LEGISLATIVE BUDGET BOARD
Austin, Texas
 
FISCAL NOTE, 78TH LEGISLATIVE REGULAR SESSION
 
April 22, 2003

TO:
Honorable Dianne White Delisi, Chair, House Committee on State Health Care Expenditures, Select
 
FROM:
John Keel, Director, Legislative Budget Board
 
IN RE:
HB2824 by Eissler (Relating to adoption of a medical savings account program for the provision of health benefits coverage to active employees of school districts.), As Introduced



Estimated Two-year Net Impact to General Revenue Related Funds for HB2824, As Introduced: a negative impact of ($20,000,000) through the biennium ending August 31, 2005.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.



Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2004 ($10,000,000)
2005 ($10,000,000)
2006 ($10,000,000)
2007 ($10,000,000)
2008 ($10,000,000)




Fiscal Year Probable Savings/(Cost) from
GENERAL REVENUE FUND
1 		Change in Number of State Employees from FY 2003
2004 ($10,000,000) 2.0
2005 ($10,000,000) 2.0
2006 ($10,000,000) 2.0
2007 ($10,000,000) 2.0
2008 ($10,000,000) 2.0

Fiscal Analysis

The bill would establish a medical savings account (MSA) program for Texas public school and charter school employees and their dependents, to be administered by the Teacher Retirement System.  The medical savings account program would be required to provide a primary care coverage plan comparable in cost to the basic coverage provided to state employees and a catastrophic care coverage plan.

The bill would require the state to annually contribute $1,900 to the MSA established for the public school or charter school employee in the following manner: $900 would be distributed through the school finance formulas, and $1,000 would be distributed by the Teacher Retirement System. However, a school district that is ineligible to receive state aid under Chapter 42 of the Education Code would be entitled to the full $1,900 state contribution.

The bill would require each participating employee to contribute any amounts required to cover health benefit options selected by the employee beyond the state contribution amount.


Methodology

Under current law, the Teacher Retirement System (TRS) distributes a $1,000 annual supplement to each TRS member employed by a public school district or charter school.  The Texas Education Agency ensures that each school district or charter school receives a $900 annual health insurance allotment per employee, either through additional Foundation School Program revenue or direct state aid. 

The bill would re-direct these two allocations into a medical savings account program administered by TRS. Under the section of the bill that amends the Texas Insurance Code, TRS would deliver $1,000 per public education employee directly to the employee's medical savings account; while the remaining $900 would be distributed by the school finance formulas.  However, another section of the bill that amends the Education Code would provide state aid to school districts based on a $1,900 per employee allotment, if the school district does not receive that amount through the school finance formulas.  Because the overall effect of the bill would be to re-direct the two allocations ($1,000 supplement and the $900 insurance allotment) to a medical savings account program, there would be no fiscal impact associated with this re-direction.

Based on the experience of the Employee Retirement System administering a similar program, which administers a smaller-scale voluntary program for state employees, TRS estimates a cost of $10 million per year to finance the administrative cost associated with a medical savings account program.  The TRS estimate is based on a $16 annual cost per school district and charter school employee, and assumes over 600,000 employees.  Most of these costs would be associated with a third party administrator.  TRS indicates that two additional full-time equivalent employees would be necessary.


Local Government Impact

School districts and charter schools that participate in the medical savings account program would incur administrative costs associated with establishing a medical savings account program.


Source Agencies:
304 Comptroller of Public Accounts, 454 Department of Insurance
LBB Staff:
JK, JO, EB, UP, RB, RN