Text: December 11, 1996 The Honorable George W. Bush Governor of Texas Governor's Office State Capitol, Room E1.304 Austin, Texas 78701 Dear Governor Bush: The Texas Health Reinsurance System (System), effective September 1, 1995, is operating according to statute (V.T.C.S. Insurance Code, Article 26) and its Plan of Operation. It is governed by a Board of Directors (Board), whose nine members are appointed by the Commissioner of Insurance. In addition, the Board and the Department of Insurance (Department) have the necessary controls to ensure efficient and effective management of the System. No public funds are at risk in the System because it is financed by reinsurance premiums and carrier assessments, and the assessments do not qualify as offsets to premium taxes. As of September l, 1996, the System had 44 small-employer insurance carriers, with 18 group and 52 individual health plans reinsured (a total of 168 individuals). Our recommendations concerning the System are as follows: System Board of Directors Amend the Plan of Operation to include System requirements for reinsured carriers to provide their own audits. This Plan of Operation provision will serve as notice and explanation to reinsured carriers. The Board may also wish to consider tracking loss ratios for the reinsured carriers to help evaluate System performance. Department of Insurance Consider asking the Legislature to change the two-year, non-staggered terms for the Board of Directors to two- or three-year staggered terms. Under current statute, unless a Board member agrees to serve another term, a new Board is created every two years. Consider appointing a small carrier to the Board of Directors when a private-industry vacancy occurs. The five private-industry members currently serving the Board are from medium and large companies, but more small companies participate in the System.
