This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0764 - Managed Health Care Plans
L.R. NO. 2895-02
BILL NO. SB 764
SUBJECT: Insurance-Medical, Health, Department of Insurance
TYPE: #Corrected
DATE: February 5, 1996
#To correct Department of Insurance fiscal impact
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
General Revenue $0 ($3,961,669) to ($7,923,337) to
(UNKNOWN) (UNKNOWN)
Conservation
Commission $0 ($247,500) ($495,000)
Insurance
Dedicated #0* #0* #0*
Total Estimated
Net Effect on All #0 #($4,209,169) to #($8,418,337) to
State Funds #0 (UNKNOWN) (UNKNOWN)
*Income and cost net to $0
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Federal $0 (UNKNOWN) (UNKNOWN)
Total Estimated
Net Effect on All
Federal Funds $0 (UNKNOWN) (UNKNOWN)
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Oversight assumes this proposal will limit managed care plans, insurance
companies and other health care networks ability to negotiate on lower prices
and higher volume with doctors and other providers. It requires that plans
must allow all doctors within a geographic area to apply to be credentialed
by the plan. This would make it difficult for a plan to limit the number of
doctors offered by the plan. The result would be lower discounts for the
health care plan and higher health care cost. This proposal also requires
every plan to offer a point-of-service option with a maximum of 20%
coinsurance at a cost no greater than the actuarial value of the alternative
services. This change would have the effect of allowing more participants to
go outside the network to receive services. The result will be to further
diminish the managed care plans ability to negotiate lower prices from
providers in return for higher volume. All plans would have to be in
compliance as of January 1, 1998.
#The Department of Insurance(MDI) stated that this proposal includes the
authority for the Director to set fees at a level designed to produce revenue
not to exceed the cost and expense of administering the program There are
approximately 244 insurers writing major and comprehensive medical insurance
policies for groups and individuals. Of these, approximately 90 percent
offer some form of a managed care meeting this proposal's definition. In
addition, there are approximately 25 health maintenance organizations writing
policies in this state. The HMO's will write an average of three variations
of plans each. Based upon these numbers, the MDI estimates 295 applications
for certification. MDI assumes a certification fee of $425. The MDI also
assumes an annual recertification process since contractual arrangements
between insurers\hospitals\providers of care often change\terminate. The
Department would request two Insurance Product Analyst II to review
applications for certification of managed care plans for compliance to
standards and criteria set forth in the proposal and serve as liaisons
between the MDI and managed care entities, contractors, and health care
providers and the public. They would also need one Clerk Typist III for
clerical support for the two professional positions including filing
applications for certification\recertification and typing correspondence to
applicants and qualified managed care plans.
#Oversight assumes this proposal can be implemented with the addition of one
Insurance Product Analyst II. Based on MDI estimates one analyst could
allocate at least five hours for each application. In addition, Oversight
assumes that the Director will set certification fees sufficient to cover the
cost of the new FTE.
Officials from the Department of Social Services (DSS) responded to a similar
fiscal note this session and stated this proposed legislation would increase
cost to the Medicaid program in an unknown amount. This proposal reduces
payors ability to negotiate aggressive rates based on guaranteed volumes. DSS
is concerned about Section 4. (5) of the proposal which requires that all
plans allow all health care providers within the plan's geographic service
area to apply for credentials. Managed care entities would not be allowed to
limit the number of specialists with which they contract. Section 6. (1)
would alter the current MC+ program for Medicaid by requiring a
point-of-service option. This would adversely effect the ability of DSS to
control costs.
Officials from the Missouri Consolidated Health Care Plan (HCP) reported this
proposal would require all plans to credential providers seeking contracts
regardless of whether there are openings in the plan's network. Financial
data currently confidential would have to be released to enrollees and the
public. The publication of this data would eliminate competitive contracting.
These requirements would increase the administrative cost to HCP, and reduce
their ability to select only high quality appropriate providers for the
network. A study prepared for the Group Health Association of America
concluded that "any willing provider" legislation would increase costs
resulting in premium increases of 9.1% to 28.7%. The estimated cost of the
above noted administrative changes to HCP is $5,920,000 annually. The
proposal also requires a limit in the point-of-service (POS) coinsurance of
20%. HCP has a POS option with a 30% coinsurance level. In addition, the
Limited Indemnity-Preferred Provider Option offered by HCP has a 30%
coinsurance level and has 5,000 members enrolled. The changes in these two
areas would cost the plan $2,003,337 annually. The overall cost of this
proposal to HCP is estimated at $7,923,337.
Officials from the Department of Highway and Transportation (DHT) stated that
passage of this legislation would have no fiscal impact on their agency.
Oversight assumes this proposal will have fiscal impact on DHT. DHT responded
to a proposal with a similar effect that their current discount on claims
from their preferred provider network is 16.5%. Using projected calendar year
1997 claims paid of approximately $34,000,000 the elimination of this
discount would result in an additional $5,610,000 in annual cost. Oversight
assumes these cost would be paid by participants in the Department's health
plan or the plan.
Officials from the Department of Conservation (MDC) stated that passage of
this legislation will have no fiscal impact on their department.
Oversight assumes this proposal will have fiscal impact on the Department of
Conservation (MDC). MDC reported on a similar proposal with the same effect
that it would increase costs to the Department by $495,000.
Oversight assumes that premium cost would increase 16% as a result of this
proposal. The resulting cost to the Department would be approximately
$495,000 annually.
Officials from the Department of Public Safety (DPS)-Highway Patrol (MHP)
responded to a similar fiscal note this session and stated that passage of
this legislation would have no fiscal impact on their department.
Officials from the Department of Corrections (DOC), Department of Health
(DOH), and the Office of Administration (OA) stated that passage of this
legislation would have no fiscal impact on their department.
FISCAL IMPACT-State Government FY 1997 FY 1998 FY 1999
(10 Months)
GENERAL REVENUE FUND
Cost - Department of Social Services
Increased Medicaid Payments $0 (UNKNOWN) (UNKNOWN)
Cost - Consolidated Health Care Plan
Increased Health Plan Cost $0 ($3,961,669) ($7,923,337)
Estimated Net Effect on General
Revenue Fund $0 ($3,961,669) ($7,923,337)
to to
(UNKNOWN) (UNKNOWN)
CONSERVATION COMMISSION
FUND
Cost to Department of Conservation
Increased Health Plan Cost $0 ($247,500) ($495,000)
Estimated Net Effect on Conservation
Commission Fund $0 ($247,500) ($495,000)
INSURANCE DEDICATED FUND
#Income-Department of Insurance
Certification Fees $35,942 $36,630 $36,946
Cost-Department of Insurance
Personal Services(1FTE) ($21,280) ($26,174) ($26,289)
Fringe Benefits ($6,541) ($8,046) ($8,247)
Expense and Equipment ($8,121) ($2,410) ($2,410)
Total Cost Department of Insurance ($35,942) ($36,630) ($36,946)
Estimated Net Effect on Insurance
Dedicated Fund #$0 #$0 #$0
FEDERAL FUNDS
Cost-Department of Social Services
Increased Medicaid Payments $0 (UNKNOWN) (UNKNOWN)
Estimated Net Effect on Federal
Funds $0 (UNKNOWN) (UNKNOWN)
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
$0 $0 $0
DESCRIPTION
This act requires the Director of the Department of Insurance to establish a
process for certification of managed health care plans. The Director is also
required to establish procedures for periodic review and recertification of
qualified managed care plans.
The Director has the power to terminate or suspend the certification of a
previously qualified managed care plan if the Director determines that the
plan no longer meets the requirements for certification. Prior to
termination or suspension, the Director shall notify the managed care plan
and provide the plan with notice and the opportunity for a hearing on the
decision. The specific requirements for certification are set out in Section
3 of the act. The Director of the Department of Insurance will be required
to develop a Consumer Quality Assurance Process to resolve complaints filed
by enrollees and process shall provide for a timely review of complaints
relating to the managed care entity's decision: (1) regarding the medical
necessity or therapeutic value of any procedure, treatment or service; (2) to
deny or discontinue enrollment of an enrollee; (3) on the claims of
inadequate access to health care services or providers; and (4) on the claims
of failure to provide covered services. Each managed care plan which offers a
plan that restricts access to providers or controls utilization shall offer
point of service plans. All managed care plans shall be in compliance with
these provisions by January 1, 1998.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Department of Insurance
Department of Health
Department of Highway and Transportation
Department of Corrections
Department of Conservation
Office of Administration
Missouri Consolidated Health Care Plan
Not Responding: Department of Public Safety, Department of Social Services