LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                              March 25, 2001
  
  
          TO:  Honorable John T. Smithee, Chair, House Committee on
               Insurance
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB1862  by Eiland (Relating to the regulation and prompt
               payment of health care providers under certain health
               benefit plans.), As Introduced
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB1862, As Introduced:  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.                                                             *
**************************************************************************
  
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             $(161,560)             $161,560                  3.0 *
*  2003              (146,025)              146,025                  3.0 *
*  2004              (146,025)              146,025                  3.0 *
*  2005              (146,025)              146,025                  3.0 *
*  2006              (146,025)              146,025                  3.0 *
**************************************************************************
  
Technology Impact
  
Additional computer hardware and software would be needed for the three
Full-time Equivalent Positions (FTEs) totaling $8,097 in fiscal year
2002.
  
  
Fiscal Analysis
  
The bill amends various sections of the Insurance Code.  The provisions
of the bill would require HMOs to verify an enrollee's coverage and
benefits 24 hours a day, seven days a week, to any preferred
provider/physician who requests the verification before rendering
services.  The bill would prohibit an HMO from denying payment for the
services rendered unless (1) the provider/physician receives written
notice of an error in verification before the service is performed or (2)
the denial was made under the provisions of the bill.  The Texas
Department of Insurance (TDI) expects these provisions to cause an
increase in provider complaints for three reasons.  First, more providers
would contract with HMOs because the bill alleviates many providers'
traditional concerns about managed care such as denials of claims and
definitions of medical necessity.  Second, the new requirements to verify
coverage and provide written notice of any verification errors prior to
the enrollee receiving the treatment create specific grounds for
disagreements between providers and HMOs.  Third, HMOs would find it
difficult to comply with the provisions of the bill, resulting in more
complaints regarding the failure to comply.

The bill takes effect September 1, 2001.
  
  
Methodology
  
TDI estimates that it will need three additional FTEs that would handle
an additional 3,014 physician and provider complaints per year.  This is
based on the agency anticipating receiving a seventy percent increase
over the projected 6,150 complaints for fiscal year 2001 related to HMOs.
The needed three additional insurance complaint specialists are
estimated to handle approximately 860 complaints per year.

It is assumed that TDI would adjust its fees to cover the expected costs
of the implementation of the bill.
  
  
Local Government Impact
  
No fiscal implication to units of local government is anticipated.
  
  
Source Agencies:   327   Employees Retirement System, 454   Texas
                   Department of Insurance
LBB Staff:         JK, JO, RT, DE