THE ATTORNEY GENERAL
OF TEXAS
April 7, 1988
Honorable David W. Wallace Opinion No. JR-887
Sutton County Attorney
Sonora, Texas 76850 Re: Authority of a commis-
sioners court to enter into
certain contracts to provide
health insurance coverage
for its employees (RQ-1237)
Dear Mr. Wallace:
You ask:
Does [the County Commissioners Court of
Sutton County] have the authority, in its
effort to provide health insurance coverage
for employees and dependents, to enter into
a contract under the following circum-
stances:
1. A portion of the total money spent by
the county for coverage goes into a separate
bank account for payment of a portion of
the medical benefits due to employees and
dependents.
2. The administration of the above
mentioned bank account, and the benefits
paid from it, is in the control of a company
that is unlicensed as an insurance company
and is totally independent from the county
except for certain contractual conditions
which are further detailed in this request
and the attachments.
3. The administrator of the bank account
provides for the purchase of high deductible
($500.00) insurance. However, the coverage
that the complete program offers is for a
lower deductible ($100.00). Sutton County,
through the administration of this account
by the third party, assumes the risk for
this difference in deductible.
Honorable David W. Wallace - Page 2 (-887)
4. All interest on the county funds
deposited to this account that exceed 5%
pass on to the exclusive use of the adminis-
trator.
5. The administrator draws regular
monthly fees out of this bank account.
6. Termination of the contract with the
administrator by the county results in
penalties of up to 50% of the county funds
in the above bank account to be forfeited to
the administrator.
The scheme you describe would involve the county's
self-insuring a portion of the deductible amount provided
for in the underlying insurance contract. Attorney
General Opinion MW-473 (1982) noted that there was
only one statutory provision authorizing such a self-
insurance scheme, i.e., section 2 of article 2372h,
V.T.C.S., which app= only to counties with populations
of over 500,000. Article 237211. was repealed by the 70th
Legislature in 1987 and section 2 was recodified as
section 157.002 of the Local Government Code. The
provision currently embodied in section 157.002 remains
the only one in Texas law authorizing a county to self-
insure. Since Sutton County's population is less than
500,000, section 157.002 does not authorize it to Self-
insure. Since certain counties are authorized, under
section 157.002, to self-insure, the lack of authorization
elsewhere in Texas law for other counties such as Sutton
County to self-insure, indicates that the legislature did
not intend to authorize counties with populations under
500,000 to self-insure. Commissioners courts may exercise
only such powers specifically conferred upon them, by the
constitution or by statute, or which may reasonably be
implied therefrom. Canales V. LawhUn, 214 S.W.Zd 451
(Tex. 1948). See also Attorney General Opinion JM-406
(1985) .
We are therefore of the opinion that the Sutton
County self-insurance scheme you described is not author-
ized by law. Having reached this conclusion, we need not
address the other issues that we would have addressed had
we answered in the affirmative the threshold question of
the county's authority to self-insure: e.s., whether
county funds may legally be deposited with the adminis-
trator in light of chapter 116 of the Local Government
Code, whether the administrator would be authorized to
p. 4345
.
Honorable David W. Wallace - Page 3 (JR-887)
act as such in light of article21.07-5 of the Insurance
Code, etc.
SUMMARY
The commissioners court of Sutton County
is not authorized to self-fund a health
insurance program for county employees.
JIM MATTOX
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
LOUMCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by William Walker
Assistant Attorney General
p. 4346