LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 23, 2001
TO: Honorable David Sibley, Chair, Senate Committee on
Business & Commerce
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB1284 by Van de Putte (Relating to payment by certain
issuers of health benefit plans of certain claims;
providing penalties. ), Committee Report 1st House,
Substituted
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB1284, 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 $(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 *
**************************************************************************
Technology Impact
Computers and software for the additional Full-time Equivalent positions
totaling $37,786 in fiscal year 2002.
Fiscal Analysis
The bill amends Article 3.70-3C, Texas Insurance Code requiring preferred
provider carriers and HMOs to verify that 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 sections 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 for utilization
review and the appeal process in place for utilization review
determinations including the Independent Review Process that is
conducted.
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 to implement the provisions of the bill, which
all consist of insurance specialists. According to TDI, the provisions
of the bill would require HMOs to verify medical necessity for proposed
services between 6 a.m. and 6 p.m. seven days a week, to any provider or
physician who requests the verification before rendering services. It
also prohibits an HMO from denying payment for the services authorized
unless (1) the provider/physician misstated the nature of the services or
(2) the services authorized were not rendered. TDI expects these
subsections to cause an increase in provider and consumer complaints for
two reasons. 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. TDI estimates that 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 currently has 1.6
Insurance Specialist FTEs who process URA filings. They
certified/registered 54 URAs and renewed 46 URAs in fiscal year 2000, and
they certified/registered 74 URAs and renewed 87 URAs in fiscal year
1999, for an average of 163 URA applications per person per year.
Processing the additional 403 companies each year would thus require 2.5
additional Insurance Specialist FTEs (403/163 = 2.47).
Any retrospective reviews that result in an adverse determination would
be subject to the UR appeal process outlined in Texas Insurance Code.
Under this process, TDI assigns Independent Review Organizations (IROs)
as requested. TDI has 1 Insurance Specialist FTE 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 Specialist FTEs (3,551 / 400 = 8.88).
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 other fees to cover the cost of
implementing the bill not covered by this additional revenue.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 529 Health and Human Services Commission, 327
Employees Retirement System, 454 Texas Department
of Insurance
LBB Staff: JK, JO, RT, DE