78S40741 AJA-D
By: Averitt S.B. No. 11
A BILL TO BE ENTITLED
AN ACT
relating to health coverage, compensation supplementation, and
health reimbursement arrangements for active school employees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 1580, Insurance Code, is reenacted and
amended to read as follows:
CHAPTER 1580. ACTIVE EMPLOYEE HEALTH COVERAGE
OR COMPENSATION SUPPLEMENTATION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1580.001. DEFINITIONS. In this chapter:
(1) "Cafeteria plan" means a plan as defined and
authorized by Section 125, Internal Revenue Code of 1986, and its
subsequent amendments.
(2) "Employee" means a participating member of the
Teacher Retirement System of Texas who:
(A) is employed by a school district, other
educational district whose employees are members of the Teacher
Retirement System of Texas, participating charter school, or
regional education service center; and
(B) is not a retiree covered under the program
established under Chapter 1575.
(3) "Participating charter school" means an
open-enrollment charter school established under Subchapter D,
Chapter 12, Education Code, that participates in the program
established under Chapter 1579.
(4) "Regional education service center" means a
regional education service center established under Chapter 8,
Education Code.
(5) "Trustee" means the Teacher Retirement System of
Texas.
Sec. 1580.002. AUTHORITY TO ADOPT RULES; OTHER AUTHORITY.
(a) The trustee may adopt rules to implement this chapter.
(b) The trustee may enter into interagency contracts with
any agency of this state for the purpose of assistance in
implementing this chapter.
Sec. 1580.003. EXPIRATION. This chapter expires September
1, 2005.
[Sections 1580.004-1580.050 reserved for expansion]
SUBCHAPTER B. DISTRIBUTION OF STATE FUNDS BY TRUSTEE
Sec. 1580.051. DISTRIBUTION BY TRUSTEE. Each year, the
trustee shall deliver to each school district, including a school
district that is ineligible for state aid under Chapter 42,
Education Code, each other educational district that is a member of
the Teacher Retirement System of Texas, each participating charter
school, and each regional education service center state funds in
an amount, as determined by the trustee, equal to the product of the
number of active employees employed by the district, school, or
service center multiplied by $1,000 or a greater amount as provided
by the General Appropriations Act for purposes of this chapter.
Sec. 1580.052. EQUAL INSTALLMENTS. The trustee shall
distribute funds under this chapter in equal monthly installments.
Sec. 1580.053. FUNDS HELD IN TRUST. All funds received by a
school district, other educational district, participating charter
school, or regional education service center under this chapter are
held in trust for the benefit of the active employees on whose
behalf the district, school, or service center received the funds.
Sec. 1580.054. RECOVERY OF DISTRIBUTIONS. The trustee is
entitled to recover from a school district, other educational
district, participating charter school, or regional education
service center any amount distributed under this chapter to which
the district, school, or service center was not entitled.
Sec. 1580.055. DETERMINATION OF TRUSTEE FINAL. A
determination by the trustee under this subchapter is final and may
not be appealed.
[Sections 1580.056-1580.100 reserved for expansion]
SUBCHAPTER C. EMPLOYEE ELECTION
Sec. 1580.101. EMPLOYEE COVERED BY CAFETERIA PLAN. (a) If
an active employee is covered by a cafeteria plan of a school
district, other educational district, participating charter
school, or regional education service center, the state
contribution under this chapter shall be deposited in the cafeteria
plan, and the employee may elect among the options provided by the
cafeteria plan.
(b) A cafeteria plan receiving state contributions under
this chapter may include a medical savings account option and must
include, at a minimum, the following options:
(1) a health care reimbursement account;
(2) a benefit or coverage other than that provided
under Chapter 1579, or any employee coverage or dependent coverage
available under Chapter 1579 but not otherwise fully funded by the
state or the employer contributions, any of which must be a
"qualified benefit" under Section 125, Internal Revenue Code of
1986, and its subsequent amendments;
(3) an option for the employee to receive the state
contribution as supplemental compensation; or
(4) an option to divide the state contribution among
two or more of the other options provided under this subsection.
Sec. 1580.102. EMPLOYEE NOT COVERED BY CAFETERIA PLAN. If
an active employee is not covered by a cafeteria plan of a school
district, other educational district, participating charter
school, or regional education service center, the state
contribution under this chapter shall be paid to the active
employee as supplemental compensation.
Sec. 1580.103. SUPPLEMENTAL COMPENSATION. Supplemental
compensation under this subchapter must be in addition to the rate
of compensation that:
(1) the school district, other educational district,
participating charter school, or regional education service center
paid the employee in the preceding school year; or
(2) the district, school, or service center would have
paid the employee in the preceding school year if the employee had
been employed by the district, school, or service center in the same
capacity in the preceding school year.
Sec. 1580.104. TIME FOR ELECTION. For each state fiscal
year, an election under this subchapter must be made before the
later of:
(1) August 1 of the preceding state fiscal year; or
(2) the 31st day after the date the employee is hired.
Sec. 1580.105. WRITTEN EXPLANATION; ELECTION FORM. (a)
The trustee shall prescribe and distribute to each school district,
other educational district, participating charter school, and
regional education service center:
(1) a model explanation written in English and Spanish
of the options active employees may elect under this section and the
effect of electing each option; and
(2) an election form to be completed by active
employees.
(b) Each state fiscal year, a school district, other
educational district, participating charter school, or regional
education service center shall prepare and distribute to each
active employee a written explanation in English and Spanish, as
appropriate, of the options the employee may elect under this
section. The explanation must be based on the model explanation
prepared by the trustee under Subsection (a) and must reflect all
available health coverage options available to the employee. The
explanation must be distributed to an employee before the later of:
(1) July 1 of the preceding state fiscal year; or
(2) the fifth day after the date the employee is hired.
(c) The written explanation under Subsection (b) must be
accompanied by a copy of the election form prescribed under
Subsection (a)(2).
Sec. 1580.106. RETURN OF UNENCUMBERED FUNDS. Any
unencumbered funds that are returned to the school district from
accounts established under Section 1580.101 may be used only to
provide employee compensation, benefits, or both.
[Sections 1580.107-1580.150 reserved for expansion]
SUBCHAPTER D. MEDICAL SAVINGS ACCOUNT
Sec. 1580.151. DEFINITION. In this subchapter, "qualified
health care expense" means an expense paid by an employee for
medical care, as defined by Section 213(d), Internal Revenue Code
of 1986, and its subsequent amendments, for the employee or the
employee's dependents, as defined by Section 152, Internal Revenue
Code of 1986, and its subsequent amendments.
Sec. 1580.152. RULES. The trustee, by rule, shall specify
the requirements for a medical savings account established under
this chapter.
Sec. 1580.153. QUALIFICATION OF ACCOUNT. (a) The trustee
shall request in writing a ruling or opinion from the Internal
Revenue Service as to whether the medical savings accounts
established under this chapter and the state rules governing those
accounts qualify the accounts for appropriate federal tax
exemptions.
(b) Based on the response of the Internal Revenue Service
under Subsection (a), the trustee shall:
(1) modify the rules, plans, and procedures adopted
under this section as necessary to ensure the qualification of
those accounts for appropriate federal tax exemptions; and
(2) certify the information regarding federal tax
qualifications to the comptroller.
Sec. 1580.154. EMPLOYEE ELECTION. An employee who elects
under Section 1580.101 to have state funds distributed under this
chapter placed in a medical savings account may use the money in
that account only for a qualified health care expense.
SECTION 2. Subtitle H, Title 8, Insurance Code, is amended
by adding Chapter 1583 to read as follows:
CHAPTER 1583. ACTIVE EMPLOYEE HEALTH
REIMBURSEMENT ARRANGEMENTS FOR CERTAIN EDUCATION EMPLOYEES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 1583.001. GENERAL DEFINITIONS. In this chapter:
(1) "Account" means a health reimbursement
arrangement account established under this chapter for a
participating employee.
(2) "Administering firm" means any entity designated
by the trustee to administer any coverages, services, benefits, or
requirements under this chapter and the trustee's rules adopted
under this chapter.
(3) "Approved health benefit plan provider" means an
entity approved by the trustee to offer health benefit plan
coverage under this chapter.
(4) "Dependent" means:
(A) the spouse of a person;
(B) an unmarried child of the person if that
child is under 25 years of age, including:
(i) an adopted child;
(ii) a stepchild, foster child, or other
child who has a regular parent-child relationship with the person;
or
(iii) a recognized natural child; or
(C) the person's recognized natural child,
adopted child, foster child, stepchild, or other child who is in a
regular parent-child relationship with the participating employee
and who lives with or has his or her care provided by the person on a
regular basis regardless of the child's age if the child is mentally
retarded or physically incapacitated to an extent that the child is
dependent on the person for care or support, as determined by the
trustee.
(5) "Employee" means a participating member of the
Teacher Retirement System of Texas who:
(A) is employed by a school district, other
educational district whose employees are members of the Teacher
Retirement System of Texas, participating charter school, or
regional education service center;
(B) is not a retiree covered under the program
established under Chapter 1575;
(C) is not covered by a group insurance program
under Chapter 1551 or 1601; and
(D) is not an individual performing personal
services for a participating entity as an independent contractor.
(6) "Health benefit plan" means a plan designed to
provide, pay for, or reimburse expenses for health care services.
The term includes:
(A) an insurance policy, contract, or
certificate;
(B) a medical or hospital service agreement; and
(C) a similar arrangement, including coverage
through a health maintenance organization operating under Chapter
843.
(7) "Health benefit plan issuer" means an entity that
provides health benefit plan coverage in this state. The term
includes:
(A) an insurance company authorized to do
business in this state;
(B) a group hospital service corporation
operating under Chapter 842;
(C) a health maintenance organization operating
under Chapter 843;
(D) a stipulated premium insurance company
operating under Chapter 884;
(E) a multiple employer welfare arrangement
subject to Chapter 846;
(F) an approved nonprofit health corporation
that holds a certificate of authority issued under Chapter 844; and
(G) any other entity providing a plan of health
insurance or health benefits coverage subject to state regulation
by the department.
(8) "Health reimbursement arrangement" is a health
benefit plan that:
(A) is paid for solely by the employer;
(B) is not provided under a salary reduction
election;
(C) reimburses a participant for a qualified
health care expense incurred by the participant or the
participant's dependent;
(D) provides reimbursements up to a maximum
dollar amount at the end of a coverage period; and
(E) provides that any unused portion of the
maximum dollar amount at the end of a coverage period is carried
forward to increase the maximum reimbursement amount in subsequent
coverage periods.
(9) "Participant" means a person enrolled in the
program.
(10) "Participating charter school" means an
open-enrollment charter school established under Subchapter D,
Chapter 12, Education Code, that participates in the program
established under Chapter 1579.
(11) "Program" means the health reimbursement
arrangement program established under this chapter.
(12) "Qualified health care expense" means an expense
paid by an employee for medical care, as defined by Section 213(d),
Internal Revenue Code of 1986, and its subsequent amendments, for
the employee or the employee's dependents, as defined by Section
152, Internal Revenue Code of 1986, and its subsequent amendments.
(13) "Regional education service center" means a
regional education service center established under Chapter 8,
Education Code.
(14) "Trustee" means the Teacher Retirement System of
Texas.
Sec. 1583.002. DEFINITION OF EMPLOYER. (a) For purposes of
qualification under federal law of a health reimbursement
arrangement established under this chapter, "employer" means this
state and a school district, another educational district whose
employees are members of the Teacher Retirement System of Texas, a
participating charter school, or a regional education service
center.
(b) This chapter does not make an employee an employee of
this state for any purpose other than the limited purpose described
by Subsection (a).
[Sections 1583.003-1583.050 reserved for expansion]
SUBCHAPTER B. HEALTH REIMBURSEMENT ARRANGEMENT PROGRAM;
STATE CONTRIBUTION
Sec. 1583.051. DISTRIBUTION TO HEALTH REIMBURSEMENT
ARRANGEMENT. (a) For each employee, the state shall annually
contribute $1,000 or the amount specified in the General
Appropriations Act to the health reimbursement arrangement account
established for that employee for the payment of qualified health
care expenses.
(b) Each year, the trustee shall contribute to the health
reimbursement arrangement account of each employee of each school
district, including a school district that is ineligible for state
aid under Chapter 42, Education Code, each other educational
district that is a member of the Teacher Retirement System of Texas,
each participating charter school, and each regional education
service center the amount to which the employee is entitled under
Subsection (a).
Sec. 1583.052. EQUAL INSTALLMENTS. The trustee shall
distribute funds under this chapter in equal monthly installments.
Sec. 1583.053. DIRECTION OF EXPENDITURES BY EMPLOYEE. (a)
Each employee shall direct the expenditure of the amount of the
state contribution made under this subchapter and that is allocated
to the employee in accordance with the General Appropriations Act
and this chapter.
(b) An employee may use money described by Subsection (a)
only in accordance with this chapter for the employee and the
employee's dependents for health benefit plan coverage offered by
approved health benefit plan providers and for other qualified
health care expenses.
Sec. 1583.054. EFFECT ON CAFETERIA PLAN. Any funds in a
cafeteria plan authorized by Section 125, Internal Revenue Code of
1986, and its subsequent amendments, and described by Section
1580.101, for an employee who received the funds under Chapter 1580
as that chapter existed immediately before September 1, 2005, that
were designated by the employee for health care expenses and are
unspent as of September 1, 2005, must be spent by the employee for
qualified health care expenses before the employee may spend any
funds from the health reimbursement arrangement account
established for that employee under this section.
Sec. 1583.055. EQUITABILITY IN NEGOTIATED RATES. (a) A
health benefit plan used to provide coverage under the program must
be designed to ensure that an employee who purchases coverage under
the health benefit plan through the employee's health reimbursement
arrangement account is entitled to pay a physician or other health
care provider for services provided to the employee that are not
reimbursed from the account at the same rate negotiated with the
physician or other health care provider by the approved health
benefit plan provider for provision of those services under the
plan.
(b) Subsection (a) applies to medical services, dental
services, and vision care services.
[Sections 1583.056-1583.100 reserved for expansion]
SUBCHAPTER C. PROGRAM FUNDING STRUCTURE
Sec. 1583.101. PROGRAM FUNDING STRUCTURE. (a) The
trustee, in consultation with the comptroller, shall by rule
develop a funding structure that:
(1) implements Subchapter B in accordance with this
chapter;
(2) permits an employee to carry over money allocated
to the employee throughout the period the employee is eligible to
participate in the program; and
(3) ensures, to the extent feasible and consistent
with this chapter, favorable federal tax treatment to the employee.
(b) The funding structure shall use a health reimbursement
arrangement established in a manner compatible with federal tax
law.
Sec. 1583.102. COMPTROLLER DUTIES. To implement Section
1583.101, the comptroller shall, as requested by the trustee:
(1) establish separate accounts attributable to
individual participating employees within the Texas school
employees uniform group coverage trust fund; or
(2) transfer funds from the Texas school employees
uniform group coverage trust fund to trust accounts outside the
fund in the custody of the comptroller established for the benefit
of employees.
Sec. 1583.103. EFFECT OF EMPLOYEE SEPARATION FROM SERVICE.
On an employee's separation from service with an entity described
by Section 1583.051(b), the employee may continue to use for
qualified health care expenses any money carried over by the
employee under Section 1583.101(a)(2) that was allocated to the
employee under this chapter and was not spent before the effective
date of the separation.
[Sections 1583.104-1583.150 reserved for expansion]
SUBCHAPTER D. GENERAL RULES AND ADMINISTRATION OF PROGRAM
Sec. 1583.151. RULES. The trustee shall adopt rules to
implement this chapter.
Sec. 1583.152. TRUSTEE AUTHORITY; LIMITATIONS. (a) The
trustee may not directly administer health benefit plan coverages
made available under the program and may not provide those
coverages on a self-funded basis.
(b) The trustee may not establish, approve, or limit premium
rates for health benefit plan coverages made available under the
program.
(c) Notwithstanding Subchapter B, the trustee may pay all
administrative costs incurred by the trustee in operating the
program from the contributions made by the state under Section
1583.051(a).
Sec. 1583.153. CONTRACTS. (a) The trustee may contract
with an independent and experienced group insurance consultant or
actuary for advice and counsel in implementing and administering
the program.
(b) The trustee may enter into interagency contracts with
any agency of this state, including the Employees Retirement System
of Texas and the department, for the purpose of assistance in
implementing this chapter.
Sec. 1583.154. COMPETITIVE BIDDING REQUIREMENTS. (a) The
trustee may, on a competitive bid basis, contract with an entity to
act for the trustee as an independent administrator or manager of
the coverages, services, and benefits authorized under this
chapter.
(b) The entity must be a qualified, experienced firm of
group insurance specialists or an administering firm and shall
assist the trustee in ensuring the proper administration of this
chapter and the coverages, services, and benefits authorized under
this chapter.
Sec. 1583.155. CONTRACT AWARD; CONSIDERATIONS. (a) In
awarding a contract under this chapter, the trustee is not required
to select the lowest bid and may consider also any relevant
criteria, including the bidder's:
(1) ability to service contracts;
(2) past experience, including experience with the
operation of health reimbursement arrangements; and
(3) financial stability.
(b) If the trustee awards a contract to a bidder whose bid
deviates from that advertised, the trustee shall record the
deviation and fully justify the reason for the deviation in the
minutes of the next trustee meeting.
Sec. 1583.156. CONFIDENTIALITY OF PARTICIPANT RECORDS. (a)
The records of a participant in the program in the custody of the
trustee, or of an administrator or health benefit plan issuer
acting under the program, are confidential and not subject to
disclosure and are exempt from the public access provisions of
Chapter 552, Government Code, except as provided by this section.
(b) The trustee may release the records to:
(1) an administrator, health benefit plan issuer,
agent, or attorney acting under the program;
(2) another governmental entity;
(3) a medical provider of the participant to
accomplish the purposes of this chapter; or
(4) a party in response to a subpoena issued under
applicable law.
[Sections 1583.157-1583.200 reserved for expansion]
SUBCHAPTER E. DUTIES OF HEALTH BENEFIT PLAN ISSUER
Sec. 1583.201. CERTIFICATE OF COVERAGE. An approved health
benefit plan provider shall issue, to each employee purchasing
health benefit plan coverage from the health benefit plan provider
under the program, a certificate of coverage that states:
(1) the benefits to which the participant is entitled;
(2) to whom the benefits are payable;
(3) to whom a claim must be submitted; and
(4) the provisions of the plan document, in summary
form, that principally affect the participant.
Sec. 1583.202. ISSUER RECORDS. A health benefit plan
issuer providing coverages to participants in the program shall:
(1) furnish any reasonable report the trustee
determines is necessary to enable the trustee to perform its
functions under this chapter; and
(2) permit the trustee and a representative of the
state auditor to examine records of the health benefit plan issuer
as necessary to accomplish the purposes of this chapter.
SECTION 3. Section 822.201(c), Government Code, is
reenacted and amended to read as follows:
(c) Excluded from salary and wages are:
(1) expense payments;
(2) allowances;
(3) payments for unused vacation or sick leave;
(4) maintenance or other nonmonetary compensation;
(5) fringe benefits;
(6) deferred compensation other than as provided by
Subsection (b)(3);
(7) compensation that is not made pursuant to a valid
employment agreement;
(8) payments received by an employee in a school year
that exceed $5,000 for teaching a driver education and traffic
safety course that is conducted outside regular classroom hours;
(9) the benefit replacement pay a person earns as a
result of a payment made under Subchapter B or C, Chapter 661;
(10) supplemental compensation received by an
employee under Chapter 1580 [Article 3.50-8], Insurance Code, or
contributions to a health reimbursement arrangement account
received by an employee under Chapter 1583, Insurance Code; and
(11) any compensation not described by [in] Subsection
(b).
SECTION 4. (a) The following laws are repealed:
(1) Section 57, Chapter 201, Acts of the 78th
Legislature, Regular Session, 2003; and
(2) Chapter 313, Acts of the 78th Legislature, Regular
Session, 2003.
(b) Chapter 1580, Insurance Code, as reenacted and amended
by this Act, applies beginning with the 2004-2005 school year.
(c) Chapter 1583, Insurance Code, as added by this Act,
applies beginning with the 2005-2006 school year and takes effect
September 1, 2005.
SECTION 5. (a) The Teacher Retirement System of Texas
shall continue to operate the medical savings account program
established under Chapter 1580, Insurance Code, as reenacted and
amended by this Act, until September 1, 2005.
(b) Any unspent funds in a medical savings account
established for an employee under Chapter 1580, Insurance Code, as
reenacted and amended by this Act, are transferred to the health
reimbursement arrangement account established for that employee
under Chapter 1583, Insurance Code, as added by this Act, effective
September 1, 2005.
(c) The Teacher Retirement System of Texas, in consultation
with the comptroller, shall develop the funding structure required
by Subchapter B, Chapter 1583, Insurance Code, as added by this Act,
and shall take necessary action to implement the health
reimbursement arrangement program in accordance with Chapter 1583,
Insurance Code, as added by this Act, not later than September 1,
2005.
(d) Notwithstanding any other law, until September 1, 2005,
the Teacher Retirement System of Texas may pay for administrative
expenses incurred by the system in developing the health
reimbursement arrangement program from funds received by the system
in fiscal year 2004 under Chapter 1580, Insurance Code, as
reenacted and amended by this Act, for operation of the employee
health coverage and compensation supplementation program.
(e) Not later than July 31, 2005, the Teacher Retirement
System of Texas shall provide written information to school
districts eligible to participate in the health reimbursement
arrangement program under Chapter 1583, Insurance Code, as added by
this Act, that provides a general description of the requirements
for such a program under Chapter 1583, Insurance Code, as added by
this Act.
(f) During the initial implementation of Chapter 1583,
Insurance Code, as added by this Act, and notwithstanding any
bidding requirements or other requirements set forth in Chapter
1580, Insurance Code, as reenacted and amended by this Act, the
Teacher Retirement System of Texas may amend any agreement in
effect on September 1, 2004, that it has entered into under Chapter
1580, Insurance Code, as reenacted and amended by this Act, as
necessary to comply with Chapter 1583, Insurance Code, as added by
this Act.
SECTION 6. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect on the 91st day after the last day of the
legislative session.