BREAKING TEXAS LEGISLATIVE NEWS (DING, DONG, THE SENATE BILL 51 WITCH IS DEAD!)

Authored by Mike and Shannon Meroney, Meroney Public Affairs

A long-awaited legislative fix to one of the most burdensome administrative rules in group health insurance has passed the Texas Legislature. Senate Bill 1332, authored by Sen. Kelly Hancock (R-North Richland Hills), and its companion House Bill 2583, sponsored by Rep. Lacey Hull (R-Houston), have both passed their respective chambers with a two-thirds majority vote, positioning the bill to take immediate effect upon becoming law.

While Governor Greg Abbott’s signature is still pending, the supermajority passage means that even if unsigned, the bill will automatically become law 10 days after being presented to the Governor (excluding Sundays). This timeline ensures the law will be effective in time for retroactive group health plan terminations processed as soon as June 2025 (for terminations in late May 2025). It also provides important relief ahead of the upcoming July 4th holiday—a holiday that has historically proven especially problematic for retroactive terminations.

The Problem: SB 51 and a 20-Year-Old Headache for Employers

SB 1332 / HR 2583 addresses a long-standing issue originating from Senate Bill 51, passed during the 79th Legislative Session in 2005. That law created one of the most rigid deadlines in benefits administration: if an employee’s group coverage ends during the last seven days of a month, the employer must notify the insurer no later than the third day of the following month. Missing that deadline results in the employer being charged a full additional month of premiums — even if the former employee used no covered services.

Additionally, while technological advancements have streamlined many aspects of benefits administration over the past 20 years, they have also revealed just how outdated and unforgiving these rules have become. Many employers and insurance carriers now rely on Electronic Data Interchange (EDI) feeds, which typically transmit weekly. If a termination occurs during the last week of the month and the EDI feed doesn’t transmit before the third day of the following month, the employer can be held financially responsible for an entire extra month of premium — without recourse.

This disconnect between modern systems and legacy policy rules has only increased the urgency for reform—and this legislative change provides a clear path forward. 

What SB 1332 / HB 2583 Does

The new legislation gives insurers the discretion to waive premium liability in cases where the employer submits a termination notice late—but only if no covered services were used after the employee’s eligibility ended.

Key Provisions:

• Applies to fully insured group health plans issued in Texas
• Allows the carrier to waive premiums for months following late-submitted terminations
• Waiver is only allowed if no claims were incurred after the end of the eligibility month
• Does not apply to self-funded or level-funded (ERISA) plans (note: these plans are already unaffected by SB 51 rules)
• Will become immediately effective once the Governor signs the bill or allows it to become law after 10 days without action

Timing and Implementation

Because both the Senate and House passed the legislation with a two-thirds vote, the law is eligible for immediate effect—meaning it will go into effect as soon as it becomes law, rather than waiting until the usual default September 1, 2025 date.

This timing is especially meaningful for employers processing late-May terminations (in early June) or preparing for administrative challenges around the July 4th holiday. Once the 10-day constitutional window has passed, insurers will be permitted to begin applying the waiver as outlined in the law.

Congratulations to NABIP-TX’s Legislative Council on a job well done for our membership and their customers!