Relating to health benefits offered by postsecondary educational institutions to students and their families.
CriticalImmediate action required
Medium Cost
Effective:2025-09-01
Enforcing Agencies
Texas Department of Insurance
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.
Access to affordable and comprehensive healthcare is a critical factor in ensuring the well-being and academic success of students in Texas' institutions of higher education. Many colleges and universities provide health benefits to students and their families to support their physical and mental health needs. However, current state law does not clearly define or regulate these offerings, creating uncertainty for institutions and students regarding the scope and structure of such health benefits.
Some institutions of higher education seek to provide health benefits outside of traditional insurance models, offering plans tailored to students' needs. These plans often provide essential medical coverage, yet because they are not classified as traditional health insurance, they operate without a clear legal framework. Without proper guidance, institutions may face challenges in structuring and administering these plans, and students may lack sufficient transparency about the nature of the benefits they are receiving.
S.B. 1409 establishes a statutory framework for institutions of higher education to offer health benefit plans to students and their families. The bill clarifies that these plans are not considered traditional health insurance but are instead institution-sponsored health benefits. It ensures that institutions must provide clear disclosures to enrollees regarding the nature of the benefits, including the fact that they are not subject to state insurance regulations.
Additionally, S.B. 1409 protects students by limiting waiting periods for preexisting conditions, ensuring reasonable access to healthcare services. Institutions offering these plans must register with the Texas Department of Insurance to provide transparency and accountability. The legislation also permits institutions to contract with licensed insurance companies to transfer risk or obtain coverage for their obligations under these plans. By creating a structured approach to institution-sponsored health benefits, this bill promotes greater access to healthcare for students and their families while ensuring consumer protections.
As proposed, S.B. 1409 amends current law relating to health benefits offered by institutions of higher education to students and their families.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 1275.002, Insurance Code, as follows:
Sec. 1275.002.� APPLICABILITY OF CHAPTER.� Provides that Chapter 1275 (Balance Billing Prohibitions and Out-of-Network Claim Dispute Resolution for Certain Plans) applies only to certain health benefit plans, including a health benefit plan offered by an institution of higher education under Chapter 1683. Makes nonsubstantive changes.
SECTION 2. Amends Subtitle K, Title 8, Insurance Code, by adding Chapter 1683, as follows:
CHAPTER 1683. HEALTH BENEFITS PROVIDED BY CERTAIN INSTITUTIONS OF HIGHER EDUCATION
Sec. 1683.001.� DEFINITIONS. Defines "institution of higher education," "higher education health benefits," and "preexisting condition."
Sec. 1683.002. HIGHER EDUCATION HEALTH BENEFITS AUTHORIZED. Authorizes an institution of higher education or an affiliate of the institution to offer in this state higher education health benefits.
Sec. 1683.003. WAITING PERIOD FOR PREEXISTING CONDITION. Prohibits an institution of higher education that offers higher education health benefits, notwithstanding any other provision of this chapter, from requiring a waiting period of more than six months for treatment of a preexisting condition otherwise included in higher education health benefits.
Sec. 1683.004.� REQUIRED DISCLOSURE FOR HIGHER EDUCATION HEALTH BENEFITS. (a) Requires an institution of higher education that offers higher education health benefits to provide to an individual applying for higher education health benefits written notice that the benefits are not provided through an insurance policy or other product the offering or issuance of which is regulated as the business of insurance in this state.
(b)� Requires an individual to sign and return to the institution of higher education the notice described by Subsection (a) before the individual is authorized to enroll in higher education health benefits. Requires the institution of higher education to maintain a copy of the signed written notice for the duration of the term during which the higher education health benefits are provided to the individual and, at the request of the individual, provide a copy of the written notice to the individual.
Sec. 1683.005. INSTITUTION OF HIGHER EDUCATION NOT ENGAGED IN BUSINESS OF HEALTH INSURANCE; REGISTRATION REQUIRED. (a) Provides that, notwithstanding any other provision of the Insurance Code, for the purposes of offering higher education health benefits, an institution of higher education that acts in accordance with this chapter is not a health insurer and is not engaging in the business of health insurance in this state.
(b)� Requires an institution of higher education that offers higher education health benefits to register with the Texas Department of Insurance and provide information as needed to facilitate compliance with Chapter 1467 (Out-Of-Network Claim Dispute Resolution), as applicable to those benefits under Section 1275.004 (Out-Of-Network Claim Dispute Resolution).
Sec. 1683.006.� RISK TRANSFER OR COVERAGE. Authorizes an institution of higher education that offers higher education health benefits under this chapter to contract with a company authorized to engage in the business of insurance in this state that is not under common control with the institution of higher education to transfer to that company all or a portion of the organization's risks arising from higher education health benefits offered under this chapter or obtain insurance coverage from the company guarantying the institution of higher education's obligations arising from higher education health benefits offered under this chapter.
SECTION 3. Effective date: upon passage or September 1, 2025.
Honorable Brandon Creighton, Chair, Senate Committee on Education K-16
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
SB1409 by Parker (Relating to health benefits offered by institutions of higher education to students and their families.), As Introduced
No significant fiscal implication to the State is anticipated.
It is assumed that any costs associated with the bill could be absorbed using existing resources.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.
Source Agencies:
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, 758 Texas State University System, 768 Texas Tech University System Administration, 769 University of North Texas System Administration, 783 University of Houston System Administration
LBB Staff:
JMc, FV, BFa
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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. Implementation Timeline Effective Date: September 1, 2025 Compliance Deadline: September 1, 2025 Note: There is no phase-in period.
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 urgent is compliance with SB1409?
The compliance urgency for SB1409 is rated as "critical". Businesses and organizations should review the requirements and timeline to ensure timely compliance.
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.
Legislative data provided by LegiScanLast updated: November 25, 2025
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