CHAPTER 172. TEXAS POLITICAL SUBDIVISIONS UNIFORM GROUP BENEFITS PROGRAM - Texas Statutes

LOCAL GOVERNMENT CODE

TITLE 5. MATTERS AFFECTING PUBLIC OFFICERS AND EMPLOYEES

SUBTITLE C. MATTERS AFFECTING PUBLIC OFFICERS AND EMPLOYEES OF

MORE THAN ONE TYPE OF LOCAL GOVERNMENT

CHAPTER 172. TEXAS POLITICAL SUBDIVISIONS UNIFORM GROUP BENEFITS

PROGRAM

Sec. 172.001. SHORT TITLE. This chapter may be cited as the

Texas Political Subdivision Employees Uniform Group Benefits Act.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989.

Sec. 172.002. PURPOSE. The purpose of this chapter is to:

(1) provide uniformity in benefits including accident, health,

dental, and long-term disability coverage to employees of

political subdivisions;

(2) enable the political subdivisions to attract and retain

competent and able employees by providing them with accident and

health benefits coverages at least equal to those commonly

provided in private industry;

(3) foster, promote, and encourage employment by and service to

political subdivisions as a career profession for persons of high

standards of competence and ability;

(4) recognize and protect the political subdivisions' investment

in each permanent employee by promoting and preserving economic

security and good health among those employees;

(5) foster and develop high standards of employer-employee

relationships between each political subdivision and its

employees;

(6) recognize the service to political subdivisions by elected

officials and employees of affiliated service contractors by

extending to them the same accident and health benefits coverages

as are provided for political subdivision employees; and

(7) recognize the long and faithful service and dedication of

employees of political subdivisions and to encourage them to

remain in service of their respective political subdivisions

until eligible for retirement by providing health benefits to

those employees.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 2001, 77th Leg., ch. 491, Sec. 1, eff.

Sept. 1, 2001.

Sec. 172.003. DEFINITIONS. In this chapter:

(1) "Affiliated service contractor" means an organization

qualified for exemption under Section 501(c), Internal Revenue

Code (26 U.S.C. Section 501(c)), as amended, that provides

governmental or quasi-governmental services on behalf of a

political subdivision and derives more than 25 percent of its

gross revenues from grants or funding from the political

subdivision.

(2) "Employee" means a person who works at least 20 hours a week

for a political subdivision.

(3) "Political subdivision" means a county, municipality,

special district, school district, junior college district,

housing authority, or other political subdivision of this state

or any other state.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 2001, 77th Leg., ch. 491, Sec. 2, eff.

Sept. 1, 2001.

Amended by:

Acts 2005, 79th Leg., Ch.

1094, Sec. 28, eff. September 1, 2005.

Acts 2009, 81st Leg., R.S., Ch.

1363, Sec. 5, eff. June 19, 2009.

Sec. 172.004. BENEFITS CONTRACT. (a) A political subdivision

or a group of political subdivisions pursuant to The Interlocal

Cooperation Act (Chapter 791, Government Code) directly or

through a risk pool may provide health and accident coverage for

political subdivision officials, employees, and retirees or any

class of officials, employees, or retirees, and employees of

affiliated service contractors.

(b) The types of coverage that may be provided include group

health and accident, group dental, accidental death and

dismemberment, and hospital, surgical, and medical expense.

(c) A political subdivision also may include under the coverage

dependents of the officers, employees, and retirees and of

employees of affiliated service contractors.

(d) A pool's board of trustees may provide coverage for the

trustees and the pool's staff, including persons with whom the

pool has contracted to perform staff functions, on approval of

the members of the pool.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 2001, 77th Leg., ch. 491, Sec. 3, eff.

Sept. 1, 2001.

Sec. 172.005. RISK POOL. (a) A political subdivision may

establish a risk pool or may enter into an interlocal agreement

under The Interlocal Cooperation Act (Chapter 791, Government

Code) with other political subdivisions to establish a risk pool

to provide health and accident coverage for officials, employees,

retirees, employees of affiliated service contractors, and their

dependents.

(b) Contributions paid by a political subdivision's officials,

employees, and retirees and employees of affiliated service

contractors for coverage shall be deposited to the credit of the

risk pool's fund and used as provided by rules of the risk pool.

(c) A pool by contract may purchase insurance coverage for

persons who are covered by the pool from an insurance company

authorized to do business in this state.

(d) A pool or its agents may not represent to persons who apply

for coverage or who are covered by the pool that the coverage

being provided is insurance unless the coverage is by contract

purchased from an insurance company authorized to do business in

this state.

(e) A risk pool organized under this section is a legal entity

that may contract with an insurer licensed to do business in

Texas to assume any excess of loss of a benefit contract

authorized under Section 172.004. Notwithstanding any provision

of the Insurance Code or any other law governing insurance in

this state, an insurer authorized to do business in Texas may

assume the excess of loss of the benefit contract under Section

172.004.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 1991, 72nd Leg., ch. 611, Sec. 1, eff. Aug.

26, 1991; Acts 2001, 77th Leg., ch. 491, Sec. 4, eff. Sept. 1,

2001.

Sec. 172.006. SUPERVISION AND ADMINISTRATION OF POOL. (a) A

political subdivision or a group of political subdivisions that

create a risk pool shall select trustees to supervise the

operation of the pool.

(b) A pool may be administered by a staff employed by the pool,

an entity created by the political subdivision or group of

political subdivisions participating in the pool, a staff or

entity that administers another pool established under this

chapter, or a third party administrator.

(c) Before entering into a contract with a person to be a third

party administrator of the pool, the trustees shall require that

person to submit information necessary for the trustees to

evaluate the background, experience, and financial qualifications

and solvency of that person. The information submitted by a

prospective administrator other than an insurance company must

disclose:

(1) any ownership interest that the prospective administrator

has in an insurance company, group hospital service corporation,

health maintenance organization, or other provider of health care

indemnity; and

(2) any commission or other benefit that the prospective

administrator will receive for purchasing services or coverage

for the pool.

(d) An attorney employed by a third party administrator,

provider of excess loss coverage, or reinsurer may not be

simultaneously employed by the pool unless, before the attorney

is employed by the pool, the third party administrator, provider

of excess loss coverage, reinsurer, or attorney discloses to the

pool's board of trustees that the attorney is employed by the

administrator, provider, or reinsurer.

(e) If the state enacts a law providing for the licensing or

registration of third party administrators, a risk pool in

contracting for administrative services may only contract for

services of a third party administrator licensed or registered

under that law. This subsection does not apply to a nonprofit

corporation that is acting solely on behalf of the risk pool or

other pools or administrative agencies established under The

Interlocal Cooperation Act (Article 4413(32c), Vernon's Texas

Civil Statutes).

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 1999, 76th Leg., ch. 988, Sec. 1, eff.

Sept. 1, 1999.

Sec. 172.007. TRUSTEE TRAINING. (a) Trustees who act as

fiduciaries for a risk pool must have at least 16 hours of

combined professional instruction with four hours of instruction

in each of the following areas:

(1) law governing the establishment and operation of risk pools

by political subdivisions;

(2) principles of self-insurance and risk pools, including

actuarial and underwriting principles and investment principles;

(3) principles relating to reading and understanding financial

statements; and

(4) the general fiduciary duties of trustees.

(b) Not later than the 180th day after the date of selection as

trustee, or after the effective date of this chapter, whichever

is the later date, a trustee must complete the training required

by Subsection (a).

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989.

Sec. 172.008. EXCESS LOSS COVERAGE AND REINSURANCE. (a) A risk

pool may purchase excess loss coverage or reinsurance to insure a

pool against financial losses that the pool determines might

place the solvency of the pool in financial jeopardy.

(b) If a risk pool does not purchase excess loss coverage or

reinsurance, the administrator shall give written notice to each

person who applies for coverage from the pool that the pool does

not maintain excess loss coverage or reinsurance. The

administrator shall provide the notice before coverage is issued

to an applicant and shall give the applicant the opportunity to

decline the coverage.

(c) If a risk pool cancels or does not renew excess loss

coverage or reinsurance, the administrator shall give notice to

each person covered by the pool that the coverage has been

canceled or has not been renewed and shall give each an

opportunity to cancel his coverage. The administrator must give

the notice and opportunity to cancel coverage not later than the

30th day after the date on which the pool cancels or does not

renew the excess loss coverage or reinsurance.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989.

Sec. 172.009. INVESTMENTS. (a) The trustees of a risk pool

shall invest the pool's money in accordance with Subchapter A,

Chapter 2256, Government Code to the extent that law can be made

applicable.

(b) In addition to investments authorized under Subchapter A,

Chapter 2256, Government Code, the trustees of a pool may invest

the pool's money in any investment authorized by the Texas Trust

Code (Subtitle B, Title 9, Property Code).

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.95(11),

eff. Sept. 1, 1995.

Sec. 172.010. AUDITS. (a) The trustees of the pool shall have

the fiscal accounts and records of the risk pool audited annually

by an independent auditor.

(b) The person who performs the audit must be a certified public

accountant or public accountant licensed by the Texas State Board

of Public Accountancy.

(c) The independent audit shall cover a pool's fiscal year.

(d) The trustees of the pool shall file annually with the State

Board of Insurance a copy of the audit report. The State Board of

Insurance shall maintain the copies of the audit reports at a

convenient location and shall make the copies of the audit

reports available for public inspection during regular business

hours. A person may request the State Board of Insurance to

provide copies of any item included in an audit report on payment

of the cost of providing the copies. The State Board of Insurance

may adopt rules governing the time and manner for filing audit

reports under this subsection and the procedures for filing,

inspecting, and obtaining copies of audit reports.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 1991, 72nd Leg., ch. 599, Sec. 15, eff.

Sept. 1, 1991.

Sec. 172.011. INSOLVENCY. (a) The trustees of a risk pool

shall declare the pool insolvent if the trustees determine that

the pool is unable to pay valid claims within 60 days after the

date the claims are verified.

(b) If a pool is declared insolvent by the trustees, the pool

shall cease operation on the day of the declaration, and the

trustees shall provide for the disposition of the pool's assets,

debts, obligations, losses, and other liabilities.

(c) A person who has coverage under a risk pool may institute

proceedings to have the pool declared insolvent by petitioning a

district court in Travis County to declare the pool insolvent. If

the district court, after notice and hearing, determines that the

pool is insolvent, the court shall appoint a receiver to take

charge of and dispose of the pool's assets, debts, obligations,

losses, and other liabilities. Except as provided by this

chapter, a receivership under this section is governed by Chapter

64, Civil Practice and Remedies Code, to the extent that chapter

can be made applicable.

(d) After a receiver takes charge of the assets and determines

outstanding debts, obligations, losses, and other liabilities,

the receiver shall give notice of his determination to any

person, including a political subdivision that is a participant

in the pool.

(e) If the receiver determines that money is owed to the pool by

a political subdivision that is a participant in the pool, the

political subdivision may protest the determination by filing

with the court a protest statement not later than the 15th day

after the date the notice of the receiver's determination is

mailed.

(f) If a court in which a protest statement is filed determines

after a hearing that an amount is owed by the political

subdivision filing the protest statement, the political

subdivision shall pay that amount to the receiver not later than

the 30th day after the date on which the court's determination

becomes final. A determination by a court on a protest statement

is interlocutory.

(g) If a protest statement is not filed with the court, the

political subdivision shall pay to the receiver the amount

determined to be owed not later than the 30th day after the date

on which the receiver mails the notice under Subsection (d).

(h) The court that appoints a receiver may direct that a

reasonable fee be paid to the receiver as compensation for

performance of responsibilities and duties and may assess each

political subdivision that is a participant in the pool under the

receiver's control an amount necessary to compensate the

receiver.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989.

Sec. 172.012. LIMITATION OF RISK POOLS. (a) Except as provided

by Subsection (b), a county may not provide health and accident

coverage through a risk pool under this chapter, except:

(1) as authorized by Subchapter A, Chapter 157; or

(2) through an interlocal contract entered under The Interlocal

Cooperation Act (Article 4413(32c), Vernon's Texas Civil

Statutes) with other political subdivisions of this state if the

aggregate annual contributions to the pool will exceed $1 million

based on an actuarial estimate by an actuary who is a member of

the American Academy of Actuaries.

(b) A county with a population of fewer than 500,000 may create

and provide coverage through a pool if the aggregate annual

claims, contributions, or both claims and contributions to the

pool will exceed $300,000 based on an actuarial estimate by an

actuary who is a member of the American Academy of Actuaries.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 1991, 72nd Leg., ch. 649, Sec. 1, eff. Aug.

26, 1991.

Sec. 172.013. PAYMENT OF CONTRIBUTIONS AND PREMIUMS. (a) A

political subdivision may pay all or part of the contributions

for coverage under this chapter from local funds, including

federal grant or contract pass-through funds, that are not

dedicated by law to some other purpose.

(b) A political subdivision also may pay all or part of the

contributions for coverage for officers, employees, retirees, and

dependents, but may not pay any part of the contributions for

coverage for employees of affiliated service contractors or their

dependents.

(c) On written approval of an officer or employee, a political

subdivision may deduct from the officer's or employee's

compensation an amount necessary to pay that person's and his

dependents' contributions. A retiree may authorize in writing the

person who pays his retirement benefits to deduct from those

benefits an amount sufficient to pay the retiree's and his

dependents' contributions.

(d) State funds, except federal grant or contract funds passed

through the state to its political subdivisions, may not be used

to purchase coverage or to pay contributions under this chapter.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989. Amended by Acts 2001, 77th Leg., ch. 491, Sec. 5, eff.

Sept. 1, 2001.

Sec. 172.014. APPLICATION OF CERTAIN LAWS. A risk pool created

under this chapter is not insurance or an insurer under the

Insurance Code and other laws of this state, and the State Board

of Insurance does not have jurisdiction over a pool created under

this chapter.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989.

Sec. 172.015. SUBROGATION; ADEQUATE RECOVERY. (a) In this

section, "covered individual" means a person who is covered by

the pool. The term includes an official, an employee, a retiree,

and an employee of an affiliated service contractor and their

dependents.

(b) The payor of employee benefits, whether a political

subdivision, group of political subdivisions, pool, or carrier

providing reinsurance to one of those entities, is subrogated to

a covered individual's right of recovery for personal injuries

caused by the tortious conduct of a third party.

(c) A payor of employee benefits whose interest is not actively

represented by an attorney in a third-party action shall pay to

an attorney representing the covered individual a fee in an

amount determined under an agreement entered into between the

attorney and the payor of employee benefits. Except as provided

by Subsection (i), in the absence of an agreement, the court

shall award to the attorney, payable out of the recovery of the

payor of employee benefits, a reasonable fee for recovery of the

interest of the payor of employee benefits, not to exceed

one-third of the payor's recovery.

(d) If the injured covered individual is not able to realize a

complete and adequate recovery for injuries sustained as a result

of the actionable fault of a third party, the payor of employee

benefits is entitled to a pro rata recovery described by

Subsection (e). A common law doctrine that requires that an

injured party be made whole before a subrogee makes a recovery

does not apply to the recovery of the payor of employee benefits

under this subsection.

(e) Unless otherwise agreed by a covered individual and the

payor of employee benefits and subject to Subsection (f), the

payor's pro rata share under Subsection (d) is an amount that is

equal to the lesser of:

(1) one-third of the covered individual's total recovery; or

(2) the total cost of employee benefits paid by the payor as a

direct result of the tortious conduct of the third party.

(f) A covered individual may bring an action for declaratory

judgment to establish that the amount of the pro rata recovery to

which the payor of employee benefits is entitled is an amount

that is less than the pro rata share described by Subsection (e).

To prevail in an action brought under this subsection, the

covered individual must prove by a preponderance of the evidence

that the amount of the covered individual's total recovery is

less than 50 percent of the value of the covered person's

underlying claim for damages.

(g) Except as otherwise provided by this subsection, the court

shall establish the payor's pro rata recovery under Subsection

(f) in an amount that is not less than 15 percent of and not more

than one-third of the covered individual's total recovery. If a

covered individual shows by clear and convincing evidence that

the pro rata share otherwise described by this subsection would

result in manifest injustice, the court shall establish the

payor's pro rata recovery in an amount that is less than 15

percent of and equal to or greater than five percent of the

covered individual's total recovery.

(h) Notwithstanding Chapter 37, Civil Practice and Remedies

Code, or any other law, in an action brought under Subsection (f)

the court may not award costs or attorney's fees to any party in

the action.

(i) Notwithstanding Subsection (c), a payor of employee benefits

may not be assessed out of the recovery to which the payor is

entitled under Subsection (e) or (f) any attorney's fees under

any theory or rule of law, including the common fund doctrine.

(j) Subsections (c)-(i) do not apply to a payor of employee

benefits participating in a cooperative effort to design and

administer benefits through an administrative agency that

includes a cooperative member that is a county with a population

of at least two million that is adjacent to a county with a

population of at least one million.

Added by Acts 1989, 71st Leg., ch. 1067, Sec. 1, eff. Sept. 1,

1989.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

1379, Sec. 1, eff. June 15, 2007.

Sec. 172.016. STATUS OF AFFILIATED SERVICE CONTRACTORS.

Inclusion of the employees of affiliated service contractors in

the uniform group benefits program authorized by this chapter

does not, for any purpose:

(1) make an affiliated service contractor a political

subdivision or a division of a political subdivision; or

(2) make an employee of an affiliated service contractor an

employee of a political subdivision or a division of a political

subdivision.

Added by Acts 2001, 77th Leg., ch. 491, Sec. 6, eff. Sept. 1,

2001.