LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 11, 2001
TO: Honorable David Sibley, Chair, Senate Committee on
Business & Commerce
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1609 by Averitt (Relating to the scheduled benefit
review and utilization review.), As Engrossed
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1609, As Engrossed: positive impact of $0 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. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 0 *
* 2004 0 *
* 2005 0 *
* 2006 0 *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Probable Revenue Change in Number of *
* Year Savings/(Cost) from Gain/(Loss) from State Employees from *
* Texas Department of Texas Department of FY 2001 *
* Insurance Operating Insurance Operating *
* Fund Account/ Fund Account/ *
* GR-Dedicated GR-Dedicated *
* 0036 0036 *
* 2002 $(792,405) $792,405 13.5 *
* 2003 (719,906) 719,906 13.5 *
* 2004 (719,906) 719,906 13.5 *
* 2005 (719,906) 719,906 13.5 *
* 2006 (719,906) 719,906 13.5 *
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Technology Impact
Additional computers and software for the additional Full-time Equivalent
positions (FTEs) totaling $37,786 in fiscal year 2002.
Fiscal Analysis
The bill amends various sections of the Texas Insurance Code (TIC). The
provisions of the bill require the issuer of a Preferred Provider Benefit
plan or an HMO to conduct a review or to delegate to a third party
administrator (TPA) or a utilization review agent (URA) to conduct such
review to determine if a service, treatment or supply being requested by
an enrollee is described as a benefit in the enrollee s health plan. It
also would require preferred provider carriers and HMOs to verify
services are medically necessary for an enrollee before the physician or
provider renders covered services. The provisions would prohibit a
preferred provider carrier or an HMO from denying payment for the
services rendered unless (1) the provider/physician misstated the nature
of the services or (2) the services authorized were not rendered. The
provisions would prohibit preferred provider carriers and HMOs from
requiring the use of a dispute resolution procedure that violates the new
law. It would also require preferred provider carriers and HMOs that
conduct retrospective review of claims to comply with requirements
currently set forth in the bill for utilization review. The amendments
make retrospective review subject to the appeal process in place for
utilization review determinations including the Independent Review
Process that is conducted pursuant to the TIC.
The effective date of the bill is September 1, 2001.
Methodology
The Texas Department of Insurance (TDI) estimates that it would require
thirteen and a half FTEs, which all consist of Insurance Specialists. TDI
expects an increase in provider and consumer complaints for two reasons.
First, the new requirements to verify coverage create specific grounds
for disagreements between enrollees and HMOs and between providers and
HMOs. Second, HMOs would find it difficult to comply with the provisions
of the bill, resulting in more complaints regarding the failure to
comply. TDI estimates that the provisions of the bill will increase
complaints by 40 percent over the fiscal year 2001 projection, or 1,736
more complaints per year. Each complaint specialist handles
approximately 860 complaints per year, so the additional workload would
require 2 additional Insurance Specialists. The complaints workload
would stay at the higher level as physicians/providers and HMOs move in
and out of contracts.
According to TDI, 403 indemnity health plan carriers (commercial health
insurance companies, as opposed to HMOs) reported premiums in 1999 from
the sale of health insurance. Each company would have to be
certified/registered as a utilization review agent (URA) pursuant to the
bill, since each conducts retrospective reviews. TDI has 1.6 Insurance
Specialists who process URA filings, which average 163 URA applications
per person per year. Processing the additional 403 companies each year
would thus require 2.5 additional Insurance Specialist (403/163 = 2.47).
Any retrospective reviews that result in an adverse determination would
be subject to the UR appeal process outlined in TIC. Under this process,
TDI assigns Independent Review Organizations (IROs) as requested. TDI
has 1 Insurance Specialist who processes 400 IRO requests per year.
According to TDI, commercial HMOs had 2,850,011 enrollees in 1999. Thus,
TDI receives 1 IRO request per 7,125 HMO enrollees per year. The
commercial health insurance enrollment for the same period was
25,301,600. Assuming that the ratio of complaints to enrollees is the
same for the new potential retrospective review appellants, TDI would
receive 3,551 additional IRO requests per year (25,301,600 / 7,125).
Because one Insurance Specialist can handle 400 requests per year, the
additional 3,551 requests would require an additional 9 Insurance
Specialists (3,551 / 400 = 8.88).
According to TDI, the URA application fee is $2,150 and the renewal fee
is $545. The renewal period is two years. TDI Operating Fund 36 revenue
would increase by $866,450 (403 x $2,150) in the first year of
implementation. TDI Operating Fund 36 revenue would increase by $219,635
(403 x 545) every two years thereafter.
It is assumed that TDI would adjust its fees to offset the costs of
implementing the bill.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 454 Texas Department of Insurance, 327 Employees
Retirement System
LBB Staff: JK, JO, DE