LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION April 1, 2013 TO: Honorable Tryon D. Lewis, Chair, House Committee on Judiciary & Civil Jurisprudence FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB1869 by Price (Relating to contractual subrogation rights of certain insurers and benefit plan issuers.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for HB1869, As Introduced: a negative impact of ($3,077,660) 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.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION
April 1, 2013
TO: Honorable Tryon D. Lewis, Chair, House Committee on Judiciary & Civil Jurisprudence FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB1869 by Price (Relating to contractual subrogation rights of certain insurers and benefit plan issuers.), As Introduced
TO: Honorable Tryon D. Lewis, Chair, House Committee on Judiciary & Civil Jurisprudence
FROM: Ursula Parks, Director, Legislative Budget Board
IN RE: HB1869 by Price (Relating to contractual subrogation rights of certain insurers and benefit plan issuers.), As Introduced
Honorable Tryon D. Lewis, Chair, House Committee on Judiciary & Civil Jurisprudence
Honorable Tryon D. Lewis, Chair, House Committee on Judiciary & Civil Jurisprudence
Ursula Parks, Director, Legislative Budget Board
Ursula Parks, Director, Legislative Budget Board
HB1869 by Price (Relating to contractual subrogation rights of certain insurers and benefit plan issuers.), As Introduced
HB1869 by Price (Relating to contractual subrogation rights of certain insurers and benefit plan issuers.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB1869, As Introduced: a negative impact of ($3,077,660) 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.
Estimated Two-year Net Impact to General Revenue Related Funds for HB1869, As Introduced: a negative impact of ($3,077,660) 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.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2014 ($1,538,830) 2015 ($1,538,830) 2016 ($1,538,830) 2017 ($1,538,830) 2018 ($1,538,830)
2014 ($1,538,830)
2015 ($1,538,830)
2016 ($1,538,830)
2017 ($1,538,830)
2018 ($1,538,830)
All Funds, Five-Year Impact: Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Revenue Gain/(Loss) fromGR Dedicated Accounts994 Probable Revenue Gain/(Loss) fromFederal Funds555 Probable Revenue Gain/(Loss) fromOther Special State Funds998 2014 ($1,538,830) ($89,973) ($479,553) ($9,741) 2015 ($1,538,830) ($89,973) ($479,553) ($9,741) 2016 ($1,538,830) ($89,973) ($479,553) ($9,741) 2017 ($1,538,830) ($89,973) ($479,553) ($9,741) 2018 ($1,538,830) ($89,973) ($479,553) ($9,741) Fiscal Year Probable Revenue Gain/(Loss) fromState Highway Fund6 2014 ($381,903) 2015 ($381,903) 2016 ($381,903) 2017 ($381,903) 2018 ($381,903)
Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Revenue Gain/(Loss) fromGR Dedicated Accounts994 Probable Revenue Gain/(Loss) fromFederal Funds555 Probable Revenue Gain/(Loss) fromOther Special State Funds998 2014 ($1,538,830) ($89,973) ($479,553) ($9,741) 2015 ($1,538,830) ($89,973) ($479,553) ($9,741) 2016 ($1,538,830) ($89,973) ($479,553) ($9,741) 2017 ($1,538,830) ($89,973) ($479,553) ($9,741) 2018 ($1,538,830) ($89,973) ($479,553) ($9,741)
2014 ($1,538,830) ($89,973) ($479,553) ($9,741)
2015 ($1,538,830) ($89,973) ($479,553) ($9,741)
2016 ($1,538,830) ($89,973) ($479,553) ($9,741)
2017 ($1,538,830) ($89,973) ($479,553) ($9,741)
2018 ($1,538,830) ($89,973) ($479,553) ($9,741)
Fiscal Year Probable Revenue Gain/(Loss) fromState Highway Fund6 2014 ($381,903) 2015 ($381,903) 2016 ($381,903) 2017 ($381,903) 2018 ($381,903)
2014 ($381,903)
2015 ($381,903)
2016 ($381,903)
2017 ($381,903)
2018 ($381,903)
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-third of the covered individuals total recovery or the total cost of benefits paid by the payor as a direct result of the tortious conduct of the third party. If the covered individual proves, by a preponderance of evidence, that the covered individuals total recovery is less than 50 percent of the value of the claim for damages, then the payors total allowable recovery would be limited to an amount that is no less than 15 percent, but no more than one-third of the covered individuals total recovery. If the covered individual proves, by clear and convincing evidence, that the payors recovery would result in a recognized injustice, the payors total recovery would be limited to an amount that is less than 15 percent or greater than 5 percent of the covered individuals total recovery. 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 prohibit a court from awarding costs or attorneys fees. In an action where the insurers interests are not actively represented by an attorney in a third-party action, the payor of benefits shall pay to the attorney representing the covered individual, a fee in an amount previously determined plus a pro rata share of expenses. However, in the absence of an agreement, the court shall award to the attorney a reasonable fee for recovery of the payors share. The bill would also prohibit a payor of benefits from pursuing a recovery against a covered individuals first party recovery. The bill would take effect January 1, 2014.
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-third of the covered individuals total recovery or the total cost of benefits paid by the payor as a direct result of the tortious conduct of the third party. If the covered individual proves, by a preponderance of evidence, that the covered individuals total recovery is less than 50 percent of the value of the claim for damages, then the payors total allowable recovery would be limited to an amount that is no less than 15 percent, but no more than one-third of the covered individuals total recovery. If the covered individual proves, by clear and convincing evidence, that the payors recovery would result in a recognized injustice, the payors total recovery would be limited to an amount that is less than 15 percent or greater than 5 percent of the covered individuals total recovery. 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 prohibit a court from awarding costs or attorneys fees. In an action where the insurers interests are not actively represented by an attorney in a third-party action, the payor of benefits shall pay to the attorney representing the covered individual, a fee in an amount previously determined plus a pro rata share of expenses. However, in the absence of an agreement, the court shall award to the attorney a reasonable fee for recovery of the payors share. The bill would also prohibit a payor of benefits from pursuing a recovery against a covered individuals first party recovery.
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 $2,500,000 to $5,000,000 each year. 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 information provided by the Teacher Retirement System, the University of Texas System Administration, 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.
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 $2,500,000 to $5,000,000 each year. 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 information provided by the Teacher Retirement System, the University of Texas System Administration, 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, 710 Texas A&M University System Administrative and General Offices, 720 The University of Texas System Administration
323 Teacher Retirement System, 327 Employees Retirement System, 454 Department of Insurance, 710 Texas A&M University System Administrative and General Offices, 720 The University of Texas System Administration
LBB Staff: UP, CL, MW, ER, KKR
UP, CL, MW, ER, KKR