| TO: | Honorable Robert Duncan, Chair, Senate Committee on State Affairs |
| FROM: | John S. O'Brien, Director, Legislative Budget Board |
| IN RE: | HB1977 by Taylor (Relating to the Texas Health Insurance Risk Pool.), As Engrossed |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2008 | ($46,760,000) |
| 2009 | ($46,760,000) |
| 2010 | ($46,760,000) |
| 2011 | ($46,760,000) |
| 2012 | ($46,760,000) |
| Fiscal Year | Probable Revenue (Loss) from GENERAL REVENUE FUND 1 |
Probable Revenue (Loss) from FOUNDATION SCHOOL FUND 193 |
|---|---|---|
| 2008 | ($35,070,000) | ($11,690,000) |
| 2009 | ($35,070,000) | ($11,690,000) |
| 2010 | ($35,070,000) | ($11,690,000) |
| 2011 | ($35,070,000) | ($11,690,000) |
| 2012 | ($35,070,000) | ($11,690,000) |
The bill would amend the Insurance Code to exempt the Texas Health Insurance Risk Pool from any state tax, regulatory fee, or surcharge, including premium and maintenance taxes. The bill would allow insurers to take a premium tax credit for certain assessments paid for the Texas Health Insurance Risk Pool.
The credit would be allowed for the portion of the insurer's regular assessment, determined by the pool's board of directors during the preceeding calendar year, for non-federally eligible individuals who qualified for pool coverage. The credit would be applied to the premium tax due in the calendar year following the calendar year in which the regular assessment was determined by the pool and would be limited to the premium tax liability due for the calendar year before the application of prepayments or guaranty association credits. Credit exceeding the premium tax liability for the calendar year could not be carried forward or applied backward.
The bill would take effect immediately upon a two-thirds vote in each house, otherwise the bill would take effect September 1, 2007.
Based on the analysis of the Comptroller, although future assessments are uncertain and subject to change because of changes in enrollment, eligibility, and premiums, projections for future assessments were based on an average of the two most recent annual regular assessments, which were $86.8 million in 2005 and $87.4 million in 2006 and an average for non-federally eligible enrollment of 53.5 percent.
It is assumed that the full amount of assessments would be claimed as credit in the first year they become available. To the extent that the full amounts were not claimed in the first year available, the loss in premium tax revenues would be reduced for that year.
It is assumed the bill would result in a loss to the General Revenue Fund and the Foundation School Fund 193 because the insurance premium tax is classified as an occupation tax and therefore 25 percent of its revenues are constitutionally dedicated to the Foundation School Fund 193.
Based on the analysis of the Comptroller, the exemption from insurance taxes under the bill would not have a fiscal impact because it would clarify an uncertainty under current law.
| Source Agencies: | 304 Comptroller of Public Accounts, 454 Department of Insurance
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| LBB Staff: | JOB, KJG, JRO, MW, SK
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