| TO: | Honorable John T. Smithee, Chair, House Committee on Insurance |
| FROM: | John Keel, Director, Legislative Budget Board |
| IN RE: | HB1128 by Farrar (Relating to the premium tax on certain life, health, and accident insurance policies.), As Introduced |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2004 | $0 |
| 2005 | ($4,666,666) |
| 2006 | ($7,000,000) |
| 2007 | ($7,000,000) |
| 2008 | ($7,000,000) |
| Fiscal Year | Probable Revenue (Loss) fromGENERAL REVENUE FUND 1 |
Probable Revenue (Loss) fromFOUNDATION SCHOOL FUND 193 |
|---|---|---|
| 2004 | $0 | $0 |
| 2005 | ($3,500,000) | ($1,166,666) |
| 2006 | ($5,250,000) | ($1,750,000) |
| 2007 | ($5,250,000) | ($1,750,000) |
| 2008 | ($5,250,000) | ($1,750,000) |
This bill would create an insurance premium tax exemption for certain coverage provided to employees of a political subdivision of the state.
The exemption would apply to premiums paid on group life, accident, and health policies in which the group covered by the policy consists of a single nonprofit trust established to provide coverage primarily for employees of political subdivisions of the state other than municipalities, counties, and hospital districts.
Under current law, a premium tax exemption applies to premiums paid on group life, accident, and health policies in which the group covered by the policy consists of a single nonprofit trust established to provide coverage primarily for employees of municipalities, counties, and hospital districts. This bill would extend the exemption to employees of other political subdivisions.
Chief among the other political subdivisions that would fall under the exemption would be school districts and special purpose districts.
According to the Teacher Retirement System of Texas school district health insurance premiums for the 2001-02 school year (employee and district share) totaled approximately $1.6 billion. Of this amount, the Comptroller's staff estimates that perhaps one-quarter to one-third may be through licensed insurers, either as fully-insured plans or through stop-loss coverage purchased by self-insured plans, implying a potential annual premium tax loss of between $7 and $9 million. Since the exemption would not become effective until January 1, 2004, the loss for fiscal year 2005 would be less. The annual amount would vary dependent upon the extent to which currently taxable coverage would qualify for the proposed exemption or the extent to which school districts would establish single nonprofit trusts to convert currently taxable coverage to qualify for the proposed exemption. In addition to these amounts, additional premium tax losses may be incurred for premiums paid by special purpose districts and other entities that might qualify under the provisions of this bill.
| Source Agencies: | 304 Comptroller of Public Accounts, 454 Department of Insurance
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| LBB Staff: | JK, JO, JRO, WP, DLBe
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