benefits established by
13-18    the board of trustees under this subchapter.
13-19          (n)  The board of trustees may contract directly with health
13-20    care providers, including health maintenance organizations,
13-21    preferred provider organizations, carriers, administrators, and
13-22    other qualified vendors, to provide benefits to participants.
13-23          Sec. 824.858.  BENEFIT CERTIFICATES.  The board of trustees
13-24    may require each insurance carrier to issue to each retiree,
13-25    surviving spouse, or surviving dependent child insured under this
13-26    subchapter a certificate of insurance that:
13-27                (1)  states the benefits to which the person is
13-28    entitled;
13-29                (2)  states to whom the benefits are payable;
13-30                (3)  states to whom the claims must be submitted; and
13-31                (4)  summarizes the provisions of the policy
13-32    principally affecting the person.
13-33          Sec. 824.859.  ANNUAL REPORT AND ACCOUNTING.  (a)  Not later
13-34    than the 180th day after the end of each state fiscal year, the
13-35    board of trustees shall make a written report to the Texas
13-36    Department of Insurance concerning the coverages provided and the
13-37    benefits and services being received by persons under this
13-38    subchapter.
13-39          (b)  Insurance coverage purchased under this subchapter shall
13-40    provide for an accounting to the board of trustees by each carrier
13-41    providing coverage not later than the 90th day after the end of
13-42    each policy year.
13-43          (c)  The accounting shall be on a form approved by the board
13-44    of trustees.
13-45          (d)  Other reports shall be prepared by each carrier if
13-46    considered necessary by the board of trustees.
13-47          (e)  An extra charge may not be assessed by the carrier for
13-48    the accounting reports.
13-49          (f)  All reports required by this subchapter shall be made
13-50    available for public inspection in a form that protects the
13-51    identity of the individual claimants.
13-52          Sec. 824.860.  EXEMPTION FROM EXECUTION AND TAXATION.
13-53    (a)  All insurance benefit payments, active employee and state
13-54    contributions, qualified retiree, surviving spouse, and surviving
13-55    dependent child contributions, and optional benefits payments and
13-56    any rights, benefits, or payments accruing to any person under this
13-57    subchapter, as well as all money in the 401(h) account created by
13-58    this subchapter, are exempt from execution, attachment,
13-59    garnishment, or any other process and may not be assigned except
13-60    for direct payment to benefit providers as authorized by the board
13-61    of trustees by contract, rule, or otherwise.
13-62          (b)  A premium or contribution on a policy, insurance
13-63    contract, or agreement authorized as provided by this subchapter is
13-64    not subject to any state tax, regulatory fee, or surcharge,
13-65    including premium or maintenance taxes or fees.
13-66          Sec. 824.861.  CONTRIBUTIONS.  (a)  For each state fiscal
13-67    year, each active employee, as a condition of employment, shall
13-68    contribute to the 401(h) account an amount equal to 0.25 percent of
13-69    the employee's salary.
 14-1          (b)  Each month the employer of an active employee shall
 14-2    deduct the contributions from the employee's salary and shall remit
 14-3    the contributions to the board of trustees as provided by any
 14-4    procedures that the board of trustees may require.
 14-5          (c)  Instead of deducting the contributions from salaries, an
 14-6    employer may assume and pay the total contributions due from its
 14-7    active employees for any month.
 14-8          (d)  Whether the employer deducts the contributions from
 14-9    salaries or assumes and pays the total contributions, contributions
14-10    under this subsection shall be picked up under Section 414(h) of
14-11    the Internal Revenue Code of 1986, and its subsequent amendments,
14-12    by the employer and paid to the 401(h) account, subject to approval
14-13    of the board of trustees and the board's receipt of a favorable
14-14    private letter ruling from the Internal Revenue Service.
14-15          (e)  The board of trustees shall establish any procedures and
14-16    forms necessary or appropriate to accomplish this pickup.
14-17          (f)  From September 1, 2002, to August 31, 2010, the state
14-18    shall contribute to the 401(h) account an amount equal to two
14-19    percent of the aggregate annual compensation of each active
14-20    employee.  This amount is included within the total amount that the
14-21    state actually appropriates to the retirement system for state
14-22    contributions described by Section 825.404.
14-23          (g)  Contributions from active employees become the property
14-24    of the 401(h) account on receipt by the board of trustees and may
14-25    not be refunded to the active employee under any circumstances,
14-26    including termination of employment.
14-27          (h)  Contributions to the 401(h) account deducted from the
14-28    salary of an active employee are included in annual compensation of
14-29    the employee for purposes of the retirement system.
14-30          (i)  Before the first day of November preceding each regular
14-31    session of the legislature, the board of trustees shall certify to
14-32    the Legislative Budget Board and the budget division of the
14-33    governor's office the amounts necessary to pay the state
14-34    contributions to the 401(h) account under this subchapter for
14-35    information and review.
14-36          (j)  Not later than August 31 of each year, the board of
14-37    trustees shall certify to the comptroller the estimated amount of
14-38    state contributions to be received by the 401(h) account for the
14-39    next fiscal year under the appropriations authorized by this
14-40    subchapter.
14-41          (k)  Contributions allocated under this section and
14-42    appropriated shall be paid from the general revenue fund in equal
14-43    monthly installments, based on the annual estimate certified by the
14-44    board of trustees to the comptroller for that year and subject to
14-45    any express limitations specified in the Act making the
14-46    appropriation.  Variations between the certified amount and the
14-47    actual amount due for the year shall be reconciled at the close of
14-48    the fiscal year and proper adjustments in the annual contributions
14-49    to the 401(h) account shall be made.
14-50          (l)  An employing district that fails to remit, in the period
14-51    prescribed by Section 825.408, all deposits required by this
14-52    subchapter shall pay to the 401(h) account, in addition to the
14-53    deposits, interest on the unpaid amounts at the annual rate of six
14-54    percent compounded annually.
14-55          (m)  An employing district and its board of trustees hold
14-56    amounts due to the 401(h) account under this subchapter in trust
14-57    for its participants and may not divert the amounts for any other
14-58    purpose.
14-59          Sec. 824.862.  COLLECTION OF CONTRIBUTIONS FROM FEDERAL OR
14-60    PRIVATE SOURCES.  If an employer applies for money provided by the
14-61    United States, an agency of the United States, or a privately
14-62    sponsored source and if any of the money will pay part or all of an
14-63    active employee's salary, the employer shall apply for any legally
14-64    available money to pay state contributions required by this
14-65    subchapter to be paid to the 401(h) account, using the same
14-66    procedures provided by Section 825.406.
14-67          Sec. 824.863.  STUDIES, REPORTS, AND AUDITS.  (a)  The board
14-68    of trustees shall study the operation and administration of this
14-69    subchapter.
 15-1          (b)  The board of trustees shall make a report to the
 15-2    legislature at each regular legislative session relating to the
 15-3    operation and administration of this subchapter.
 15-4          (c)  Each contract entered into under this subchapter shall
 15-5    include provisions requiring carriers to:
 15-6                (1)  furnish to the board of trustees on a timely basis
 15-7    reasonable reports that the board of trustees determines are
 15-8    necessary to carry out its functions under this subchapter; and
 15-9                (2)  permit the board of trustees and state auditor to
15-10    examine records of the carriers as may be necessary to carry out
15-11    this subchapter.
15-12          Sec. 824.864.  COVERAGE FOR DEPENDENTS, SURVIVING SPOUSES,
15-13    AND SURVIVING DEPENDENT CHILDREN.  (a)  Any qualified retiree
15-14    participating in the program is entitled to secure for the
15-15    retiree's dependents group insurance coverages provided for the
15-16    board of trustees.
15-17          (b)  The additional contribution payments for the coverages
15-18    for dependents shall be deducted from the annuities of the
15-19    qualified retiree in the manner and form determined by the board of
15-20    trustees.
15-21          (c)  A surviving spouse who is entitled to insurance benefits
15-22    under this subchapter may elect to retain or obtain the insurance
15-23    coverage for the spouse or the qualified retiree's dependents, at
15-24    the applicable rates for retirees, provided the surviving spouse
15-25    provides payment of applicable contributions in the manner
15-26    established by the board of trustees.
15-27          (d)  A surviving dependent child, the guardian of the child's
15-28    estate, or the person having custody of the child may elect to
15-29    retain or obtain insurance coverage for the surviving dependent
15-30    child at rates applicable for dependents if applicable
15-31    contributions are made in the manner established by the board of
15-32    trustees.
15-33          Sec. 824.865.  EXPULSION FROM PROGRAM FOR FRAUD.  (a)  After
15-34    notice and a hearing as provided by this section, the board of
15-35    trustees may expel from participation in the 401(h) account any
15-36    qualified retiree, surviving spouse, dependent, or surviving
15-37    dependent child who submits a fraudulent claim under, or has
15-38    defrauded or attempted to defraud, any health benefit plan offered
15-39    under this subchapter.
15-40          (b)  On its own motion or on the receipt of a complaint, the
15-41    board of trustees may call and hold a hearing to determine whether
15-42    a person has submitted a fraudulent claim under or has defrauded or
15-43    attempted to defraud under this subchapter.
15-44          (c)  A proceeding under this section is a contested case
15-45    under Chapter 2001.
15-46          (d)  If the board of trustees, at the conclusion of the
15-47    hearing, issues a decision that finds that the accused submitted a
15-48    fraudulent claim or has defrauded or attempted to defraud under
15-49    this subchapter, the board of trustees shall expel the person from
15-50    participation in the program.
15-51          (e)  The substantial evidence rule shall be used on any
15-52    appeal of a decision of the board of trustees under this section.
15-53          (f)  A person expelled from coverage may not be insured by
15-54    any benefits for a period, to be determined by the board of
15-55    trustees, of up to five years from the date the expulsion takes
15-56    effect.
15-57          Sec. 824.866.  CONFIDENTIALITY OF RECORDS.  (a)  Section
15-58    825.507, concerning the confidentiality and disclosure of records,
15-59    applies to records that are in the custody of the retirement
15-60    system, or in the custody of an administrator, carrier, agent,
15-61    attorney, consultant, or governmental body acting in cooperation
15-62    with or on behalf of the retirement system, regarding retirees,
15-63    annuitants, or beneficiaries under the 401(h) account.
15-64          (b)  The retirement system may disclose to health and benefit
15-65    providers information in the records of an individual that the
15-66    retirement system determines to be necessary to administer this
15-67    subchapter.
15-68          Sec. 824.867.  COORDINATED CARE NETWORK.  The board of
15-69    trustees may take action as it determines necessary to implement
 16-1    and administer a coordinated care network for the 401(h) account,
 16-2    under Section 18C, Article 3.50-4, Insurance Code.
 16-3          Sec. 824.868.  ASSISTANCE.  The Texas Department of
 16-4    Insurance, as requested by the board of trustees, shall assist the
 16-5    board of trustees in implementing and administering this
 16-6    subchapter.
 16-7          Sec. 824.869.  EFFECTIVE DATE OF COVERAGE.  Coverage under
 16-8    the 401(h) account authorized by this subchapter shall begin on the
 16-9    later of September 1, 2002, or the date the board of trustees has
16-10    appropriate approval from the Internal Revenue Service.
16-11          SECTION 4.04.  Section 825.402, Government Code, is amended
16-12    to read as follows:
16-13          Sec. 825.402.  RATE OF MEMBER CONTRIBUTIONS.  The rate of
16-14    contributions for each member of the retirement system is:
16-15                (1)  five percent of the member's annual compensation
16-16    or $180, whichever is less, for service rendered after August 31,
16-17    1937, and before September 1, 1957;
16-18                (2)  six percent of the first $8,400 of the member's
16-19    annual compensation for service rendered after August 31, 1957, and
16-20    before September 1, 1969;
16-21                (3)  six percent of the member's annual compensation
16-22    for service rendered after August 31, 1969, and before the first
16-23    day of the 1977-78 school year;
16-24                (4)  6.65 percent of the member's annual compensation
16-25    for service rendered after the last day of the period described by
16-26    Subdivision (3) and before September 1, 1985; and
16-27                (5)  6.4 percent of the member's annual compensation
16-28    for service rendered after August 31, 1985, plus the percentage
16-29    required under Section 824.861(a).
16-30          SECTION 4.05.  Section 825.306, Government Code, is amended
16-31    to read as follows:
16-32          Sec. 825.306.  CREDITING SYSTEM ASSETS.  The assets of the
16-33    retirement system shall be credited, according to the purpose for
16-34    which they are held, to one of the following accounts:
16-35                (1)  member savings account;
16-36                (2)  state contribution account;
16-37                (3)  retired reserve account;
16-38                (4)  interest account;
16-39                (5)  expense account; [or]
16-40                (6)  deferred retirement option account; or
16-41                (7)  the 401(h) account under Subchapter J, Chapter
16-42    824.
16-43          SECTION 4.06.  Sections 825.307(a) and (b), Government Code,
16-44    are amended to read as follows:
16-45          (a)  Except as provided by Subchapter J, Chapter 824, the
16-46    [The] retirement system shall deposit in a member's individual
16-47    account in the member savings account:
16-48                (1)  the amount of contributions to the retirement
16-49    system that is deducted from the member's compensation;
16-50                (2)  the portion of a deposit made on or after
16-51    resumption of membership that represents the amount of retirement
16-52    benefits received;
16-53                (3)  the portion of a deposit to reinstate service
16-54    credit previously canceled that represents the amount withdrawn or
16-55    refunded;
16-56                (4)  the portion of a deposit to establish membership
16-57    service credit previously waived that is required by Section
16-58    823.202(b)(1);
16-59                (5)  the portion of a deposit to establish membership
16-60    service credit for service performed after retirement that is
16-61    required by Section 823.502(c)(3);
16-62                (6)  the portion of a deposit to establish military
16-63    service credit required by Section 823.302(c);
16-64                (7)  the portion of a deposit to establish equivalent
16-65    membership service credit required by Section 823.401(d),
16-66    823.402(e)(1) or (e)(2), 823.404(c), or 823.3021(f)(1); and
16-67                (8)  interest earned on money in the account as
16-68    provided by Subsections (b) and (c) and Section 825.313(c).
16-69          (b)  Interest on a member's contribution other than interest
 17-1    on the portion of the member's contribution deposited in the 401(h)
 17-2    account under Subchapter J, Chapter 824, is earned monthly and
 17-3    computed at the rate of five percent a year.  Except as provided by
 17-4    Subsection (c), interest is computed based on the mean balance in
 17-5    the member's account during that fiscal year and shall be credited
 17-6    on August 31 of each year.
 17-7          SECTION 4.07.  Section 825.308, Government Code, is amended
 17-8    to read as follows:
 17-9          Sec. 825.308.  STATE CONTRIBUTION ACCOUNT.  The retirement
17-10    system shall deposit in the state contribution account:
17-11                (1)  [all] state contributions to the retirement system
17-12    required by Section 825.404 other than contributions deposited in
17-13    the 401(h) account under Subchapter J, Chapter 824;
17-14                (2)  amounts from the interest account as provided by
17-15    Section 825.313(b)(2) [825.313(b)(5)];
17-16                (3)  retirement annuities waived or forfeited in
17-17    accordance with Section 824.601 or 824.004;
17-18                (4)  fees collected under Section 825.403(h);
17-19                (5)  fees and interest for reinstatement of service
17-20    credit or establishment of membership service credit as provided by
17-21    Section 823.202, 823.501, or 823.502;
17-22                (6)  the portion of a deposit required by Section
17-23    823.302 to establish military service credit that represents a fee;
17-24    and
17-25                (7)  the portion of a deposit required by Section
17-26    823.401(e) to establish out-of-state service credit that represents
17-27    a fee.
17-28          SECTION 4.08.  Section 825.312(a), Government Code, is
17-29    amended to read as follows:
17-30          (a)  The retirement system shall deposit in the expense
17-31    account:
17-32                (1)  money transferred from the interest account under
17-33    Section 825.313(d); and
17-34                (2)  money received from the Texas Public School
17-35    Employees Group Insurance Program or another health insurance
17-36    program for school employees or retirees for service performed for
17-37    the program by the retirement system.
17-38          SECTION 4.09.  Section 825.404(e), Government Code, is
17-39    amended to read as follows:
17-40          (e)  Except for money appropriated by the state to the 401(h)
17-41    account under Subchapter J, Chapter 824, all [All] money
17-42    appropriated by the state to the retirement system under this
17-43    subtitle shall be paid to the state contribution account in equal
17-44    monthly installments as provided by Section 403.093(c), [Government
17-45    Code,] except money appropriated under Subsection (d), which
17-46    remains in the general revenue fund until expenses are approved
17-47    under Chapter 2103.
17-48          SECTION 4.10.  Section 16, Article 3.50-4, Insurance Code, is
17-49    amended to read as follows:
17-50          Sec. 16.  CONTRIBUTIONS.  (a)  For each [the] state fiscal
17-51    year in which active employee contributions are not required to be
17-52    deposited in the 401(h) account under Subchapter J, Chapter 824,
17-53    Government Code [beginning September 1, 1985, and for each
17-54    subsequent state fiscal year], each active employee, as a condition
17-55    of employment, shall contribute to the fund an amount equal to .25
17-56    percent of the employee's salary.  Each month the employer of an
17-57    active employee shall deduct the contributions from the employee's
17-58    salary and shall remit the contributions to the trustee as provided
17-59    by any procedures that the trustee may require.  In lieu of
17-60    deducting the contributions from salaries, an employer may assume
17-61    and pay the total contributions due from its active employees for
17-62    any month.
17-63          (b)  The state shall contribute as the state's contribution
17-64    to the fund each fiscal year an amount equal to one [.50] percent
17-65    of the salary of each active employee.  The state may contribute
17-66    amounts in addition to the contribution required by this
17-67    subsection.
17-68          (c)  [If after the state fiscal year beginning September 1,
17-69    1990, the amount of state and active employee contributions to the
 18-1    fund is raised by the legislature above the percentages provided by
 18-2    Subsections (a) and (b) of this section to provide adequate funding
 18-3    for the program, the ratio between the state's contribution and the
 18-4    active employees' contributions must be maintained at two to one.]
 18-5          [(d)]  Contributions from active employees become the
 18-6    property of the fund on receipt by the trustee and may not be
 18-7    refunded to the active employee under any circumstances, including
 18-8    termination of employment.
 18-9          (d) [(e)]  Contributions to the fund deducted from the salary
18-10    of an active employee are included in "annual compensation" for
18-11    purposes of the Teacher Retirement System of Texas.
18-12          (e) [(f)]  Before the first day of November preceding each
18-13    regular session of the legislature, the trustee shall certify to
18-14    the Legislative Budget Board and the budget division of the
18-15    governor's office the amounts necessary to pay the contributions of
18-16    the state to the fund under this article for information and
18-17    review.  Not later than August 31 of each year, the trustee shall
18-18    certify to the comptroller of public accounts the estimated amount
18-19    of state contributions to be received by the fund for the next
18-20    fiscal year under the appropriations authorized by this article.
18-21          (f) [(g)]  Contributions allocated and appropriated under
18-22    this section shall be paid from the General Revenue Fund in equal
18-23    monthly installments, based on the annual estimate certified by the
18-24    trustee to the comptroller of public accounts for that year, and
18-25    subject to any express limitations specified in the Act making the
18-26    appropriation.  Variations between the certified amount and the
18-27    actual amount due for the year shall be reconciled at the close of
18-28    the fiscal year and proper adjustments in the annual contributions
18-29    to the fund shall be made.
18-30          (g) [(h)]  An employing district that fails to remit, before
18-31    the 11th day after the last day of the month, all member deposits
18-32    required by this section to be remitted by the district for the
18-33    month shall pay to the Texas public school retired employees group
18-34    insurance fund, in addition to the deposits, interest on the unpaid
18-35    amounts at the annual rate of six percent compounded monthly.
18-36          (h) [(i)]  An employing district and its trustees hold
18-37    amounts due to the Texas public school retired employees group
18-38    insurance fund under this article in trust for the fund and its
18-39    participants and may not divert the amounts for any other purpose.
18-40          SECTION 4.11.  (a)  Monthly payments of a death or retirement
18-41    benefit annuity by the Teacher Retirement System of Texas are
18-42    increased in accordance with this section beginning with the
18-43    payment due at the end of September 2001.
18-44          (b)  The increase does not apply to payments under Section
18-45    824.304(a), 824.404, or 824.501, Government Code.
18-46          (c)  For the purpose of computing the monthly payments of
18-47    annuities for retirees who retired on or before August 31, 2000,
18-48    the amount of the monthly payment is equal to the amount of the
18-49    last monthly payment made before the effective date of this Act
18-50    multiplied by 1.06.
18-51          (d)  After making the computations required by Subsection (c)
18-52    of this section, the Teacher Retirement System of Texas shall
18-53    increase the monthly payment of each annuity made by the system
18-54    beginning on September 1, 2001, other than an annuity under Section
18-55    824.304(a), 824.404, or 824.501, Government Code, by 2.27 percent,
18-56    which is a benefit equivalent to the benefit provided by using a
18-57    2.25-percent multiplier for computing annuities.
18-58          SECTION 4.12  Notwithstanding Sections 824.861 and 824.862,
18-59    Government Code, as added by this Act, a contribution may not be
18-60    made or credited to the 401(h) account established under Subchapter
18-61    J, Chapter 824, Government Code, until the board of trustees of the
18-62    Teacher Retirement System of Texas receives appropriate approval
18-63    from the Internal Revenue Service.
18-64          SECTION 4.13.  Except as provided by Section 7.01 of this
18-65    Act, this article takes effect September 1, 2001.
18-66                ARTICLE 5.  CONFORMING AMENDMENTS; REPEALER
18-67          SECTION 5.01.  Article 3.50-4, Insurance Code, is amended by
18-68    adding Section 3A to read as follows:
18-69          Sec. 3A.  TRANSFER OF RECORDS.  The trustee shall transfer
 19-1    from the program established under this article all records
 19-2    relating to that program that apply to a school district, regional
 19-3    education service center, or charter school that elects to
 19-4    participate in the group benefits program established under Article
 19-5    3.50-7 of this code to the group benefits program not later than
 19-6    the 60th day after the date on which the school district, regional
 19-7    education service center, or charter school begins participation in
 19-8    the group benefits program.
 19-9          SECTION 5.02.  Section 1, Article 3.50-4, Insurance Code, is
19-10    amended to read as follows:
19-11          Sec. 1.  SHORT TITLE.  This article may be cited as the Texas
19-12    Public School Retired Employees Group Insurance Act.
19-13          SECTION 5.03.  Sections 2(3) and (4), Article 3.50-4,
19-14    Insurance Code, are amended to read as follows:
19-15                (3)  "Dependent" means:
19-16                      (A)  a spouse of a retiree [or active member];
19-17                      (B)  a retiree's[, an active member's,] or a
19-18    deceased active member's unmarried child who is younger than 25
19-19    years of age including:
19-20                            (i)  an adopted child;
19-21                            (ii)  a foster child, a stepchild, or other
19-22    child who is in a regular parent-child relationship; and
19-23                            (iii)  a recognized natural child; and
19-24                      (C)  a retiree's [or active member's] recognized
19-25    natural child, adopted child, foster child, stepchild, or other
19-26    child who is in a regular parent-child relationship and who lives
19-27    with or whose care is provided by the retiree[, active member,] or
19-28    surviving spouse on a regular basis, regardless of the child's age,
19-29    if the child is mentally retarded or physically incapacitated to
19-30    such an extent as to be dependent on the retiree[, active member,]
19-31    or surviving spouse for care or support, as determined by the
19-32    trustee, or in the case of a deceased active member, a recognized
19-33    natural child, adopted child, foster child, stepchild, or other
19-34    child who was in a regular parent-child relationship and who lived
19-35    with or whose care was provided by the deceased active member on a
19-36    regular basis, regardless of the child's age, if the child is
19-37    mentally retarded or physically incapacitated to such an extent as
19-38    to have been dependent on the deceased active member or surviving
19-39    spouse for care or support, as determined by the trustee.
19-40                (4)  "Fund" means the retired [Texas public] school
19-41    employees group insurance fund.
19-42          SECTION 5.04.  Section 3(a), Article 3.50-4, Insurance Code,
19-43    is amended to read as follows:
19-44          (a)  The Texas Public School Retired Employees Group
19-45    Insurance Program is established to provide for an insurance plan
19-46    or plans under this article.
19-47          SECTION 5.05.  Section 5(a), Article 3.50-4, Insurance Code,
19-48    is amended to read as follows:
19-49          (a)  The trustee may adopt rules, plans, procedures, and
19-50    orders reasonably necessary to implement this article, including:
19-51                (1)  establishment of minimum benefit and financing
19-52    standards for group insurance coverage to be provided to all
19-53    retirees, [active employees,] dependents, surviving spouses, and
19-54    surviving dependent children;
19-55                (2)  establishment of basic and optional group coverage
19-56    to be provided to retirees, [active employees,] dependents,
19-57    surviving spouses, and surviving dependent children;
19-58                (3)  establishment of the procedures for contributions
19-59    and deductions;
19-60                (4)  establishment of periods for enrollment and
19-61    selection of optional coverage and procedures for enrolling and
19-62    exercising options under the plan;
19-63                (5)  determination of methods and procedures for claims
19-64    administration;
19-65                (6)  study of the operation of all insurance coverage
19-66    provided under this article;
19-67                (7)  administration of the fund;
19-68                (8)  adoption of a timetable for the development of
19-69    minimum benefit and financial standards for group insurance
 20-1    coverage, establishment of group insurance plans, and the taking of
 20-2    bids for and awarding of contracts for insurance plans; and
 20-3                (9)  contracting with an independent and experienced
 20-4    group insurance consultant or actuary[, who does not receive
 20-5    insurance commissions from any insurance company,] for advice and
 20-6    counsel in implementing and administering this program.
 20-7          SECTION 5.06.  Sections 8(e) and (i), Article 3.50-4,
 20-8    Insurance Code, are amended to read as follows:
 20-9          (e)  The trustee may contract for and make available to all
20-10    retirees, dependents, surviving spouses, and surviving dependent
20-11    children optional group health benefit plans in addition to the
20-12    basic plans.  The optional coverage may include a smaller
20-13    deductible, lower coinsurance, or additional categories of benefits
20-14    permitted under Subsection (b) of this section to provide
20-15    additional levels of coverages and benefits.  The trustee may
20-16    utilize a portion of the funds received for the Texas Public School
20-17    Retired Employees Group Insurance Program to offset some portion of
20-18    costs paid by the retiree for optional coverage if such utilization
20-19    does not reduce the period the program is projected to remain
20-20    financially solvent by more than one year in a biennium.  Any
20-21    additional contributions for these optional plans shall be paid for
20-22    by the retiree, surviving spouse, or surviving dependent children.
20-23          (i)  In contracting for any benefits under this article,
20-24    competitive bidding shall be required under rules adopted by the
20-25    trustee.  [The rules must require that prospective bidders provide
20-26    information, for each area consisting of a county and all adjacent
20-27    counties, on the number and types of qualified providers willing to
20-28    participate in the coverage or plan for which the bid is made.  The
20-29    rules may provide criteria to determine qualified providers.  The
20-30    trustee shall consider the information before awarding a contract
20-31    but may not require a bidder to demonstrate a minimum standard of
20-32    provider participation.]  The trustee is not required to select the
20-33    lowest bid but may consider also ability to service contracts, past
20-34    experiences, financial stability, and other relevant criteria.  If
20-35    the trustee awards a contract to an entity whose bid deviates from
20-36    that advertised, the deviation shall be recorded and the reasons
20-37    for the deviation shall be fully justified in the minutes of the
20-38    next meeting of the trustee.
20-39          SECTION 5.07.  Section 9, Article 3.50-4, Insurance Code, is
20-40    amended to read as follows:
20-41          Sec. 9.  BENEFIT CERTIFICATES.  At such times, or upon such
20-42    events, as designated by the trustee, each insurance carrier shall
20-43    issue to each retiree, [active employee,] surviving spouse, or
20-44    surviving dependent child insured under this article a certificate
20-45    of insurance that:
20-46                (1)  states the benefits to which the person is
20-47    entitled;
20-48                (2)  states to whom the benefits are payable;
20-49                (3)  states to whom the claims must be submitted; and
20-50                (4)  summarizes the provisions of the policy
20-51    principally affecting the person.
20-52          SECTION 5.08.  Section 10(a), Article 3.50-4, Insurance Code,
20-53    is amended to read as follows:
20-54          (a)  Not later than the 180th day after the end of each state
20-55    fiscal year, the trustee shall make a written report to the Texas
20-56    Department [State Board] of Insurance concerning the insurance
20-57    coverages provided and the benefits and services being received by
20-58    persons insured under this article.
20-59          SECTION 5.09.  Section 12, Article 3.50-4, Insurance Code, is
20-60    amended to read as follows:
20-61          Sec. 12.  DEATH CLAIMS:  BENEFICIARIES.  The amount of group
20-62    life insurance and group accidental death and dismemberment
20-63    insurance covering a retiree, [active employee,] surviving spouse,
20-64    dependent, or surviving dependent child at the date of death shall
20-65    be paid, on the establishment of a valid claim, only:
20-66                (1)  to the beneficiary or beneficiaries designated by
20-67    the person in a signed and witnessed written document received
20-68    before death in the trustee's office; or
20-69                (2)  if no beneficiary is properly designated or in
 21-1    existence, to persons in accordance with the trustee's death
 21-2    benefit provisions in Subsection (b), Section 824.103, Government
 21-3    Code.
 21-4          SECTION 5.10.  Section 13, Article 3.50-4, Insurance Code, is
 21-5    amended to read as follows:
 21-6          Sec. 13.  AUTOMATIC COVERAGE.  A retiree [or active employee]
 21-7    who applies during an enrollment period may not be denied any of
 21-8    the group insurance basic coverage provided under this article
 21-9    unless the person has been found under Section 18A of this article
21-10    to have defrauded or attempted to defraud the Texas Public School
21-11    Retired Employees Group Insurance Program.
21-12          SECTION 5.11.  Section 15, Article 3.50-4, Insurance Code, is
21-13    amended to read as follows:
21-14          Sec. 15.  RETIRED SCHOOL EMPLOYEES GROUP INSURANCE FUND.
21-15    (a)  The retired school employees group insurance fund is created.
21-16    The comptroller is the custodian of the fund, and the trustee shall
21-17    administer the fund.  All contributions from active employees,
21-18    retirees, and the state, contributions for optional coverages,
21-19    investment income, appropriations for implementation of this
21-20    program, and other money required or authorized to be paid into the
21-21    fund shall be paid into the fund.  From the fund shall be paid,
21-22    without state fiscal year limitation, the appropriate premiums to
21-23    the carrier or carriers providing group coverage under the plan or
21-24    plans under this article, claims for benefits under the group
21-25    coverage, and the amounts expended by the trustee for
21-26    administration of the program.  The appropriate portion of the
21-27    contributions to the fund to provide for incurred but unreported
21-28    claim reserves and contingency reserves, as determined by the
21-29    trustee, shall be retained in the fund.
21-30          (b)  The trustee shall transfer the amounts deducted from
21-31    annuities for contributions into the fund.
21-32          (c)  Expenses for the development and administration of the
21-33    program shall be spent as provided by a budget adopted by the
21-34    trustee.
21-35          (d)  The trustee may invest and reinvest the money in the
21-36    fund as provided by Subchapter D, Chapter 825, Government Code, for
21-37    assets of the Teacher Retirement System of Texas.
21-38          SECTION 5.12.  Section 18A, Article 3.50-4, Insurance Code,
21-39    is amended to read as follows:
21-40          Sec. 18A.  EXPULSION FROM PROGRAM FOR FRAUD.  (a)  After
21-41    notice and hearing as provided by this section, the trustee may
21-42    expel from participation in the Texas Public School Retired
21-43    Employees Group Insurance Program any retiree, [active employee,]
21-44    surviving spouse, dependent, or surviving dependent child who
21-45    submits a fraudulent claim under, or has defrauded or attempted to
21-46    defraud, any health benefits plan offered under the program.
21-47          (b)  On its motion or on the receipt of a complaint, the
21-48    trustee may call and hold a hearing to determine whether a person
21-49    has submitted a fraudulent claim under, or has defrauded or
21-50    attempted to defraud, any health benefits plan offered under the
21-51    Texas Public School Retired Employees Group Insurance Program.
21-52          (c)  A proceeding under this section is a contested case
21-53    under Chapter 2001, Government Code [the Administrative Procedure
21-54    and Texas Register Act (Article 6252-13a, Vernon's Texas Civil
21-55    Statutes)].
21-56          (d)  If the trustee, at the conclusion of the hearing, issues
21-57    a decision that finds that the accused submitted a fraudulent claim
21-58    or has defrauded or attempted to defraud any health benefits plan
21-59    offered under the Texas Public School Retired Employees Group
21-60    Insurance Program, the trustee shall expel the person from
21-61    participation in the program.
21-62          (e)  The substantial evidence rule shall be used on any
21-63    appeal of a decision of the trustee under this section.
21-64          (f)  A person expelled from the Texas Public School Retired
21-65    Employees Group Insurance Program may not be insured by any health
21-66    insurance plan offered by the program for a period, to be
21-67    determined by the trustee, of up to five years from the date the
21-68    expulsion takes effect.
21-69          SECTION 5.13.  Section 18B(a), Article 3.50-4, Insurance
 22-1    Code, is amended to read as follows:
 22-2          (a)  Section 825.507, Government Code, concerning the
 22-3    confidentiality and disclosure of records, applies to [of
 22-4    information in] records that are in the custody of the Teacher
 22-5    Retirement System of Texas or[, applies to information in records
 22-6    that are] in the custody of an administrator, carrier, agent,
 22-7    attorney, consultant, or governmental body acting in cooperation
 22-8    with or on behalf of the retirement system regarding retirees,
 22-9    active employees, annuitants, or beneficiaries under the Texas
22-10    Public School Retired Employees Group Insurance Program.
22-11          SECTION 5.14.  Sections 18C(c), (d), and (i), Article 3.50-4,
22-12    Insurance Code, are amended to read as follows:
22-13          (c)  The trustee, the Texas public school retired employees
22-14    group insurance program, the retired school employees group
22-15    insurance fund, and the board of trustees, officers, advisory
22-16    committee members, and employees of the trustee are not liable for
22-17    damages arising from the acts or omissions of health care providers
22-18    who are participating health care providers in the coordinated care
22-19    network established by the trustee.  Those health care providers
22-20    are independent contractors and are responsible for their own acts
22-21    and omissions.
22-22          (d)  The trustee, the Texas public school retired employees
22-23    group insurance program, the retired school employees group
22-24    insurance fund, or a member of a credentialing committee, or the
22-25    board of trustees, officers, advisory committee members, or
22-26    employees of the trustee are not liable for damages arising from
22-27    any act, statement, determination, recommendation made, or act
22-28    reported, without malice, in the course of the evaluation of the
22-29    qualifications of health care providers or of the patient care
22-30    rendered by those providers.
22-31          (i)  A credentialing committee, a person participating in a
22-32    credentialing review, a health care provider, the trustee, the
22-33    Texas public school retired employees group insurance program, or
22-34    the board of trustees, officers, advisory committee members, or
22-35    employees of the trustee that are named as defendants in any civil
22-36    action filed as a result of participation in the credentialing
22-37    process may use otherwise confidential information obtained for
22-38    legitimate internal business and professional purposes, including
22-39    use in their own defense.  Use of information under this subsection
22-40    does not constitute a waiver of the confidential and privileged
22-41    nature of the information.
22-42          SECTION 5.15.  Section 19, Article 3.50-4, Insurance Code, is
22-43    amended to read as follows:
22-44          Sec. 19.  ASSISTANCE.  In implementing and administering this
22-45    article, the Texas Department [State Board] of Insurance, as
22-46    requested by the trustee, shall assist the trustee in carrying out
22-47    this article.
22-48          SECTION 5.16.  Section 22.004, Education Code, is amended to
22-49    read as follows:
22-50          Sec. 22.004.  GROUP HEALTH BENEFITS FOR SCHOOL EMPLOYEES.
22-51    (a)  Each district may participate in the group benefits program
22-52    established under Article 3.50-7, Insurance Code.
22-53          (b)  A district that does not elect to participate in the
22-54    program described by Subsection (a) shall make available to its
22-55    employees group health coverage provided by a risk pool established
22-56    by one or more school districts under Chapter 172, Local Government
22-57    Code, or under a policy of insurance or group contract issued by an
22-58    insurer, a company subject to Chapter 20, Insurance Code, or a
22-59    health maintenance organization under the Texas Health Maintenance
22-60    Organization Act (Chapter 20A, Vernon's Texas Insurance Code).  The
22-61    coverage must meet the substantive coverage requirements of Article
22-62    3.51-6, Insurance Code, and any other law applicable to group
22-63    health insurance policies or contracts issued in this state.  The
22-64    coverage must include major medical treatment but may exclude
22-65    experimental procedures.  In this subsection, "major medical
22-66    treatment" means a medical, surgical, or diagnostic procedure for
22-67    illness or injury.  The coverage may include managed care or
22-68    preventive care and must be comparable to the basic health coverage
22-69    provided under the Texas Employees Uniform Group Insurance Benefits
 23-1    Act (Article 3.50-2, Vernon's Texas Insurance Code).  The board of
 23-2    trustees of the Teacher Retirement System of Texas shall adopt
 23-3    rules to determine whether a school district's group health
 23-4    coverage is comparable to the basic health coverage specified by
 23-5    this subsection.  The rules must provide for consideration of the
 23-6    following factors concerning the district's coverage in determining
 23-7    whether the district's coverage is comparable to the basic health
 23-8    coverage specified by this subsection:
 23-9                (1)  the deductible amount for service provided inside
23-10    and outside of the network;
23-11                (2)  the coinsurance percentages for service provided
23-12    inside and outside of the network;
23-13                (3)  the maximum amount of coinsurance payments a
23-14    covered person is required to pay;
23-15                (4)  the amount of the copayment for an office visit;
23-16                (5)  the schedule of benefits and the scope of
23-17    coverage;
23-18                (6)  the lifetime maximum benefit amount; and
23-19                (7)  verification that the coverage is issued by a
23-20    provider licensed to do business in this state by the Texas
23-21    Department of Insurance or is provided by a risk pool authorized
23-22    under Chapter 172, Local Government Code, or that a district is
23-23    capable of covering the assumed liabilities in the case of coverage
23-24    provided through district self-insurance.
23-25          (c) [(b)]  The cost of the coverage provided under the
23-26    program described by Subsection (a) shall be paid by the state, the
23-27    district, and the employees in the manner provided by Article
23-28    3.50-7, Insurance Code.  The cost of coverage provided under a plan
23-29    adopted under Subsection (b) shall [may] be shared by the employees
23-30    and the district without contribution by the state.
23-31          (d) [(c)]  Each district shall report the district's
23-32    compliance with this section [subsection] to the executive director
23-33    of the Teacher Retirement System of Texas not later than March 1 of
23-34    each even-numbered year in the manner required by the board of
23-35    trustees of the Teacher Retirement System of Texas.  For a district
23-36    that does not elect to participate in the program described by
23-37    Subsection (a), the [The] report must be based on the district
23-38    group health coverage plan in effect during the current plan year
23-39    and must include:
23-40                (1)  appropriate documentation of:
23-41                      (A)  the district's contract for group health
23-42    coverage with a provider licensed to do business in this state by
23-43    the Texas Department of Insurance or a risk pool authorized under
23-44    Chapter 172, Local Government Code; or
23-45                      (B)  a resolution of the board of trustees of the
23-46    district authorizing a self-insurance plan for district employees
23-47    and of the district's review of district ability to cover the
23-48    liability assumed;
23-49                (2)  the schedule of benefits;
23-50                (3)  the premium rate sheet, including the amount paid
23-51    by the district and employee;
23-52                (4)  the number of employees covered by the [each]
23-53    health coverage plan offered by the district; and
23-54                (5)  any other information considered appropriate by
23-55    the executive director of the Teacher Retirement System of Texas.
23-56          (e) [(d)]  Based on the criteria prescribed by Subsection (b)
23-57    [(a)], the executive director of the Teacher Retirement System of
23-58    Texas shall, for each district that does not elect to participate
23-59    in the program described by Subsection (a), certify whether a
23-60    district's coverage is comparable to the basic health coverage
23-61    provided under the Texas Employees Uniform Group Insurance Benefits
23-62    Act (Article 3.50-2, Vernon's Texas Insurance Code).  If the
23-63    executive director of the Teacher Retirement System of Texas
23-64    determines that the group health coverage offered by a district is
23-65    not comparable, the executive director shall report that
23-66    information to the district and to the Legislative Budget Board.
23-67    The executive director shall submit a report to the legislature not
23-68    later than September 1 of each even-numbered year describing the
23-69    status of each district's group health coverage program based on
 24-1    the information contained in the report required by Subsection (d)
 24-2    [(c)] and the certification required by this subsection.
 24-3          (f) [(e)]  A school district that does not elect to
 24-4    participate in the program described by Subsection (a) may not
 24-5    contract with an insurer, a company subject to Chapter 20,
 24-6    Insurance Code, or a health maintenance organization to issue a
 24-7    policy or contract under this section, or with any person to assist
 24-8    the school district in obtaining or managing the policy or contract
 24-9    unless, before the contract is entered into, the insurer, company,
24-10    organization, or person provides the district with an audited
24-11    financial statement showing the financial condition of the insurer,
24-12    company, organization, or person.
24-13          (g) [(f)]  An insurer, a company subject to Chapter 20,
24-14    Insurance Code, or a health maintenance organization that issues a
24-15    policy or contract under this section and any person that assists
24-16    the school district in obtaining or managing the policy or contract
24-17    for compensation shall provide an annual audited financial
24-18    statement to the school district showing the financial condition of
24-19    the insurer, company, organization, or person.
24-20          (h) [(g)]  An audited financial statement provided under this
24-21    section must be made in accordance with rules adopted by the
24-22    commissioner of insurance or state auditor, as applicable.
24-23          SECTION 5.17.  Sections 7A and 20, Article 3.50-4, Insurance
24-24    Code, are repealed.
24-25          SECTION 5.18.  Except as provided by Section 7.01 of this
24-26    Act, this article takes effect September 1, 2002.
24-27                          ARTICLE 6.  TRANSITION
24-28          SECTION 6.01.  (a)  During the 2001-2002 school year, the
24-29    Teacher Retirement System of Texas shall develop the plan or plans
24-30    to be implemented and administered under Article 3.50-7, Insurance
24-31    Code, as added by this Act.
24-32          (b)  Coverage under the plan or plans authorized under
24-33    Article 3.50-7, Insurance Code, as added by this Act, shall begin
24-34    with the 2002-2003 school year, but not later than September 1,
24-35    2002.
24-36          (c)  Coverage provided to a retiree under the plan or plans
24-37    authorized under Article 3.50-4, Insurance Code, as amended by this
24-38    Act, must be at least equal to the coverage provided to the retiree
24-39    under that article as that article existed on August 31, 2002.
24-40          SECTION 6.02.  The Teacher Retirement System of Texas shall
24-41    adopt rules as necessary to implement Section 4.02 of this Act not
24-42    later than March 1, 2002.
24-43          SECTION 6.03.  Except as provided by Section 7.01 of this
24-44    Act, this article takes effect September 1, 2001.
24-45                       ARTICLE 7.  CONTINGENT EFFECT
24-46          SECTION 7.01.  (a)  Except as provided by this section, this
24-47    Act takes effect only if the constitutional amendment proposed by
24-48    the 77th Legislature, Regular Session, 2001, relating to the use of
24-49    contributions to the pension fund of the Teacher Retirement System
24-50    of Texas to finance health care benefits for retirees of the system
24-51    is approved by the voters.
24-52          (b)  Except as provided by this section, if the proposed
24-53    constitutional amendment described by Subsection (a) of this
24-54    section is not approved by the voters, this Act has no effect.
24-55          (c)  Subsections (a) and (b) of this section do not apply to
24-56    Sections 2.02, 2.05, 2.09, 2.11, 4.02, and 4.11 of this Act.
24-57                                 * * * * *