H.B. 1243 78(R)    BILL ANALYSIS


H.B. 1243
By: Thompson
Insurance
Committee Report (Unamended)



BACKGROUND AND PURPOSE 

The Health Insurance Portability and Accountability Act (HIPAA) is the
federal legislation that charges states with the responsibility of
ensuring that individuals and small employers have full, open access to
the health insurance market.  HIPAA discourages small employer carriers
from designing agent compensation schedules that provide either an
incentive or a disincentive for an agent to recommend one carrier over
another to a given small employer, depending on that employer's health
status. 

Currently, the Texas Insurance Code prohibits a small employer carrier
from entering into an agreement with an agent that provides the agent
varied compensation based on the health status or claims experience of
eligible employees and dependents of the employer.  An exception to this
provision is provided under current state law,  if an agent is compensated
based on a percentage of the premium that does not vary based on the
health status or claims experience of the eligible employees and
dependents of the employer.  Some carriers have gotten around this
exception by compensating agents with a flat-dollar fee, which is the same
for each policy written, or by not paying any percentage on the additional
premiums charged for health status or claims experience. These practices
remove the incentive to write small group health insurance policies for
employers with high claims experience and may reduce the accessibility of
small group health insurance. 

H.B. 1243 specifies that agents who sell small employer group health
insurance policies are to be compensated by a percentage commission based
on the total premium. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

House Bill 1243 amends the Insurance Code to provide that when small
employer carriers charge small employers additional premiums based upon
health status or claims experience, agents are to receive the same
percentage of the total premium charged (commission) as on other policies
that do not charge extra premiums.  The bill prohibits a small employer
carrier from using an agent compensation schedule that provides
compensation in a specific dollar amount for each individual or for each
group of individuals covered during a specified period.  The bill sets
forth a prospective clause.  
 

EFFECTIVE DATE

September 1, 2003.