Glenn Hegar, Comptroller of Public Accounts of the State of Texas and Ken Paxton, Attorney General of the State of Texas v. Health Care Service Corporation

Supreme Court of Texas
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No. 21-0080
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Glenn Hegar, Comptroller of Public Accounts of the State of
Texas and Ken Paxton, Attorney General of the State of Texas,
Petitioners,

v.

Health Care Service Corporation,
Respondent

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On Petition for Review from the
Court of Appeals for the Third District of Texas
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JUSTICE BLACKLOCK, joined by JUSTICE DEVINE, JUSTICE BUSBY,
and JUSTICE YOUNG, dissenting.

“We have consistently applied an ancient pro-taxpayer
presumption: The reach of an ambiguous tax statute must be construed
strictly against the taxing authority and liberally for the taxpayer. In
other words, a tax must apply unequivocally.” TracFone Wireless, Inc.
v. Comm’n on State Emergency Commc’ns, 397 S.W.3d 173, 182 (Tex.
2013) (cleaned up) (quoting Morris v. Hous. Indep. Sch. Dist., 388 S.W.3d
310, 313 (Tex. 2012)). This venerable presumption traces its roots to “an
old English rule that the sovereign is bound to express its intention to
tax in clear and unambiguous language.” Id. (citation, internal
quotation marks omitted). This Court has long employed it. E.g., Tex.
Unemployment Comp. Comm’n v. Bass, 151 S.W.2d 567, 570 (Tex. 1941).
This well-established default rule demands clarity from the
Legislature before taxes may be imposed. It should not be invoked
lightly, as its injudicious use would allow taxpayers to unfairly escape
their obligations. Courts must strive to understand the Legislature’s
meaning, even when its choice of words makes that task difficult. But
in the face of a tax statute that cannot be applied with confidence one
way or another, the default rule acknowledges that it is better for courts
to admit that the statute is unclear and require the Legislature to clarify
itself than to side with the government and thereby risk judicially
imposing a tax the Legislature never authorized. By invoking the
default rule in favor of taxpayers when indeterminate statutes yield
indeterminate results, courts ensure that the Legislature, not the
Comptroller or the judiciary, imposes the taxes collected by the State.
The presumption in favor of taxpayers should control today’s case.
The primary question presented is whether the “premium tax” imposed
on health insurers by the Insurance Code applies to “stop-loss” policies
issued to employers who provide self-funded health coverage to their
employees. See TEX. INS. CODE § 222.002(b). To answer that question,
the Court must decide whether these insurance policies “cover[] risks on
individuals or groups.” Id. The Court and the Comptroller have a
reasonable reading of the Code under which Blue Cross must pay the
premium tax on these policies. But the court of appeals and Blue Cross
likewise have a reasonable reading. Because the Code’s text provides

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no unambiguous answer, we should rule for the taxpayer. If this causes
an unanticipated or undesirable gap in the tax’s application, the
Legislature should amend the statute to express its wishes more clearly.
I respectfully dissent in part. 1
I.
The premium tax applies to “premiums . . . received by the
insurer . . . from any kind of . . . insurance policy or contract covering
risks on individuals or groups located in this state and arising from the
business of . . . health insurance . . . .” TEX. INS. CODE § 222.002(b). The
parties dispute whether the stop-loss policies sold by Blue Cross “aris[e]
from the business of . . . health insurance.” I agree with the Court that
they do. The real question is whether the stop-loss policies “cover[] risks
on individuals or groups.” 2
The premium tax has been amended in the not-too-distant past
in a way that bears directly on this question. The premium tax
previously applied to premiums from policies “covering a person located

1 I agree with the Court that the stop-loss policies are unambiguously
subject to the “maintenance tax,” and I join that portion of the Court’s opinion.
See TEX. INS. CODE § 257.003.
2 The Court emphasizes the statute’s instruction that the tax applies to

“any kind” of “policy or contract covering risks on individuals or groups”
(emphasis added). Ante at 6–7. Of course, a policy must first cover risks on
individuals or groups before it can be “any kind” of policy that does so. The
words “any kind” do not expand the range of taxable premiums beyond those
derived from policies covering individuals or groups. We are left with the
question of whether these stop-loss policies cover “risks on individuals or
groups.” The words “any kind” have no direct bearing on that question, and
any oblique suggestion that might be derived from them lacks the clarity
required of tax statutes.

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in this state.” 3 After a 2007 amendment, the tax now applies to
premiums from policies “covering risks on individuals or groups.” Id.
Because “person” typically includes business entities, the parties agree
that corporate purchasers of Blue Cross’s stop-loss policies are
“person[s] located in this state.” They therefore agree that the pre-2007
version of the premium tax would have applied to the stop-loss policies
at issue. The parties disagree on what to make of the 2007 amendment,
although there is little question it should be given some effect. Hunter
v. Fort Worth Cap. Corp., 620 S.W.2d 547, 551 (Tex. 1981) (“[T]he
legislature is never presumed to do a useless act.”).
In construing the amendment’s meaning, the Comptroller relies
in part on a “bill analysis” prepared by legislative staff. This document
indicates that, in the mind of the staff who wrote the bill analysis, the
amendment was intended to expand the scope of the premium tax. 4 The
Court correctly ignores this appeal to legislative history, which should
play no role in statutory interpretation. 5 Yet even if the “bill analysis”
made any difference, an overall legislative desire to expand the tax’s
application to previously uncovered premiums would not preclude the

Act of May 22, 2003, 78th Leg., R.S., ch. 1274, § 1, sec. 222.002(b), 2003
3

Tex. Gen. Laws 3611, 3621.
4 House Comm. on Ways & Means, Bill Analysis, Tex. H.B. 3315, 80th
Leg., R.S. (2007) (“The bill amends Section 222.002(b), Insurance Code, to
clarify that the life, accident and health premiums subject to taxation are those
premiums for risks on individuals or groups located in the state of Texas. The
current wording limits taxation to a person.”).
5“The law as it passed is the will of the majority of both houses, and the
only mode in which that will is spoken is in the act itself.” In re Facebook, Inc.,
625 S.W.3d 80, 88 n.4 (Tex. 2021) (quoting Aldridge v. Williams, 44 U.S. (3
How.) 9, 24 (1845)).

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possibility that the amendment also had the effect—intended or not—of
shielding some premiums from the tax. Indeed, skilled players of the
legislative game may find ways of making such things happen without
those who write the “bill analysis” being any the wiser, which is one of
the many reasons courts should give legislative history no weight.
What does it mean for an insurance policy to cover “risks on”
individuals or groups? One natural way of understanding this phrasing
would be to equate it with “risks to” individuals or groups. Sticklers
might object that this gives no meaning to the Legislature’s use of “on”
instead of “to.” But parsing the statute’s confounding choice of
preposition gets us no closer to understanding its meaning. I see no
basis in the statutory text or in the common usage of these prepositions
that would justify interpreting “risks on” any differently from “risks to.”
Blue Cross’s position, with which the court of appeals agreed, is
that stop-loss policies cover financial risk “on” the corporate insured that
offers self-funded healthcare coverage to its employees. Because the
company purchasing the insurance to cover its own risk is neither an
“individual” nor a “group,” Blue Cross reasons, the premium tax does
not apply. This simple, text-based approach to the statute’s application
has much to commend it. “Individual” typically refers to a natural
person, not a business entity. 6 And “group” typically refers to multiple

6 E.g., Individual, WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY
(2002) (“a single human being as contrasted with a social group or institution”);
TEX. INS. CODE §§ 4001.003(5) (“‘Individual’ means a natural person.”);
6002.002(5) (“‘Individual’ means a natural person, including an owner,
manager, officer, occupant, or other individual.”).

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individuals, or at least multiple persons. 7 Absent a legislative definition
or some other textual indication to the contrary, it would be quite odd to
categorize a single company as either an “individual” or a “group.”
The Comptroller responds that even if the company is neither an
individual nor a group, the stop-loss policy nevertheless covers “risks on”
the employees—who themselves are individuals or groups. Under this
argument, although the employer buys the policy to protect its own
financial interests, the risks covered are ultimately the risks that
individual employees face from illness or injury. The employer assumes
these risks on “individuals” (or “groups” of employees) when it offers a
self-funded health plan, and the stop-loss policy offers protection against
excess “risks on individuals or groups” that the employer might face.
This is not an unreasonable reading of section 222.002(b), if one reads it
as applying to “an insurance policy or contract indirectly covering risks
on individuals or groups.” But the word “indirectly” is not found in the
statute, and courts should not “add words that are not implicitly
contained in the language of the statute.” Jones v. Liberty Mut. Ins. Co.,
745 S.W.2d 901, 902 (Tex. 1988).
Blue Cross’s position is that only policies directly covering risks
on individuals or groups are subject to the tax. Of course, the word
“directly” is not in the statute either. The statute does, however,
expressly require the “policy” to “cover” risks “on” individuals or groups.
One straightforward way to think of what it means for a policy to “cover

7 E.g., Group, WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY
(2002) (“a number of individuals bound together by a community of interest,
purpose, or function”).

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risks on” someone is to ask what risk the policy is actually written to
cover. Correctly identifying the precise “risk” a policy “covers” is an
important question to ask about any insurance policy. The covered risk
may arise from other risks or relate to other risks in various ways, but
that does not make those related risks the covered risks. Stop-loss
insurance policies are written to “cover” only financial risks on the
employing entity—not healthcare risks on employees, who are owed
benefits by their employer whether the stop-loss policy pays or not. As
the court of appeals reasoned, “stop-loss insurance insures the employer
against the excess risk the employer assumes when it takes
responsibility for its group members’ medical costs—it does not insure
the group of members against individual medical costs or losses.” ___
S.W.3d ___, 2020 WL 7294614, at *5 (Tex. App.—Austin Dec. 11, 2020).
That the insured’s reason for insuring against one risk is to
protect against a second risk does not convert the second risk into the
risk “covered” by the policy. Insurance policies are carefully written to
cover only certain risks, and this one was written to cover only the
employer’s financial risk, not the employees’ healthcare risk. If the only
risk covered is a “risk on” the employer, which is neither an individual
nor a group, then the tax described by this statute does not apply.
The Comptroller responds that Blue Cross’s reading of
“individual” would lead to the absurd result that premiums paid by a
corporate employer would not be subject to premium taxes, but
premiums paid by an individual proprietor would. This does seem like
an oddity, but the concern may be purely theoretical. The Comptroller
is correct that stop-loss premiums paid by an “individual” employer

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acting without having formed any business entity would be subject to
the tax under Blue Cross’s reading of the statute. But it is not absurd
to suggest that the Legislature may not have accounted for
unincorporated sole proprietorships when it amended a statute in a way
that creates a distinction between “individuals” and business entities.
Very few businesses operate as individual proprietorships, and very few
that do so are in the market for stop-loss insurance. Such oversights or
odd results in outlier cases are not the kind of true absurdities that
would compel us to read “individuals or groups” to include entities that
are neither.
The Comptroller also argues that, read in context, “individuals”
and “groups” are antonyms reflecting the Legislature’s attempt to
include all health insurance policies. As the Comptroller sees it, “the
only reasonable interpretation is that the Legislature intended the two
antonyms to be all-inclusive so that there would be no gaps in the
premium taxes.” This is not an entirely unreasonable way to read the
statute, although, yet again, it requires interpreting “individuals or
groups” to include entities that are neither. Had the Legislature sought
such an all-inclusive result, expansive words like “anyone” or “any
insured” were available. The Legislature chose, instead, the apparently
limiting words “individuals or groups.” Why use these words of
limitation unless there are some insureds whose healthcare-related
policies are not covered by the tax? What purpose does “individuals or
groups” serve in the statute if not to carve out policies covering insureds
who are neither? It is not the courts’ job to make sure there are no “gaps”

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in a tax’s application. “Tax policy gap-filling . . . is best left to legislators,
not courts or agencies.” TracFone, 397 S.W.3d at 176.
The Court and the Comptroller note that Chapter 222 expressly
makes an exception for only a specific type of stop-loss policy, which
suggests that other types of stop-loss policies are subject to the tax.
Section 222.002(c)(3) provides that “premiums received from an insurer
for reinsurance” are not subject to the tax. Section 222.002(d) then
states: “For purposes of Subsection (c)(3), a stop-loss or excess loss
insurance policy issued to a health maintenance organization is
considered reinsurance.” Reinsurance premiums are not subject to the
premium tax. TEX. INS. CODE § 222.002(c)(3). The Comptroller argues
that if all stop-loss policies were not covered by the premium tax, there
would be no reason for the Legislature to specifically exclude HMOs’
stop-loss policies in section 222.002(d).
Blue Cross responds with a plausible theory explaining the
exception. Subsection (d) is specific to HMOs, which are not “insurers”
in the statute’s parlance but which nevertheless must pay premium
taxes. See id. § 222.002(b) (imposing premium tax on both “an insurer”
and a “health maintenance organization”). Whereas insurers concerned
about their own excess risk would purchase “reinsurance,” HMOs
concerned about their excess risk could not buy reinsurance, which only
insurers can buy. 8 Instead, an HMO would buy a stop-loss policy to

8 See Tex. Dep’t of Ins. v. Am. Nat’l Ins. Co., 410 S.W.3d 843, 848 (Tex.
2012) (“Reinsurance, on the other hand, has been described as the transfer of
all or part of one insurer’s risk to another insurer, which accepts the risk in
exchange for a percentage of the original premium. The true reinsurer is

9
cover the same risk insurers cover with reinsurance. Reinsurance
premiums are excluded altogether from the premium tax. Id.
§ 222.002(c)(3). Thus, to ensure HMOs are treated comparably to
insurers, the Legislature enacted section 222.002(d) to denominate
stop-loss policies issued to HMOs as “reinsurance” in order to
categorically exclude them from the tax and ensure equal treatment as
between insurers and HMOs.
The Comptroller’s argument regarding the subsection (d)
exception has some appeal. If Blue Cross’s stop-loss plans were not
taxed because they do not cover “risks on individuals or groups,” then
an HMO’s stop-loss plan would likely not be taxed, because it covers
“risks on” the HMO, which is certainly not an “individual” and probably
not a “group.” If that is how the statute works, then section 222.002(d)
seems to have little independent effect. We often presume “the
Legislature did not intend to do a useless thing by putting a meaningless
provision in a statute.” Barr v. Bernhard, 562 S.W.2d 844, 849 (Tex.
1978). But this canon is not absolute, and must sometimes yield to other
concerns. 9 Rigid application of the canon assumes that legislators would
never employ a belt-and-suspenders approach to clearly resolve a

merely an insurance company or underwriter which deals only with other
insurance companies.” (cleaned up)).
9 See Marx v. Gen. Revenue Corp., 568 U.S. 371, 385 (2013) (“The canon
against surplusage is not an absolute rule . . . .”); ANTONIN SCALIA & BRYAN A.
GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 176 (2012)
(“Put to a choice, however, a court may well prefer ordinary meaning to an
unusual meaning that will avoid surplusage. So like all other canons, this one
must be applied with judgment and discretion, and with careful regard to
context.”).

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discrete question about the statute’s application without commenting on
its other applications.
Here, the canon of surplusage-avoidance does not dictate the
statute’s meaning because the Legislature changed “person” to
“individual or group” after section 222.002(d) was already part of the
statute. Thus, as the statute used to read, section 222.002(d) carved out
stop-loss plans issued to a particular category of “person”—HMOs. If,
however, the change from “person” to “individuals or groups” is given its
natural effect, then a broader category of stop-loss plans is no longer
subject to the tax. In light of the statute’s history, section 222.002(d)’s
apparent superfluity does not mean the Legislature “did a useless act.”
See In re Mo. Pac. R.R., 998 S.W.2d 212, 216 (Tex. 1999). Instead, its
continued presence in the statute merely indicates the Legislature did
not bother to repeal it—a repeal which would surely have been
vigorously opposed by HMOs, who valued their explicit carve out in
section 222.002(d). 10
Ultimately, the Comptroller’s argument is that the non-repeal of
an exception covering a subset of stop-loss policies implies that other
stop-loss policies are generally taxable—even though it is hard to see
how these policies cover “risks on individuals or groups.” But this kind
of reasoning is particularly suspect in tax cases: “[W]e will not extend

10 “[T]his is the history of the legislation, not legislative
history. . . . [N]obody should quarrel with examining how an enacted statute
changes over time.” Pruski v. Garcia, 594 S.W.3d 322, 328 n.2 (Tex. 2020)
(quoting Ojo v. Farmers Grp., Inc., 356 S.W.3d 421, 445 n.31 (Tex. 2011)
(Willett, J., concurring in part)).

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the reach of an ambiguous tax by implication.” TracFone, 397 S.W.3d
at 183.
Finally, the Court reasons that another exception found in section
222.002 shows that an employer can be viewed as a “group.” Section
222.002(c)(5) exempts from the premium tax policies “in which the group
covered . . . consists of a single nonprofit trust established to provide
coverage” to certain governmental employees. If such a trust could be a
“group,” the Court says, then so could an employer purchasing stop-loss
insurance. This argument is unconvincing. The Court takes from
subsection (c)(5) a suggestion that a single entity, a “trust established to
provide coverage” to individuals, can be a “group.” From this suggestion,
it extrapolates that the statute’s use of “group” must include any single
business entity—which would be a wholesale departure from the
ordinarily plural meaning of “group.”
I see no reason to think that “group” bizarrely includes any
singular business entity just because “group” can mean a certain kind of
insurance trust. The only trust that subsection (c)(5) suggests can be a
“group” is a trust “established to provide coverage” to government
employees. In such a scenario, the coverage is directly for the
employees, and the trust is just the vehicle by which their group
coverage is accomplished. Calling such an entity a “group” for insurance
purposes bears no resemblance to calling a single corporation insuring
against its financial risk a “group.” The former sounds like typical
insurance parlance, while the latter altogether defies the ordinary
meaning of “group.”

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II.
I honestly cannot tell whether, under the peculiar, amended
wording of section 222.002, stop-loss policies cover “risks on individuals
or groups.” Rather than pretend it has discovered the statute’s one true
meaning, the Court should require the Legislature to speak more
clearly. Like the court of appeals, we should “strictly construe the
language of section 222.002(b) against taxation to conclude that a
stop-loss policy issued to a self-insured employer is not an ‘insurance
policy or contract covering risks on individuals or groups.’” 2020 WL
7294614, at *5 (quoting TEX. INS. CODE § 222.002(b)); see also TracFone,
397 S.W.3d at 182. The court of appeals’ judgment on the premium tax
should be affirmed. Because the Court does otherwise, I respectfully
dissent in part.

James D. Blacklock
Justice

OPINION DELIVERED: June 17, 2022

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