Hon. Robert S. Calvert

Comptroller of Public Accounts Austin, Texas Opinion No. M- 1109 Re: Construction ofArticles 3.50 and 3.51 ofthe Texas Insurance Code with reference to the meaning and applicability of

“group” to permit payroll deductions for insurance preDear Mr. Calvert: miums for state employees. Reference is made toyour letter of February 15, 1972 (as clarified byyour letter ofFebruary 29, 1972) which requested an opinion from this office as to the above captioned matter. The following questions were asked:

“(1) Under the provisions ofArticle 3.50 ofthe Insurance Code, what is the definition of a ‘group’ which will allow payroll deductions and also’ the State paying a portion ofthe premium for a State employee?

“(2) Under the provisions ‘ofArticle 3.51 ofthe Insurance Code, what is the definition of a ‘group’ which will allow payroll deductions and also the State paying a portion of the premium for a State employee?

“(3) Under the provisions ofArticle 3.50 ofthe Insurance Code, could a payroll deduction be legally made for or the State contribute premiums for an employee on a policy ofwholesale, franchise, or employee life insurance?

-5407-Honorable Robert S. Calvert, page 2 (M-l 109)

“(4) Under the provisions of either Article 3.50 or Article 3.51 of the Insurance Code, could a payroll deduction be legally made for or the State contribute premiums for an employee on a policy contracted for bythe employee and issued to that employee under permission of the Department Head?

“(5) Under the provisions ofArticle 3.50 of the Insurance Code, Section 1, Subsection (3) and also Sections 2 and 3 seem to be all ofthe provisions that would apply to group insurance for State employees which authorize payment by the State for an employee for group life insurance, is this correct, or would other provisions apply, and if so, what provisions7

“(6) Under the provisions ofArticle 3.51 ofthe Insurance Code, does Section 2ofthis Article make the provisions ofArticle 3.50 ofthe Insurance Code, as set out inQuestion No. 5 above, applicable to insurance policies contracted for under Article 3.51 of the Insurance Code?” Question No. 1asks for the definition ofagroup under Article 3.50 of the Texas Insurance Code so as to allow payroll deductions and also the state paying a portion of the premium for a state employee. Agroup, for the purpose ofgroup life insurance under Subsection (3), Section I ofArticle 3.50 of the Texas Insurance Code, is a class ofdesignated employees, of not less than 10nor less than 75% ofthe eligible employees (excluding any employee as to whom evidence of individual insurability is not satisfactory to the insurer) ofany association of state employees or employees ofany department or agency of the state. Question No. 2asks for the definition ofagroup under Article 3.51 of the Texas Insurance Code so as to allow payroll deductions and also the State paying a portion of the premiums for a state employee. Under the provisions ofArticle 3.51 there is nodefinition of agroup as can be found inArticle 3.50 and the provisions ofArticle 3.50 may not be used inthis connection. See Attorney General’s Opinion No. V-1374 (1951). For the

-5408-. .

Honorable Robert S. Calvert, page 3 (M-1109)

purposes ofArticle 3.51, a group may consist ofany number of employees in excess of one, as determined bythe contract between the department head and the insurer, this being a matter ofdiscretion with the department head. See Attorney General’s Opinion No. M-394 (1967). Question No. 3asks whether a payroll deduction can be legally made for or the State cant ribute premiums for an employee on a policy of wholesale, franchise, or employee life insurance. Your questions appears to assume that ,apolicy ofwholesale, franchise, or employee life insurance can be issued to agroup of state employees. Under the provisions of Subsection (3), Section 1ofArticle 3.50, the department head ofthe state government or the association is deemed to be the policyholder for purposes ofgroup life insurance. Subsection (6), Section 1ofArticle 3.50 states that:

“(b) Wholesale, franchise, or employee life insurance may be issued to (1)the employees of a common employer or employers, covering at date of issue not less than five employees;.

. .” Thus, Subsection (6) does not provide for issuance ofawholesale, franchise, or employee life insurance policy to adepartment head or association as the policyholder but rather directly to the employees. It is the opinion of this office that policies ofwholesale, franchise, or employee life insurance cannot be issued to state employees under Article 3.50 of the Texas Insurance Code and payroll deductions cannot be legally made for such premium payments nor can the state contribute premiums for a state employee insured under wholesale, franchise or employee life insurance policies. Question No. 4 asks whether, under the provisions of either Article 3.50 or Article 3.51 of the Texas Insurance Code, a payroll deduction can be made or the State contribute premiums for an employee on a policy contracted for bythe employee and issued to that employee under permission of the department head; Subsection (3), Section 1, Article 3.50 ofthe Texas Insurance Code states, in part, as follows:

-5409-Honorable Robert S. Calvert, page 4 (M-1109)

“(3) A policy issued to.
. .any association of state employees.

. . and any department of the state government which employer or association shall be deemed the policyholder.

. .” Subsection (2), Section 1ofArticle 3.51 ofthe Texas Insurance Code, states, in part, as follows:

“Sec. 1. (a) The State ofTexas and each of its political, government, and administrative subdivisions, departments, agencies, associations ofpublic employees,

. . .are authorized to procure contracts with any insurance company doing business inthis state insuring their respective employees,.

. .” In light ofthe above quoted statutory language, your question must be answered in the negative. Under the provisions ofArticle 3.50, the insurance policy must be issued to the department and under the provisions ofArticle 3.51, only the department head has the authority to procure the contracts of insurance. Question No. 5asks whether the provisions ofArticle 3.50 ofthe Texas Insurance Code, Section 1, Subsection (3) and also Sections 2and 3, are the only provisions that apply to group insurance for state employees which authorize payroll deductions and premium payments bythe State for an employee for group life insurance. Your question is answered inthe affirmative. Question No. 6asks whether the provisions ofSubsection 2 ofArticle 3.51 ofthe Texas Insurance Code makes the provisions ofArticle 3.50 ofthe Texas Insurance Code, as set out inQuestion No. 5, applicable to insurance policies contracted for under Article 3.51. Question No. 6is answered inthe negative. See Attorney General’s Opinion No. V-1374 (1951).

-5410-Honorable Robert S. Calvert, page 5 (M-1109)
SUMMARY Under the provisions ofSubsection (3), Section 1 ofArticle 3.50 ofthe Texas Insurance Code, a group is a class ofdesignated employees, ofnot less than 10nor less than 75% ofthe eligible employees (excluding any employee as to whom evidence of individual insurability is not satisfactory to the insurer) of any association of state employees or employees ofany department or agency of the state. For the purposes ofArticle 3.51 ofthe Texas Insurance Code, a group may consist ofany number of employees in excess of one, as determined bythe contract between the department head and the insurer. Policies ofwholesale, franchise, or employee life insurance cannot be,issued to state employees so as to authorize payroll deductions or the State to contribute premiums. Neither a payroll deduction or a state contribution for premium payments can be made under Article 3.50 or Article 3.51 where an employee contracts for an insurance policy and the policy is issued to that employee. Section 1, Subsection (3) and Sections 2 and 3of Article 3.50 ofthe Texas Insurance Code are the only provisions that apply to group insurance for state employees which authorize payroll deductions and premium payments bythe State for an employee for group life insurance. The provisions of Subsection 2 ofArticle 3.51 of the Texas Insurance Code do not make the provisions of

-5411-Honorable Robert S. Calvert, page 6 (M-1109)
Article 3.50 applicable to insurance for public employees procured under Article 3.51.

D C. MARTIN eneral ofTexas Prepared byJames Hackney Assistant Attorney General APPROVED: OPINION COMMITTEE Kerns Taylor, Chairman W. E. Allen, Co-Chairman Jack Goodman James Quick Jim Swearingen Bill Flanary SAMUEL D. MCDANIEL Staff Legal Assistant ALFRED WALKER Executive Assistant NOLA WHITE First Assistant

-5412-