LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 31, 2001
TO: Honorable John T. Smithee, Chair, House Committee on
Insurance
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB2159 by Thompson (Relating to premium rates and
minimum reserves for credit life and accident and health
insurance.), Committee Report 1st House, Substituted
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB2159, Committee Report 1st House, Substituted: 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 $(492,488) $492,488 7.5 *
* 2003 (454,777) 454,777 7.5 *
* 2004 (454,777) 454,777 7.5 *
* 2005 (454,777) 454,777 7.5 *
* 2006 (454,777) 454,777 7.5 *
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Technology Impact
Additional computers and software would be needed for the additional
Full-time Equivalent Positions (FTEs) totaling $18,893 in fiscal year
2002.
Fiscal Analysis
The bill amends Section 40.003(c) and Articles 3.28 and 3.53 Sec. 8.A,
Texas Insurance Code. The revisions allow minimum reserves for credit
life and credit accident and health insurance to be set at 75 percent of
the 1980 Commissioner of Insurance's Standard Ordinary Mortality Table.
The changes also set guidelines and hearings procedures for establishing
premium rates for credit life and credit accident and health insurance
policies. Under the provisions of the bill, the Commissioner of Insurance
sets a presumptive premium rate from which insurers would be allowed to
vary by 30 percent. Insurers may file a rate that is more than 30
percent higher or less than 30 percent lower than the adopted presumptive
rate. The Commissioner may enter an order suspending a rate that does
not comply with the bill after holding a hearing to determine if the rate
is in compliance. A rate is considered approved unless the Commissioner
disapproves it within 60 days of the insurer's filing the rate.
The bill takes effect immediately if it receives a vote of two-thirds of
each house. If the bill does not receive the vote necessary for
immediate effect, the bill takes effect September 1, 2001.
Methodology
TDI estimates that it will need an additional seven and a half FTEs to
implement the provisions of the bill. TDI estimates that those
additional FTEs would include an insurance specialist and half-time
actuary due to an increase of rate filing from seven to twelve rate
filings a month for rate deviations. TDI estimates that half of these
deviated rate filings (42) in a given year would be disapproved, and
therefore require Commissioner's hearings. According to TDI, individual
rate hearings usually take 5 days per hearing. At 5 days per hearing and
42 hearings per year, actuarial staff time needed just for hearings
(including preparation and testimony) would be 1,680 hours, or one
actuary. Additionally, rate hearings will need an expert analysis of the
degree of competition with respect to the classification to which the
rate is applicable. TDI would need one director to gather and analyze
appropriate market data for each hearing.
Two additional attorneys and one legal assistant supported by one legal
secretary would be needed to handle the expected 42 additional hearings
per year. The two attorneys would provide representation in the rate
making hearings and hearings regarding the disapproval of individual
company rate filings and participate in the rulemaking process. The legal
assistant would organize and maintain case files for the rate making
hearings and individual company rate filings and provide assistance at
the hearings. The legal secretary would assist the attorneys and legal
assistant in the rate making process.
It is assumed that the agency would adjust its fees to cover the cost of
implementing the bill.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 454 Texas Department of Insurance
LBB Staff: JK, JO, RT, DE