LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 9, 2001
TO: Honorable John T. Smithee, Chair, House Committee on
Insurance
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB1709 by Averitt (Relating to assessments used to fund
the Health Insurance Risk Pool; authorizing a premium tax
credit.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB1709, As Introduced: negative impact of $(30,000,000) 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 $(8,000,000) *
* 2003 (22,000,000) *
* 2004 (40,000,000) *
* 2005 (58,000,000) *
* 2006 (76,000,000) *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* General Revenue Fund *
* 0001 *
* 2002 $(8,000,000) *
* 2003 (22,000,000) *
* 2004 (40,000,000) *
* 2005 (58,000,000) *
* 2006 (76,000,000) *
*****************************************************
Fiscal Analysis
The bill would amend the Insurance Code to create a tax credit for
assessments paid by an insurer to the Health Insurance Risk Pool. The
bill would allow an insurer a credit equal to 100 percent of any
assessment paid by that insurer to the Health Insurance Risk Pool in any
calendar year against the insurer's insurance premium tax liability for
any year. The credit would be allowed at a rate of 10 percent per year
for ten years following the date of assessment, or for a longer period,
at the option of the insurer. Unused credits could be claimed as
admitted assets, and they could be assigned or transferred upon the
approval of the Commissioner of Insurance or in the event of a merger,
acquisition, or total assumption of reinsurance between or among
insurers.
The bill also would require the Commissioner of Insurance to appoint an
advisory committee to study the funding for the risk pool's operational
losses. The advisory committee's report would be due to the
Commissioner of Insurance, the Speaker of the House of Representatives,
and the Lieutenant Governor by December 1 , 2002.
The bill would take effect September 1, 2001.
Methodology
According to the Comptroller's Office, application of assessment credits
would reduce insurers' insurance premium tax liabilities and thereby
cause a loss to the General Revenue. The estimated losses were based on
historical and projected assessment data provided by the risk pool.
In 1999, the risk pool assessed $14 million, and in 2000, the assessment
jumped to $68 million. Projections for future assessments are uncertain
and subject to changes in several variables, particularly enrollment,
premiums, and changes in the legislative cap on premiums. As reported by
the pool, its enrollment is continuing to increase at a rapid rate.
Premiums, which are also rising, are subject to a legislative cap that
could be met within the next two years.
The fiscal impact assumes that the calendar 2002 assessment would be $80
million, growing to $140 million in 2003. By 2004, it was assumed that
the assessment would reach $180 million and remain at that level for the
next several years. The losses increase each year because the number of
annual assessments for which a credit could be taken would increase each
year over the projection period. The actual fiscal impact could be
smaller or greater, depending on future assessment levels.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 454 Texas Department of Insurance, 304
Comptroller of Public Accounts
LBB Staff: JK, JO, RT, DE