Honorable Robert Duncan, Chair, Senate Committee on State Affairs
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
HB1869 by Price (Relating to contractual subrogation and other recovery rights of certain insurers and benefit plan issuers.), As Engrossed
Estimated Two-year Net Impact to General Revenue Related Funds for HB1869, As Engrossed: a negative impact of ($2,462,128) through the biennium ending August 31, 2015.
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
2014
($1,231,064)
2015
($1,231,064)
2016
($1,231,064)
2017
($1,234,064)
2018
($1,231,064)
Fiscal Year
Probable Revenue Gain/(Loss) from General Revenue Fund 1
Probable Revenue Gain/(Loss) from GR Dedicated Accounts 994
Probable Revenue Gain/(Loss) from Federal Funds 555
Probable Revenue Gain/(Loss) from Other Special State Funds 998
2014
($1,231,064)
($71,979)
($383,642)
($7,793)
2015
($1,231,064)
($71,979)
($383,642)
($7,793)
2016
($1,231,064)
($71,979)
($383,642)
($7,793)
2017
($1,234,064)
($71,979)
($383,642)
($7,793)
2018
($1,231,064)
($71,979)
($383,642)
($7,793)
Fiscal Year
Probable Revenue Gain/(Loss) from State Highway Fund 6
2014
($305,522)
2015
($305,522)
2016
($305,522)
2017
($305,522)
2018
($305,522)
Fiscal Analysis
The bill would amend the Civil Practice and Remedies Code relating to contractual subrogation rights of certain insurers and benefit plan issuers. The bill would allow for contractual subrogation rights to certain benefit plan issuers and limit the amounts that can be recovered under those subrogation rights. The injured covered individual against whom subrogation rights are sought from could bring a declaratory judgment action to limit the amount recoverable under the subrogation rights, resulting in a recovery of one-half of the covered individual's total recovery or the total cost of benefits paid, provided, or assumed by the payor as a direct result of the tortious conduct of the third party. The bill would exclude a common law doctrine that requires an injured party to be made whole before a subrogee makes a recovery. The bill would require subrogees to share in the payment of attorney's fees and lititgation costs regardless of whether or not the subrogee is represented by counsel. The bill would also exempt workers' compensation insurance policies, Medicare, Medicaid, the state child health care plan or any self-funded plan subject to the Employee Retirement System Income Security Act from the requirements of the chapter. The bill would also prohibit a payor of benefits from pursuing a recovery against a covered individual's first party recovery. The bill would repeal Local Government Code, Section 172.015.
The bill would take effect January 1, 2014.
Methodology
Based on information provided by the Employees Retirement System (ERS), this analysis assumes an average annual recovery of $7,500,000 from subrogation activities. Under the provisions of the bill, ERS estimates that annual recoveries from subrogation activities would decrease by $2,000,000 each year and would bar futher participation in first party recoveries. This total amount is reflected in the table above across all applicable methods of financing.
Based on information provided by the Texas Department of Insurance (TDI), it is assumed that any costs associated with the implementation of this bill would be absorbed within existing staff and resources. Also, based on information provided by TDI, this analysis assumes that implementation of the bill would result in an increase in form filings due to companies updating subrogation provisions and a one-time revenue gain ($70,500 in fiscal year 2014) in General Revenue-Dedicated Texas Department of Insurance Fund 36 from filing fees. Since General Revenue-Dedicated Texas Department of Insurance Fund 36 is a self-leveling account, this analysis also assumes that any additional revenue resulting from the implementation of the bill would accumulate in account fund balances and that the department would adjust the assessment of the maintenance tax or other fees accordingly in the following year.
Based on the information provided by the University of Texas System Administration, it is assumed that annual recoveries from subrogation activities would decrease by $1,000,000 to $1,500,000 each year.
Based on information provided by the Teacher Retirement System and the Texas A&M University System Administration, it is assumed that the bill would have no significant fiscal impact and that all duties and responsibilities could be accomplished within existing resources.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies:
323 Teacher Retirement System, 327 Employees Retirement System, 454 Department of Insurance, 529 Health and Human Services Commission, 710 Texas A&M University System Administrative and General Offices, 720 The University of Texas System Administration