H.B. No. 3257
AN ACT
relating to a health reimbursement arrangement program for active
school employees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. PROGRAM
SECTION 1.01. The heading to Article 3.50-8, Insurance
Code, is amended to read as follows:
Art. 3.50-8. ACTIVE EMPLOYEE HEALTH REIMBURSEMENT
ARRANGEMENT [COVERAGE OR COMPENSATION SUPPLEMENTATION]
SECTION 1.02. The heading to Section 1, Article 3.50-8,
Insurance Code, is amended to read as follows:
Sec. 1. GENERAL DEFINITIONS.
SECTION 1.03. Section 1, Article 3.50-8, Insurance Code, is
amended by amending Subdivisions (1) and (2) and adding
Subdivisions (1-a), (1-b), (1-c), (2-a), (2-b), (2-c), (2-d),
(3-a), and (3-b) to read as follows:
(1) "Account" means a health reimbursement
arrangement account established under this article for a
participating employee ["Cafeteria plan" means a plan as defined
and authorized by Section 125, Internal Revenue Code of 1986, and
its subsequent amendments].
(1-a) "Administering firm" means any entity
designated by the trustee to administer any coverages, services,
benefits, or requirements under this article and the trustee's
rules adopted under this article.
(1-b) "Approved health benefit plan provider" means an
entity approved by the trustee to offer health benefit plan
coverage under this article.
(1-c) "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.
(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 Texas
Public School Retired Employees Group Insurance Program
established under Article 3.50-4 of this code;
(C) is not covered by a group insurance program
under Chapter 1551 or 1601 of this code; and
(D) is not an individual performing personal
services for a participating entity as an independent contractor.
(2-a) "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.
(2-b) "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 of this code;
(C) a health maintenance organization operating
under Chapter 843 of this code;
(D) a stipulated premium insurance company
operating under Chapter 884 of this code;
(E) a multiple employer welfare arrangement
subject to Chapter 846 of this code;
(F) an approved nonprofit health corporation
that holds a certificate of authority issued under Chapter 844 of
this code; and
(G) any other entity providing a plan of health
insurance or health benefits coverage subject to state regulation
by the department.
(2-c) "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.
(2-d) "Participant" means a person enrolled in the
program.
(3-a) "Program" means the health reimbursement
arrangement program established under this article.
(3-b) "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.
SECTION 1.04. Article 3.50-8, Insurance Code, is amended by
adding Section 1A to read as follows:
Sec. 1A. DEFINITION OF EMPLOYER. (a) For purposes of
qualification under federal law of a health reimbursement
arrangement established under this article, "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 article does not make an employee an employee of
this state for any purpose other than the limited purpose described
by Subsection (a) of this section.
SECTION 1.05. Section 2, Article 3.50-8, Insurance Code, is
amended to read as follows:
Sec. 2. ACTIVE EMPLOYEE HEALTH REIMBURSEMENT ARRANGEMENT
PROGRAM; STATE CONTRIBUTION [COVERAGE OR COMPENSATION
SUPPLEMENTATION]. (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 [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 the amount to which
the employee is entitled under Subsection (a) of this section
[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
article]. The contributions shall be made in equal monthly
installments.
(c) Each employee shall direct the expenditure of the amount
of the state contribution made under this section and that is
allocated to the employee in accordance with the General
Appropriations Act and this article.
(d) Money described by Subsection (c) of this section may be
used by an employee only in accordance with this article 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.
(e) Any funds in a cafeteria plan authorized by Section 125,
Internal Revenue Code of 1986, and its subsequent amendments, and
described by Section 3(a) of this article, for an employee who
received the funds under this article, as this article existed
immediately before September 1, 2003, that were designated by the
employee for health care expenses and are unspent as of September 1,
2003, 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. [(b) All funds received by a school district,
other educational district, participating charter school, or
regional education service center under this article are held in
trust for the benefit of the active employees on whose behalf the
district, school, or service center received the funds.
[(c) The trustee shall distribute funds under this article
in equal monthly installments. 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 article to which the district, school, or
service center was not entitled.
[(d) A determination by the trustee under this section is
final and may not be appealed.]
SECTION 1.06. Article 3.50-8, Insurance Code, is amended by
adding Section 2A to read as follows:
Sec. 2A. PROGRAM FUNDING STRUCTURE; RULES. (a) The
trustee, in consultation with the comptroller, shall by rule
develop a funding structure that:
(1) implements Section 2 of this article in accordance
with this article;
(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.
(c) To implement this section, 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.
(d) On an employee's separation from service with an entity
described by Section 2(b) of this article, the employee may
continue to use for qualified health care expenses any money
carried over by the employee under Subsection (a)(2) of this
section that was allocated to the employee under this article and
was not spent before the effective date of the separation.
SECTION 1.07. Section 4, Article 3.50-8, Insurance Code, is
amended to read as follows:
Sec. 4. GENERAL RULES AND ADMINISTRATION; CONTRACT
AUTHORITY. (a) The trustee shall [may] adopt rules to implement
this article.
(b) The trustee may contract with an independent and
experienced group insurance consultant or actuary for advice and
counsel in implementing and administering the program.
(c) 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 article.
(d) 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.
(e) The trustee may not establish, approve, or limit premium
rates for health benefit plan coverages made available under the
program.
(f) Notwithstanding Section 2 of this article, the trustee
may pay all administrative costs incurred by the trustee in
operating the program from the contributions made by the state
under Section 2(a) of this article.
SECTION 1.08. Article 3.50-8, Insurance Code, is amended by
adding Sections 4A-4F to read as follows:
Sec. 4A. 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
article.
(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
article and the coverages, services, and benefits authorized under
this chapter.
Sec. 4B. CONTRACT AWARD; CONSIDERATIONS. (a) In awarding a
contract under this article, 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. 4C. 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. 4D. ISSUER RECORDS. Any 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 article; 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 article.
Sec. 4E. 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 article; or
(4) a party in response to a subpoena issued under
applicable law.
Sec. 4F. 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) of this section applies to medical
services, dental services, and vision care services.
ARTICLE 2. CONFORMING AMENDMENTS AND REPEALER
SECTION 2.01. Section 822.201(c), Government Code, is
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) contributions to a health reimbursement
arrangement account [supplemental compensation] received by an
employee under Article 3.50-8, Insurance Code; and
(11) any compensation not described by [in] Subsection
(b).
SECTION 2.02. Sections 3 and 5, Article 3.50-8, Insurance
Code, are repealed.
ARTICLE 3. IMPLEMENTATION; EFFECTIVE DATE
SECTION 3.01. (a) The Teacher Retirement System of Texas,
in consultation with the comptroller, shall develop the funding
structure required by Section 2A, Article 3.50-8, Insurance Code,
as added by Article 1 of this Act, and shall take necessary action
to implement the health reimbursement arrangement program in
accordance with Article 3.50-8, Insurance Code, as amended by
Article 1 of this Act, not later than September 1, 2004.
(b) Notwithstanding any other law, until September 1, 2004,
the Teacher Retirement System of Texas may pay for administrative
expenses incurred by the system in developing the health care
reimbursement arrangement program from funds received by the system
in fiscal year 2004 under Article 3.50-8, Insurance Code, for
operation of the employee health coverage and compensation
supplementation program.
SECTION 3.02. (a) The Teacher Retirement System of Texas
shall continue to operate the medical savings account program
established under Article 3.50-8, Insurance Code, as added by
Chapter 1187, Acts of the 77th Legislature, Regular Session, 2001,
until September 1, 2004.
(b) Any unspent funds in a medical savings account
established for an employee under Article 3.50-8, Insurance Code,
as that section existed before amendment by this Act, are
transferred to the health reimbursement arrangement account
established for that employee under Article 3.50-8, Insurance Code,
as amended by this Act, effective September 1, 2004.
SECTION 3.03. Not later than July 31, 2004, the Teacher
Retirement System of Texas shall provide written information to
school districts eligible to participate in the health
reimbursement arrangement program under Article 3.50-8, Insurance
Code, as amended by Article 1 of this Act, that provides a general
description of the requirements for such a program as adopted under
Article 3.50-8, Insurance Code, as amended by Article 1 of this Act.
SECTION 3.04. During the initial implementation of Article
3.50-8, Insurance Code, as amended by Article 1 of this Act, and
notwithstanding any bidding requirements or other requirements set
forth in Article 3.50-8, Insurance Code, as added by Chapter 1187,
Acts of the 77th Legislature, Regular Session, 2001, the Teacher
Retirement System of Texas may amend any agreement in effect on
September 1, 2003, that it has entered into under Article 3.50-8,
Insurance Code, as added by Chapter 1187, Acts of the 77th
Legislature, Regular Session, 2001, as necessary to comply with
Article 3.50-8, Insurance Code, as amended by Article 1 of this Act.
SECTION 3.05. (a) Except as provided by Subsection (b) of
this section, this Act takes effect September 1, 2003.
(b) Article 2 of this Act takes effect September 1, 2004,
and applies beginning with the 2004-2005 school year.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 3257 was passed by the House on May
10, 2003, by a non-record vote.
______________________________
Chief Clerk of the House
I certify that H.B. No. 3257 was passed by the Senate on May
28, 2003, by a viva-voce vote.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor