S.B. No. 1171

relating to the suspension and reactivation of the operation of the Texas Health Reinsurance System.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 1501.302, Insurance Code, is amended to read as follows:

Sec. 1501.302. TEXAS HEALTH REINSURANCE SYSTEM. (a) The Texas Health Reinsurance System is a nonprofit entity administered by a board of directors and subject to the supervision and control of the commissioner.

(b) The system may operate only during the period an order authorizing operation of the system under Section 1501.3021 is in effect. The system may not operate after the effective date of an order of suspension of operation of the system under Section 1501.3022 until a subsequent order authorizing the operation of the system under Section 1501.3021, if any, is effective.

SECTION 2. Subchapter G, Chapter 1501, Insurance Code, is amended by adding Sections 1501.3021 and 1501.3022 to read as follows:

Sec. 1501.3021. AUTHORIZATION OF OPERATION. (a) The commissioner shall hold a hearing if:

(1) the commissioner believes small employer health benefit plan issuers in this state are threatened with the inability to secure reinsurance coverage in the open market; or

(2) the commissioner receives a petition requesting the hearing from an association of health benefit plan issuers in this state or a group of at least 15 small employer health benefit plan issuers operating in this state.

(b) If, after a hearing under Subsection (a), the commissioner finds that the operation of the system is in the public interest, the commissioner by order shall:

(1) authorize the operation of the system;

(2) appoint a board of directors under Section 1501.303; and

(3) direct the board to develop a plan of operation under Section 1501.306 to ensure the system is fully implemented on a date specified in the order that is not later than the 60th day after the effective date of the order.

(c) Sections 1501.307-1501.326 apply to the operation of the system after the date the system is implemented as described by Subsection (b)(3).

Sec. 1501.3022. SUSPENSION OF OPERATION. (a) The commissioner shall hold a hearing if the system is operating or is authorized to operate and:

(1) the commissioner believes small employer health benefit plan issuers in this state are not threatened with the inability to secure reinsurance coverage in the open market; or

(2) the commissioner receives a petition requesting the hearing from an association of health benefit plan issuers in this state or a group of at least 15 small employer health benefit plan issuers operating in this state.

(b) If, after a hearing under Subsection (a), the commissioner finds that suspension of the operation of the system is in the public interest, the commissioner by order shall direct the board to submit to the commissioner for approval, not later than the 60th day after the date of the order, a plan of suspension of operation of the system.

(c) A plan of suspension under Subsection (b) must:

(1) specify the date after which a health benefit plan issuer that is a risk-assuming health benefit plan issuer on the effective date of the plan of suspension may not:

(A) become a reinsured health benefit plan issuer under Sections 1501.310, 1501.311, and 1501.312; and

(B) reinsure with the system a small employer group, or any risk, covered under any small employer health benefit plan;

(2) specify the date after which a health benefit plan issuer that is a reinsured health benefit plan issuer on the effective date of the plan of suspension may not:

(A) reinsure with the system additional small employer groups in accordance with Section 1501.314; or

(B) cede additional eligible lives to the system in accordance with Section 1501.314;

(3) provide for:

(A) the filing, receipt, processing, and payment of all claims against and debts of the system, and extinguishment of all liabilities of the system, including balances on any lines of credit that may have been established by or on behalf of the system;

(B) the collection and receipt of all assessments made with respect to reinsured health benefit plan issuers, including any deferred assessments and any final assessment made under Subsection (f); and

(C) a final audit of the system by the state auditor as provided by Subsection (g);

(4) specify that the transactions required by the plan of suspension and addressed in Subdivisions (1)-(3) must be closed not later than the effective date of the suspension of the operation of the system as specified under Subdivision (5);

(5) state the effective date of the suspension of the operation of the system; and

(6) provide for the proportionate distribution of any surplus assets of the system that remain after the date specified under Subdivision (5).

(d) The effective date of the suspension of the operation of the system as specified under Subsection (c)(5) may not be later than the 270th day after the date the commissioner by order approves the plan of suspension.

(e) If the board fails to submit a suitable plan of suspension, the commissioner, after notice and hearing, shall adopt a plan in accordance with Subsection (c).

(f) The board may make a final assessment of the small employer health benefit plan issuers that, for any portion of the last year in which the system operated, were reinsured health benefit plan issuers. An assessment under this subsection may be made only if the board determines the assessment is necessary to recover net losses of the system, as provided in Sections 1501.319-1501.326, including administrative expenses for transactions essential to complete execution of the plan of suspension, and the cost of the final audit by the state auditor.

(g) The transactions necessary to complete execution of the plan of suspension are subject to audit by the state auditor under Chapter 321, Government Code. The state auditor shall report the cost of the final audit conducted under this section to the board and the comptroller, and the board shall remit that amount to the comptroller for deposit to the general revenue fund.

(h) The board serving immediately before the effective date of the suspension of the operation of the system is discharged on the effective date of the suspension of the operation of the system as specified under Subsection (c)(5).

(i) After the effective date of the suspension of the operation of the system as specified under Subsection (c)(5), the commissioner shall take any action necessary under Subsection (c)(6) to distribute the surplus assets of the system until all remaining assets are distributed.

(j) During a period in which the operation of the system is suspended, Sections 1501.307-1501.326 have no effect.

SECTION 3. The board of directors of the Texas Health Reinsurance System serving on the effective date of this Act shall submit to the commissioner of insurance a plan of suspension of the operation of the Texas Health Reinsurance System, as described by Section 1501.3022(c), Insurance Code, as added by this Act, not later than the 90th day after the effective date of this Act. If the board fails to timely submit the plan, the commissioner of insurance shall adopt a plan in accordance with Sections 1501.3022(c)-(i), Insurance Code, as added by this Act.

SECTION 4. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2017.

______________________________ ______________________________

President of the Senate Speaker of the House

I hereby certify that S.B. No. 1171 passed the Senate on April 19, 2017, by the following vote: Yeas 31, Nays 0.

______________________________ Secretary of the Senate

I hereby certify that S.B. No. 1171 passed the House on May 12, 2017, by the following vote: Yeas 142, Nays 0, one present not voting.

______________________________ Chief Clerk of the House

Approved:

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Date

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Governor