Fiscal Note - SB 0223 - Revises Statutes Concerning Managed Health Care Organizations
L.R. NO. 0230-14
BILL NO. SCS for SB 223
SUBJECT: Health Care; Health Care Professionals; Department of Health;
Insurance - Medical; Department of Insurance; Medical Procedures
and Personnel; Pharmacy; Physicians
TYPE: Original
DATE: March 13, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
All funds ($912,308 to ($1,106,456 to ($1,230,083 to
$1,794,522) $2,282,633) $2,419,590)
General Revenue ($322,230) ($424,046) ($423,971)
Conservation ($100,000) ($127,200) ($134,832)
Insurance
Dedicated ($78,551) ($166,106) ($173,424)
Total Estimated
Net Effect on All ($1,413,089 to ($1,823,808 to ($1,962,310 to
State Funds $2,295,303) $2,999,985) $3,151,817)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Medicaid ($330,099) ($396,119) ($396,119)
Total Estimated
Net Effect on All
Federal Funds ($330,099) ($396,119) ($396,119)
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $833,138 $1,059,753 $1,123,338
FISCAL ANALYSIS
ASSUMPTION
Officials from the Department of Corrections, the Department of Economic
Development - Division of Professional Registration, the Department of Mental
Health, and the Department of Transportation assume this proposal would not
fiscally impact their agencies.
Department of Conservation (MDC) officials state this proposal have some
fiscal impact on MDC as it would extend coverage beyond what is currently
provided. MDC estimates a cost of approximately $120,000 annually.
Officials from the Missouri Consolidated Health Care Plan (HCP) did not
respond to our fiscal impact request. However, under a similar proposal HCP
assumed increased costs for equal member payment for mail order pharmacy,
"off-label" use of drugs, the prudent lay person determination of an
emergency, and self referral.
Equal Member Payment for Mail Order Pharmacy
It is HCP's assumption that a member could obtain a 30 to 90 day supply of
medication for the same copayments through a mail order service or a local
pharmacy. HCP states that while this may not totally eliminate mail order,
it would severely hamper a plan's ability to negotiate a quantity discount if
all pharmacies were reimbursed in the same fashion (the incentives for volume
would be lost). HCP further states the Ciba Geneva Pharmacy Benefit Report
for 1996 shows a twelve percent higher discount rate for mail order than with
local pharmacies. HCP states that this is similar to the conservative ten
percent figure used in HCP' original fiscal impact response. HCP states
these numbers would indicate that the maximum cost would be within the
$250,000 to $300,000 range. In addition, HCP states that it is possible that
some mail order service could be maintained (maybe 25% to 35%) and the entire
savings may not be lost but it would be very difficult to estimate this
percentage with any amount of accuracy.
"Off-Label" Use
This portion of the proposal would permit broader use of prescription drugs
in Missouri, specifically for conditions and treatment for which the drug was
not originally approved or intended. HCP states this change would add cost
to HCP's contracted health plans which would be passed along to HCP as
premium increases. HCP states it is difficult to determine the fiscal impact
of this portion of the proposal, but an negative impact upon the already
large pharmacy costs of the health plans could result in significant cost
increases to HCP. Currently, HCP estimates more than twenty percent of all
medical plan costs are generated by pharmacy expenses. Based upon the
state's $88.2 million annual contribution to employee medical benefits, the
pharmacy component is approximately $17,640,000 annually. HCP states these
costs would obviously increase along with the costs of related services. HCP
further states that it would not be unexpected to see a one to two percent
increase in overall claims, producing additional costs of $882,000 to
$1,764,000 annually and increase six percent annually. In addition, HCP
estimates an annual increase in cost to local governments that participate in
the HCP Plan of $170,012 and increase six percent annually.
As directed by the Oversight Subcommittee on February 24, 1997, on a similar
proposal the fiscal impact for the off-label drug costs of the Missouri
Consolidated Health Care Plan were reduced to $0.
Prudent Lay Person Determination of an Emergency
The current reported costs for emergency room services (by HMO plans under
contract to HCP) is $2.86 per member per month. The current reported costs
for emergency room services in the HCP indemnity plan (where a defacto
"prudent patient" practice is already in place) is $6.26 per member per
month. Although adding the prudent person provision in managed care would
not increase costs to the indemnity level, it is still anticipated that there
would be some additional cost. If care is being denied now, even if it is
appropriate, and would be covered in the future, there would be additional
cost. However, it is very difficult to estimate an exact amount.
Should the difference between the two types of benefit plans (indemnity -
HMO) decrease by as little as ten percent, the cost would be $327,770. A
twenty-five percent change would result in additional costs of $819,427.
While there is no way to project very accurately, it could be expected that
costs would fall within this range (Social Services estimated a twenty
percent increase).
Self Referral
It is very difficult to accurately predict the cost associated with this
provision. With our plans the premium for the open access model which allows
total self referral (United HealthCare Choice) is sixteen percent higher than
the premiums for the other plans. However, since there are a limited number
of specialists and a limited number of referrals impacted by this provision,
the total overall costs should not increase by this full amount. However,
even a small increase of only one to two percent would result in increased
costs of $517,000 to $1,034,000.
In conclusion, HCP states there would also be administrative costs necessary
to implement all of the provisions in the proposal. Further, many of the
provisions are aimed at the underlying principles of how the managed care
industry operates. Therefore, many of the costs may be rather pervasive in
nature and/or not truly realized until some later time when the impact of the
proposal would be more fully realized. However, these costs cannot be
determined at this time. HCP states it is anticipated that additional costs
to the HMOs would be passed along in the form of higher premiums. Also, as
indicated, ranges of cost are given due to the extreme difficulty of
estimating exact costs. However, it would not be unexpected if the costs
leaned to the high end of the range.
MCHCP currently uses a 6% annual inflation factor to predict FY 1999 and FY
2000 costs. Industry projections are generally forecasting a 4% increase in
calendar year 1997 and potentially as high as 10% in 1998. In Missouri,
MCHCP has recently added public entities whose previous carrier quoted
increases above 15% Total estimated impact for this proposal is as follows:
Full Year (Range)
Mail Order $ 250,000 - 300,000
Prudent Lay Person $ 327,770 - 819,427
Self-Referral $ 517,000 - 1,034,000
$ 1,094,770 - 2,153,427
FY 98 (10 months) $ 912,308 - 1,794,522
FY 99 $ 1,106,546 - 2,282,633
FY 00 $ 1,230,083 - 2,419,590
Officials from the Department of Health (DOH) state that DOH would meet with
an advisory group to establish a methodology for gathering the required data
in this proposal. DOH states they would be responsible for compiling data
and producing reports concerning the quality of care, access to care, and
member satisfaction on managed care organizations. DOH would be responsible
for promulgating rules and regulations defining continual or substantial
failure to comply. DOH estimates they would need three (3) full-time
Research Analysts III ($29,940) to carry out the duties of this proposal.
One Research Analyst III would staff the advisory committee that will make
recommendations on the quality indicators which should be collected. This
position would also develop regulations on the quality indicators that would
be collected. In addition, this position would monitor the data collection
process from HMO to ensure consistency of data collected. The second
Research Analyst III position would analyze the data provided by the HMOs and
produce a HMO consumer guide. The third Research Analyst III position would
link HMO enrollment files with birth, death, hospital discharge, and cancer
registry files to produce quality indicators. One Clerk-Typist III ($18,396)
would assist the Research Analyst IIIs with taking minutes, data collection,
typing reports, filing, printing, and mailing consumer guides. Equipment
($17,312) would include office furniture and personal computer for four FTE.
Expenses ($40,600) would include rental space, travel, and office expenses
for four FTE.
Oversight assumes that only two Research Analyst IIIs would be needed in the
first year due to a lower workload and one Research Analyst III would be
added in the second year. Oversight did not allow a typewriter in the
equipment category and did not allow rental costs as it would be unlikely
that the DOH would need to rent additional space for the 3 FTE.
Officials from the Department of Insurance (INS) assume that all managed
health care organizations (MCO) would be required to file their provider
contracts with INS. INS states that there are currently 33 HMOs and each
employ several distinct contracts with providers including hospitals,
physician group practices, physician health organizations, primary care
physicians, specialist care, ancillary providers such as ambulance,
radiologists, laboratories, and physical therapists. INS estimates an
average of eight contracts per HMO. INS states the contract filing would be
accompanied with a $50 fee for each contract resulting in revenue of $13,200
for the Insurance Dedicated Fund. INS further states that changes to
contracts would also need to be filed with the department but INS is unable
to estimate what, if any, additional revenue may result.
INS states the certification of current utilization review agents (130) has
been absorbed by existing staff. This proposal would increase the number of
entities to be certified as utilization review agents to an estimated 300.
INS states that original certification as a utilization review agent includes
a fee of $1,000 and an annual renewal fee of $500. INS assumes additional
revenue as a result of this proposal would be $170,000 from original
certifications and $85,000 from renewal of certifications.
INS also states that health carriers (defined as sickness and accident
insurance companies, HMOs, nonprofit hospitals, health services corporations
(HSC), and other entities providing a plan of health insurance, health
benefits, or health services) would be required to file annually a
certification that its utilization review program complies with all federal
and state requirements. INS states that there are currently 522
sickness\accident insurers including HMOs and HSCs and, per the Department of
Health, 86 nonprofit hospitals (voluntary and church affiliated). INS
estimates the annual certifications to be filed would generate an additional
$30,400 (608 x $50). In addition, INS states that each health carrier would
also file their official grievance procedures with the department. INS
estimates an initial filing of $30,400 in FY 98 and approximately ten percent
of carriers would revise their procedures annually to generate additional
revenue of $3,040 annually.
INS assumes the additional staff and expense and equipment would be needed to
implement this proposal. One Clerk Typist III ($18,396) would provide
clerical assistance to two professional positions associated with utilization
review agents and managed care organizations. One Insurance Product Analyst
II ($24,576) review and perform an analysis of applications for original
certification and renewal certification as utilization review agents. Two
Consumer Service Specialist IIs ($26,544) would respond to an anticipated
twenty-five percent increase in consumer inquires and complaints due to a
published INS toll-free consumer complaint hot-line to all current and
prospective enrollees. One Investigator II ($26,544) would investigate the
anticipated twenty-five percent increase in fraudulent insurance practices
reported to INS. One Planner II ($29,940) would establish and maintain
Geoaccess database of HMO service area and participating provider
information, assist in the development and maintenance of criteria to
evaluate the adequacy of provider networks for each established service area,
analyze for compliance to accepted standards, and monitor and analyze all
revisions to health care service areas. One Insurance Financial Analyst II
($27,612) would review and perform an analysis of contract provisions of
managed care organizations for compliance to insurance laws and regulations.
Equipment ($61,067) would include office furniture and personal computers for
seven FTE. Expenses ($40,067) would include office and communication
expenses, travel expenses, and rental space.
Officials from the Department of Social Services (DOS) assume that the change
from the MC+ definition of emergency medical condition would increase the
usage of emergency rooms by MC+ recipients. DOS states that based on its
experience with fee-for-service, DOS would assume that costs would increase
twenty percent. DOS estimates that fifty percent of MC+ recipients would
increase their usage of emergency room care at cost of approximately
$652,800. The federal participation rate is 60.68%.
DOS assumes no additional cost associated with two visits without prior
authorization to eye care providers, dental care providers, or chiropractors.
DOS's experience with adult access to eye care through fee-for-service
program shows only one-third receive one annual eye exam and, for dental
exams, only two-thirds receive one annually. Therefore, DOS assumes that
allowing access to two eye and dental exams annually would have no impact on
MC+. Chiropractor services are not a benefit provided by the Medicaid
program so no impact would result from this proposal. Services and costs for
children would also no be affected because their access to these providers is
currently not limited.
DOS also assumes no additional cost associated with mental health parity
because MC+ offers thirty inpatient and 20 outpatient visits. MC+ recipients
may use self-referral to gain access to these services. If an MC+ recipient
exhausts these benefits, additional services are available through the
fee-for-service program.
DOS assumes the proposal regarding networks means access only to the group of
providers who have signed a contract with a particular plan. Recipients
selecting that plan would have access to all of these services. DOS states
that requiring emergency room authorization within thirty minutes is not
expected to increase costs. The MC+ contracts currently being rebid require
authorization within sixty minutes. DOS recognizes that this requirement may
increase administrative costs if contractors are not currently staffed to
handle prior authorization requests with the time requirements.
DOS assumes no additional costs, at this time, associated with increased
administration requirements such as the elimination of gag clauses,
utilization review, and information disclosure. These requirements are
already placed on MC+ plans. However, the accumulation of additional
administrative duties could, at some point, result in additional
administrative costs to MC+ plans. However, DOS does not believe that they
are at that level yet.
DOS also assumes no additional costs associated with the proposal regarding
data disclosure to the Department of Health. DOS routinely makes information
available to the Department of Health and would make any information required
available.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
ALL FUNDS
Costs - State Government
Increased premiums ($912,308 to ($1,106,456 to ($1,230,083 to
$1,794,522) $2,282,633) $2,419,590)
ESTIMATED NET EFFECT ON
ALL FUNDS ($912,308 to ($1,106,456 to ($1,230,083 to
$1,794,522) $2,282,633) $2,419,590)
GENERAL REVENUE
Cost - Department of Social Services
Increased premiums ($213,901) ($256,681) ($256,681)
Costs - Department of Health
Personal Service (4 FTE) ($66,855) ($113,694) ($116,536)
Fringe benefits ($19,074) ($32,437) ($33,248)
Expense and equipment ($22,400) ($21,234) ($17,506)
Total Costs - Department of Health ($108,329) ($167,365) ($167,290)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND ($322,230) ($424,046) ($423,971)
CONSERVATION FUND
Costs - Department of Conservation
Increased premiums ($100,000) ($127,200) ($134,832)
ESTIMATED NET EFFECT ON
CONSERVATION FUND ($100,000) ($127,200) ($134,832)
INSURANCE DEDICATED FUND
Revenue - Department of Insurance
Filing fees $213,600 $118,440 $118,440
Costs - Department of Insurance
Personal service (7 FTE) ($153,823) ($189,277) ($194,007)
Fringe benefits ($43,886) ($54,001) ($55,350)
Expense and equipment ($94,442) ($41,268) ($42,507)
Total Costs - Department of Insurance($292,151) ($284,546) ($291,864)
ESTIMATED NET EFFECT ON
INSURANCE DEDICATED FUND ($78,551) ($166,106) ($173,424)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
LOCAL GOVERNMENTS
Costs - Local Governments
Increased premiums ($833,138) ($1,059,753) ($1,123,338)
ESTIMATED NET EFFECT ON
LOCAL GOVERNMENTS ($833,138) ($1,059,753) ($1,123,338)
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that
they would incur insurance premium increases and additional administrative
costs due to the requirements of this proposal.
DESCRIPTION
This proposal would include numerous provisions relating to the regulation of
health care organizations. The substitute would:
(1) Require organizations delivering or financing health care to forward to
the Department of Health data regarding quality of care, access to care,
member satisfaction, and member health status. Failure to provide the
required data is reported to the Department of Insurance and would be
considered an unfair trade practice. The Department of Health would have the
authority to specify the types of data and the methods by which the data
would be submitted;
(2) Prohibit public disclosure of data obtained under the proposal's
provisions. However, the Department of Health may prepare and disclose to
the public reports and studies based on the data;
(3) Require the Department of Health to publish an annual consumer guide.
The department would allow health care entities to comment on the report
prior to publication and may include the comments in the report;
(4) Define an emergency medical condition to include those conditions that
would lead a prudent layperson to believe that unscheduled, immediate medical
care would be required;
(5) Require health maintenance organizations (HMOs), with their applications
for authority to do business in the state, to demonstrate that enrollees
would have adequate access to health care providers. The director of the
Department of Insurance may deny that authority if the director is not
satisfied that the HMO would provide adequate access to health care
providers;
(6) Require an HMO to include in its evidence of coverage a toll-free
customer service number and the Department of Insurance's consumer complaint
hotline;
(7) Prohibit HMOs and similar entities from restricting a provider's
discretion to inform enrollees of treatment options, risks of treatment, or
decisions of health plans to deny services;
(8) Require HMOs to provide to enrollees and prospective enrollees written
disclosures that would include explanations of coverage exclusions, any prior
authorization required for covered services, utilization review policies, an
enrollee's responsibility for payment, grievance procedures, coverage for
emergency services, procedures to obtain referrals to providers outside of
the HMO network when the HMO does not have a provider with appropriate
training to meet the needs of the enrollee, and procedures for obtaining a
specialist to coordinate an enrollee's care when the enrolled has a disease
requiring specialized medical care over a prolonged period of time;
(9) Require HMOs, upon request of an enrollee, to provide copies of annual
financial statements, provide consumer complaint information, disclose
whether specific drugs would be covered, provide descriptions of quality
assurance procedures, and provide specific clinical review criteria for a
particular condition;
(10) Require HMOs to disclose to the Department of Insurance all arrangements
that would limit the scope of offered services, referrals, or treatment. The
department would be required to approve or disapprove the arrangements within
30 days;
(11) Permit the Department of Insurance to order a penalty not to exceed $100
for each violation of Chapter 354;
(12) Allow the Department of Insurance to place restrictions on any
certificate of authority issued to an HMO;
(13) Require HMOs to establish procedures to ensure that the mental health
records of enrollees remain confidential. The procedures would be filed
annually with the Department of Insurance;
(14) Prohibit HMOs from contracting with pharmacies that are not licensed
with the Missouri Board of Pharmacies or conferring benefits on mail order
pharmacies if those benefits would not offered to other pharmacies in an
HMO's network;
(15) Require HMOs to have a sufficient number of providers so that enrollees
would not have to travel long distances or experience unreasonable delays.
The Department of Insurance would determine whether an HMO meets the
proposal's sufficiency requirements;
(16) Require HMOs to file with the Department of Insurance access plans for
each managed care plan offered in the state;
(17) Prohibit participating providers from charging any costs for covered
services other than coinsurance, deductibles, or copayments specified in the
HMO's evidence of coverage;
(18) Prohibit participating providers from collecting from enrollees any
money that an HMO owes the provider;
(19) Require HMOs to establish and disclose to the Department of Insurance
their credentialing standards. HMOs would be prohibited from using standards
that discriminate against providers treating high-risk populations;
(20) Require HMOs and providers to give each other 60 days notice before
terminating a contract. The notice would specify why the contract is being
terminated. HMOs would be required to give providers an opportunity to
appeal the termination except in cases involving fraud, imminent harm to
patients, or disciplinary action by a licensing board. The procedures would
not apply to terminations at the end of a contract period. HMOs would be
prohibited from terminating a contract because a provider has advocated on
behalf of an enrollee, filed a complaint against the HMO, appealed an HMO's
decision, or filed a report with the Department of Insurance;
(21) Require HMOs to regularly inform health care professionals of any data
used to evaluate the professional's
(22) Require an HMO to allow continued care with a provider for 90 days if
the provider leaves the HMO during a contract period for a reason other than
wrongdoing.
This would apply only if the provider agrees to accept reimbursement at the
same level;
(23) Require HMOs to arrange a referral to a nonparticipating provider at no
additional cost to an enrollee when the HMO does not have a provider within
its network that can meet the health care needs of an enrollee;
(24) Require HMOs to develop procedures to allow an enrollee who needs
ongoing care from a specialist to receive that care without first obtaining a
referral from a primary care physician for each visit;
(25) Require HMOs to allow enrollees 2 visits to a participating eye care
provider, dental care provider, chiropractor, or dermatologist without first
obtaining prior approval from the enrollee's primary care physician; and
(26) Require insurance companies, health services corporations, and HMOs to
offer as part of the policy or as a supplement mental health benefits in all
health insurance policies. Insurers would be required to cover 2 diagnostic
visits per year to a licensed psychiatrist, licensed psychologist, licensed
professional counselor or licensed clinical social worker. Insurers would
also charge the same copayments and deductibles for mental health conditions
as are charged for any other illness.
The proposal would also revise utilization review statutes. In the
provisions relating to utilization review, the proposal would:
(1) Broadly define health carriers to include health maintenance
organizations and other health insurers;
(2) Require health carriers to document their utilization review procedures
and submit an annual report of those procedures with the Department of
Insurance;
(3) Require health carriers to allow enrollees to appeal for coverage of
pharmaceutical prescriptions and durable medical equipment as part of the
utilization review process;
(4) Require health benefit plans to cover any prescribed drug, if the drug
has been approved by the FDA for at least one indication and is a recognized
treatment in one of the standard reference compendia or in substantially
accepted peer-reviewed medical literature;
(5) Require health carriers to follow procedures set forth in the proposal
for initial determinations, concurrent review determinations, retrospective
review determinations, adverse determinations, and reconsiderations. The
procedures would include requirements for notifying enrollees and providers
of the determinations. Procedures would also establish for standard and
expedited appeals processes;
(6) Require health carriers to cover emergency services necessary to screen
and stabilize an enrollee without prior authorization, to provide access to
utilization review representatives 24 hours a day, to deny certain services
within 30 minutes, and to use the prudent layperson definition of emergency;
(7) Require health carriers to maintain a register of all grievances received
during a calendar year. Carriers would file grievance procedures with the
Department of Insurance. Managed care plans would establish first and second
level reviews of grievances;
(8) Require health carriers to maintain a register of all complaints filed by
enrollees against any physician in the network. The carrier would be
required to forward quarterly a copy of the register to the Board of Healing
Arts; and
(9) Authorize the Department of Insurance to handle appeals of the second
level review panel's decision. The department's director would have broad
discretion to resolve the appeals by any legal means. The department's
decisions would be subject to judicial review.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements.
SOURCES OF INFORMATION
Department of Insurance
Department of Health
Department of Social Services
Department of Mental Health
Missouri Consolidated Health Care Plan
Department of Corrections
Department of Conservation
Department of Transportation
Department of Economic Development
Division of Professional Registration
This Fiscal Note is not an official copy and should not be quoted or cited.