SB 1781 Considers Health Insurance Cooperatives For Texas School Districts

SB 1781 is expected to pass and take effect September 1, 2023. The bill lays out the framework for public school districts to set up and govern health insurance cooperatives for the benefit of their members.

Although health insurance cooperatives are nothng new, SB 1781 sets out administrative rules to be followed in the establishment and governance of cooperatives among school districts.

Regional education service centers would be wise to consider health insurance cooperatives for their member districts as an alternative to TRS ActiveCare.

The bill also removes the Poison Pill provision in SB 1444 which was passed in the last Texas legislative session. That bill allows member school districts to exit TRS ActiveCare provided notice of termination be made no later than December 31 of any year for an effective date nine months later. This Poison Pill provision effectively precludes districts from knowing what their new plan cost will be because there is not an insurance company on the planet that will offer firm rates that far in advance of an effective date.


Teachers, administrators, and staff who work for public schools in Texas face rising health insurance coverage costs. Cooperative arrangements are one way public schools can work together to offer more affordable health insurance options to their employees. S.B. 1781 creates a framework for public schools to better utilize this coverage option.

The bill also adjusts from December 31 to May 31 the date by which public schools must give notice to the Teacher Retirement System for participation in TRS ActiveCare. Changing the notice date in this way will allow public schools to better compare ActiveCare rates with prices of other health insurance options.

Under S.B. 1781, the governing body of a public school may by resolution enter into a cooperative arrangement with other schools for the purpose of procuring group health insurance coverage. The cooperative shall have a board of directors comprised of the chief executive of each participating school or may have a board of seven members if more than seven schools comprise the cooperative. A contract for employee group health insurance coverage must be evaluated and procured through a formal request for proposals consistent with the provisions of Section 44.031, Education Code, related to notice for bids and evaluation criteria of proposals, including but not limited to the purchase price, the reputation of the vendor, and the quality of the vendor’s goods and services.


By:  Hughes          S.B. No. 1781



relating to health coverage for school district and open-enrollment charter school employees under interlocal contracts.


SECTION 1.  Chapter 791, Government Code, is amended by adding Subchapter D to read as follows:


Sec. 791.051.  DEFINITIONS.  In this subchapter:

(1)  “Cooperative” means a cooperative established under this subchapter by an interlocal contract for group health coverage.

(2)  “Local education agency” means:

(A)  a school district; or

(B)  an open-enrollment charter school as defined by Section 5.001, Education Code.

(3)  “Participating local education agency” means, with respect to a cooperative, a local education agency that participates in the cooperative.

Sec. 791.052.  COMPLIANCE WITH SUBCHAPTER REQUIRED.  A local education agency shall comply with this subchapter when procuring and administering employee group health coverage with another local education agency.

Sec. 791.053.  INTERLOCAL CONTRACT FOR GROUP HEALTH INSURANCE COVERAGE.  (a) The governing body of a local education agency may by resolution enter into an interlocal contract and cooperate with one or more other local education agencies to establish a cooperative for the purposes of procuring group health insurance coverage under this subchapter.

(b)  The governing body of a local education agency may renew an interlocal contract entered into under Subsection (a).

(c)  This subchapter does not affect the ability of local education agencies to provide group health coverage through a risk pool established in accordance with Chapter 172, Local Government Code.

Sec. 791.054.  COOPERATIVE.  (a) A cooperative is a legal entity that may procure employee group health insurance coverage for each participating local education agency.

(b)  Participating local education agencies may contract for the supervision and administration of the cooperative in accordance with Section 791.013.

(c)  Except as provided by this subsection, a cooperative is governed by a board of directors composed of the chief executive officers of each participating local education agency or the officers’ designees. If the cooperative is composed of more than seven local education agencies, the cooperative shall appoint at least seven directors to serve on the cooperative’s board of directors.

Sec. 791.055.  PROCUREMENT.  (a) A cooperative must procure a contract for employee group health coverage under this subchapter through a request for proposals to potential vendors advertised in a manner consistent with Section 44.031(g), Education Code, in at least one county in which a participating local education agency’s central office is located.

(b)  The board of directors of a cooperative shall select the vendor that provides the best value to participating local education agencies considering the factors described by Section 44.031(b), Education Code.

(c)  A cooperative that enters into a contract in accordance with this section satisfies a competitive bidding requirement applicable to the procurement of group health coverage under other law.

Sec. 791.056.  OFFER OF COVERAGE; PREMIUM LIABILITY. (a) A cooperative shall offer one or more group health insurance plans procured under Section 791.055 to employees of participating local education agencies and dependents of those employees.

(b)  The board of directors of a cooperative may determine a participating local education agency’s payment of all or part of the premiums for employees or dependents for a plan offered under Subsection (a).

(c)  A participating local education agency’s payment:

(1)  is subject to the requirements described by Section 1581.052, Insurance Code; and

(2)  shall include the contributions by the state described by Subchapter F, Chapter 1579, Insurance Code.

SECTION 2.  This Act takes effect September 1, 2023.