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