LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session February 12, 2001 TO: Honorable Paul Sadler, Chair, House Committee on Teacher Health Insurance, Select FROM: John Keel, Director, Legislative Budget Board IN RE: HB1248 by Tillery (Relating to a public school prescription drug benefit plan.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB1248, As Introduced: negative impact of $(1,070,700,000) * * through the biennium ending August 31, 2003. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $(23,800,000) * * 2003 (1,046,900,000) * * 2004 (1,271,900,000) * * 2005 (1,515,500,000) * * 2006 (1,759,100,000) * **************************************************** All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Savings/(Cost) from Change in Number of State * * Year General Revenue Fund Employees from FY 2001 * * 0001 * * 2002 $(23,800,000) 20.0 * * 2003 (1,046,900,000) 20.0 * * 2004 (1,271,900,000) 20.0 * * 2005 (1,515,500,000) 20.0 * * 2006 (1,759,100,000) 20.0 * *************************************************************************** Fiscal Analysis The bill creates a statewide prescription drug program for public school employee, retirees, and their dependents. The coverage would be comparable to the prescription drug benefits offered through the Uniform Group Insurance Program administered by the Employees Retirement System (ERS.) The drug program would be jointly administered by ERS and the Teacher Retirement System (TRS). The state would be required to pay for 100% of the cost of coverage for employees and retirees, and 50% of the cost of coverage for dependents and for part-time employees. The school districts could choose to make contributions towards the costs of coverage above the state's share. Employees and retirees would be required to pay for any costs not covered by the state and the districts. The bill takes effect September 1, 2001, allowing one year for program implementation, with program coverage beginning no later than September 1, 2002. Once the program is operational, prescription drug coverage could no longer be provided through TRS-Care, the current program for retirees, or through the health insurance programs provided by the school districts to their employees. Methodology Start-up costs for fiscal year 2002 are estimated to be $23,800,000, and that 20 full-time equivalent employees will be required each year for program administration. The total cost to the state for fiscal year 2003 would be $1.047 billion. The contribution per employee/retiree to be paid by the state's General Revenue Fund is projected to be $1,470 for fiscal year 2003. These projections assume that 712,410 employees/retirees would be covered in 2003. This contribution would increase to $2,241 by fiscal year 2006, based on projected increases in prescription drug costs ranging from 12%-20%. Program participation is projected to grow to 784,870 by fiscal year 2006. TRS estimates that the number of active employees will increase by 3% annually, and the number of retirees will increase by 4.4% annually. Total cost for fiscal year 2002 is in addition to the $181,035,657 currently in the General Appropriations Act, as introduced, for TRS-Care, the existing program for retirees. For fiscal year 2003, the total projected state cost of $1.047 billion is in addition to the $268 million currently in the General Appropriations Act. While the TRS-Care program would no longer provide coverage for prescription drugs, the amounts in the bill as introduced will be required to cover the medical and hospital costs incurred by TRS-Care. Local Government Impact Currently, local school districts pay for some of the cost of providing health insurance to their employees. TRS estimates districts currently spend approximately $850 million a year on health insurance. It is not known how much of this cost is related to prescription drug coverage. Under the provisions of this bill, the districts would no longer bear that cost, although the districts could choose to make contributions towards the costs of dependent prescription drug coverage. Source Agencies: 304 Comptroller of Public Accounts, 323 Teacher Retirement System, 454 Texas Department of Insurance LBB Staff: JK, CT, SC