LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 10, 2001
TO: Honorable David Sibley, Chair, Senate Committee on
Business & Commerce
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 2nd House, Substituted
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB2159, Committee Report 2nd 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 $(534,771) $534,771 8.0 *
* 2003 (491,882) 491,882 8.0 *
* 2004 (491,882) 491,882 8.0 *
* 2005 (491,882) 491,882 8.0 *
* 2006 (491,882) 491,882 8.0 *
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Technology Impact
Computers and software for the additional Full-time Equivalent Positions
(FTEs) totaling $21,592 in fiscal year 2002.
Fiscal Analysis
The provisions of the bill amend the Texas Insurance Code which allows
minimum reserves for credit life and credit accident and health insurance
to be set at 100 percent of the 1980 Commissioner's Standard Ordinary
Mortality Table. Under 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, however, 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 provisions of 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 establishes standards for
excessive and inadequate rates. The bill requires the Texas Department of
Insurance (TDI) to provide a report on rates for credit life and
accident and health insurance in consultation with the Office of Public
Insurance Counsel (OPIC).
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 eight 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. TDI
estimates that it will need an additional part-time actuary to provide a
report on rates for credit life and accident and health insurance in
consultation with OPIC. 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 TDI 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