| TO: | Honorable John T. Smithee, Chair, House Committee on Insurance |
| FROM: | Ursula Parks, Director, Legislative Budget Board |
| IN RE: | HB2359 by Bonnen, Greg (Relating to health care compensation under certain health benefit or managed care plans.), Committee Report 1st House, Substituted |
Estimated Two-year Net Impact to General Revenue Related Funds for HB2359, Committee Report 1st House, Substituted: a negative impact of ($59,773,359) through the biennium ending August 31, 2015.
Additionally, certain agencies estimate significant but indeterminate costs from implementing provisions of the bill.
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2014 | $0 |
| 2015 | ($59,773,359) |
| 2016 | ($64,255,759) |
| 2017 | ($68,753,972) |
| 2018 | ($73,222,623) |
| Fiscal Year | Probable Savings/(Cost) from General Revenue Fund 1 |
Probable Savings/(Cost) from GR Dedicated Accounts 994 |
Probable Savings/(Cost) from Other Special State Funds 998 |
Probable Savings/(Cost) from State Highway Fund 6 |
|---|---|---|---|---|
| 2014 | $0 | $0 | $0 | $0 |
| 2015 | ($59,773,359) | ($2,290,736) | ($361,072) | ($10,317,193) |
| 2016 | ($64,255,759) | ($2,462,519) | ($388,149) | ($11,090,878) |
| 2017 | ($68,753,972) | ($2,634,907) | ($415,321) | ($11,867,293) |
| 2018 | ($73,222,623) | ($2,806,162) | ($442,315) | ($12,638,606) |
| Fiscal Year | Probable Savings/(Cost) from Federal Funds 555 |
Probable Savings/(Cost) from Local Funds |
|---|---|---|
| 2014 | $0 | $0 |
| 2015 | ($11,246,510) | ($2,956,130) |
| 2016 | ($12,089,885) | ($3,177,810) |
| 2017 | ($12,936,235) | ($3,400,272) |
| 2018 | ($13,777,023) | ($3,621,272) |
The estimated cost to comply with the provisions of the bill would be $86.9 million in All Funds in fiscal year 2015, and would range from $93.5 million to $106.5 million in All Funds per year in subsequent fiscal years. These costs are associated with the Employees Retirement System (ERS).
ERS indicates that while the bill does not reference Insurance Code, Chapter 1551, it is likely to increase reimbursement costs paid to health care providers by the HealthSelect third-party administrator, which would increase the cost of the Group Benefit Plan. ERS indicates that the changes made by the bill would narrow the range of reimbursement rates among health care providers, increasing reimbursement rates and increasing plan costs. Currently, provider reimbursement rates vary based on factors that include geographic location, specialty, and type of facility. Based on data from the HealthSelect plan and average contract rates, the agency estimates that multiple market segments would require an increase in compensation ranging from 4 to 19 percent. The agency anticipates that additional plan costs associated with the specific contract terms may also be incurred.
Although the bill does not specifically mention Medicaid and the Children's Health Insurance Program (CHIP), it is assumed that the definition of "health benefit plan issuer" could still include the managed care organizations contracted to provide services under those programs. It is assumed there would be a significant cost from implementing the provision of the bill that would prohibit a health plan from paying a provider less than 85 percent of the maximum amount paid to a similar provider for the same service. Medicaid and CHIP reimbursements are generally more than 15 percent below the commercial or Medicare reimbursement rates; implementing this requirement would significantly raise costs in the respective programs or prevent health plans from operating in both the Medicaid and Medicare/commercial markets. HHSC does not have enough information regarding current managed care provider reimbursement rates or the corresponding reimbursements in the commercial/Medicare markets to make appropriate assumptions about the estimated fiscal impact.
HHSC estimates the cost associated with implementing the provision of the bill that requires each health care contract to include a disclosure form regarding payment, compensation, and any rate adjustment terms to be $12.4 million in All Funds in fiscal year 2015, $13.0 million in All Funds in fiscal year 2016, $13.3 million in All Funds in fiscal year 2017 and $13.6 million in All Funds in fiscal year 2018, but the portion of the cost that cannot be estimated is assumed to be significantly higher than this fiscal impact. It is assumed the bill only applies to Medicaid managed care programs; to implement the same provisions in Medicaid fee-for-service and CHIP would require additional statutory amendments. In addition, it is assumed the bill does not impact Medicaid managed care pharmacy contracts as "fee schedules" and "procedure codes" do not apply to pharmacy benefits. Should the bill apply to Medicaid managed care pharmacy contracts, there would likely be a significant cost for a significant increased burden due to the number of drug codes and the frequency of drug cost changes.
Several additional agencies indicated costs related to increased claims costs and network contract pricing. According to the Teacher Retirement System, the provisions of the bill would require additional costs to the third-party administrator which cannot be determined at this time. However, any costs associated with the provisions of the bill would be passed on to the TRS-Care program. Based on the information provided by the University of Texas System, it is estimated that annual costs to its health plan would increase by $67.5 million to $99.2 million per fiscal year. Based on the information provided by the Texas A&M University System, it is estimated that annual costs to its health plan would increase by $20.8 million per fiscal year.
Based on information provided by the Texas Department of Insurance (TDI), the bill would result in an increase in form filings; however, it is assumed that all duties and responsibilities associated with implementing the provisions of the bill could be accomplished by utilizing existing staff and resources. Also, based on information provided by TDI, this analysis assumes that implementation of the bill would result in a revenue gain of $2,650 in General Revenue-Dedicated Texas Department of Insurance Fund 36 from additional form filings. Since General Revenue-Dedicated Texas Department of Insurance Fund 36 is a self-leveling account, this analysis also assumes that any additional revenue resulting from the implementation of the bill would accumulate in account fund balances and that the department would adjust the assessment of the maintenance tax or other fees accordingly in the following year.
According to the Teacher Retirement System, the provisions of the bill could result in increased plan costs that would be passed along through increased premiums to be borne by school districts or beneficiaries.
The Texas Association of Counties indicates no significant fiscal impact to counties is anticipated.
There would be an indeterminate fiscal impact to public hospitals that operate health plans; however, the amounts would vary depending on the number of plans and the amount of the reimbursement rates.
| Source Agencies: | 323 Teacher Retirement System, 327 Employees Retirement System, 454 Department of Insurance, 514 Optometry Board, 529 Health and Human Services Commission, 710 Texas A&M University System Administrative and General Offices, 720 The University of Texas System Administration, 601 Department of Transportation
|
| LBB Staff: | UP, JJO, TP, AG, JI, ES, EMo, JW, TG
|