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Signed Into Law
Signed May 13, 2025Effective 2025-09-01
SB1409

Regular Session

Relating to health benefits offered by postsecondary educational institutions to students and their families.

Government Affairs & Regulatory Compliance Analysis

SB1409: Government Affairs Overview

SB1409 establishes a statutory "safe harbor" allowing Texas postsecondary educational institutions to self-fund student health plans without holding a commercial insurance certificate of authority. To utilize this exemption, institutions must operationalize strict solvency standards, implement mandatory "hard stop" student disclosures, and integrate with state surprise billing laws by September 1, 2025.

Sen. Tan Parker·Senate Bill·Regular Session

Critical
Medium Cost
Effective:2025-09-01
Business Impact

Who SB1409 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: critical

Significant regulatory changes (effective 2025-09-01). Review with your legal and compliance teams to understand implications.

🎓

Education

Affected business types:

  • School districts
  • Charter schools
  • Private schools
  • Education service providers
View all education legislation

Key Operational Considerations

  • 1Third-Party Administrators (TPAs): Master Services Agreements must be amended to:
  • 2Actuarial Services: You must execute a contract with a Fellow of the Society of Actuaries or a member of the American Academy of Actuaries to provide the statutorily required solvency opinion.
  • 3Stop-Loss Carriers: Policies must be reviewed to ensure coverage extends to the specific "student and family" population defined in the statute.
  • 4Enrollment Staff: Staff must be trained that auto-enrollment into this specific plan is prohibited without a signed disclosure.

Estimated Cost Impact

mediumModerate costs expected for implementation.

Enforcing Agencies

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SB1409
Critical
Relating to health benefits offered by postsecondary educational institutions to students and their families.
Critical Compliance Urgency
Requires immediate attention
Cost Impact
Medium
Effective
2025-09-01
Enforcing Agencies
Texas Department of Insurance
Primary Author: Sen. Tan Parker
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: September 1, 2025
  • Compliance Deadline: September 1, 2025
  • *Note:* There is no phase-in period. To claim the exemption from insurance regulation, all requirements (actuarial opinion, reserves, disclosures) must be active on the effective date.
  • Agency Rulemaking: The Texas Department of Insurance (TDI) must establish a registration mechanism. Expect a regulatory "gray zone" regarding the specific format of registration (portal vs. paper filing) through Summer 2025.

Immediate Action Plan

  • 1. Engage Actuary Immediately: Commission the required solvency and stop-loss opinion to determine the cash reserves necessary for a September 1 launch.
  • 2. Update Enrollment Software: Code a mandatory "gate" in your student portal that prevents enrollment until the digital signature on the non-insurance disclosure is captured.
  • 3. Draft the Disclosure: Legal counsel must draft the Sec. 1683.004 notice immediately.
  • 4. Prepare "Paper" Registration: Compile a registration packet (Plan Document, Actuarial Opinion, Cover Letter) to physically file with TDI if their digital portal is not operational by August 15.
  • 5. Audit TPA Capabilities: Verify your TPA is connected to the TDI Surprise Billing portal.

Operational Changes Required

Contracts

  • Third-Party Administrators (TPAs): Master Services Agreements must be amended to:
  • Enforce a maximum 6-month waiting period for pre-existing conditions.
  • Mandate participation in Chapter 1275/1467 dispute resolutions (Surprise Billing).
  • Actuarial Services: You must execute a contract with a Fellow of the Society of Actuaries or a member of the American Academy of Actuaries to provide the statutorily required solvency opinion.
  • Stop-Loss Carriers: Policies must be reviewed to ensure coverage extends to the specific "student and family" population defined in the statute.

Hiring/Training

  • Enrollment Staff: Staff must be trained that auto-enrollment into this specific plan is prohibited without a signed disclosure.
  • Finance/Risk Management: Personnel must be assigned to monitor cash reserves against actuarial recommendations on a continuous basis, not just annually.

Reporting & Record-Keeping

  • Mandatory Disclosure (The "Hard Stop"): You must implement a workflow requiring students to sign a written notice stating the benefits are not regulated insurance *before* enrollment is processed.
  • *Retention:* This signed document must be retained for the duration of the student's coverage and be retrievable upon request.
  • Actuarial Opinion: A formal opinion regarding reserves and stop-loss levels must be maintained on file and available for TDI inspection.
  • TDI Registration: You must register the plan with TDI prior to offering benefits.

Fees & Costs

  • Reserve Funding: Immediate liquidity is required to fund reserves to levels recommended by your actuary.
  • Professional Fees: Budget for annual actuarial retainers and potential legal costs associated with surprise billing arbitrations.

Strategic Ambiguities & Considerations

  • The Registration Mechanism: The law requires registration, but TDI has not yet released the form or portal. If a digital process is not ready by September 1, institutions risk technical non-compliance.
  • "Information to Facilitate" Dispute Resolution: The statute requires institutions to provide information to facilitate Chapter 1467 compliance but does not define the data format. Watch for TDI bulletins specifying if this requires a specific data feed to the Texas Medical Board or TDI.
  • Definition of "Family": The statute does not define eligible "family members." Institutions should define this strictly in plan documents (e.g., domestic partners, dependents) to avoid coverage disputes.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Feb 19, 2025
Passed Senate
Apr 16, 2025
Passed House
Apr 29, 2025
Signed
May 13, 2025
Effective
Sep 1, 2025
TopicsEducationEducation--higherEducation--higher--institutions & ProgramsInsuranceInsurance--health & Accident
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Senate Authors

Sen. Tan ParkerRepublican · Primary Author

House Sponsors

Rep. Ann JohnsonDemocrat · Primary Sponsor
Joint Sponsors

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

Related Legislation

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More from Sen. Tan Parker

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Related by Topic

View more Education legislation
Quick Reference

Frequently Asked Questions

Common questions about SB1409

Q

What does Texas SB1409 do?

SB1409 establishes a statutory "safe harbor" allowing Texas postsecondary educational institutions to self-fund student health plans without holding a commercial insurance certificate of authority. To utilize this exemption, institutions must operationalize strict solvency standards, implement mandatory "hard stop" student disclosures, and integrate with state surprise billing laws by September 1, 2025.

Q

Who authored SB1409?

SB1409 was authored by Texas Senator Tan Parker during the Regular Session.

Q

When was SB1409 signed into law?

SB1409 was signed into law by Governor Greg Abbott on May 13, 2025.

Q

Which agencies enforce SB1409?

SB1409 is enforced by Texas Department of Insurance.

Q

How significant are the changes in SB1409?

The regulatory priority for SB1409 is rated as "critical". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of SB1409?

The cost impact of SB1409 is estimated as "medium". This may vary based on industry and implementation requirements.

Q

What topics does SB1409 address?

SB1409 addresses topics including education, education--higher, education--higher--institutions & programs, insurance and insurance--health & accident.

Q

What are the key dates for SB1409?

Key dates for SB1409: Effective date is 2025-09-01. Consult with legal counsel regarding applicability.

Q

What are the penalties under SB1409?

SB1409 establishes the following penalties: administrative/legal penalty of Unspecified (Loss of Safe Harbor) for Failure to register, obtain actuarial opinion, or secure signed disclosures results in the plan being classified as unauthorized business of insurance, subject to standard Insurance Code sanctions.. Consult with legal counsel for specific applicability to your situation.

Q

Which Texas businesses are affected by SB1409?

SB1409 primarily affects insurance companies and financial institutions, healthcare providers and medical facilities. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026