OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

sHB-6471

AN ACT PROHIBITING MOST FAVORED NATION CLAUSES IN HEALTH CARE PROVIDER CONTRACTS.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 12 $

FY 13 $

Comptroller Misc. Accounts (Fringe Benefits)

GF & TF- Cost

Indeterminate

Indeterminate

Note: GF=General Fund and TF = Transportation Fund

Municipal Impact:

Municipalities

Effect

FY 12 $

FY 13 $

Various Municipalities

STATE MANDATE - Cost

Indeterminate

Indeterminate

Explanatio

As of July 1, 2010, the State Employees' Health plan went self insured. Pursuant to current federal law, the state's self-insured health plan would be exempt from state health insurance benefit mandates. However, in previous self-funded arrangements the state has traditionally adopted all state mandates. To the extent that the state continues this practice of voluntary mandate adoption, the following impact would be anticipated.

The bill may result in a cost to the state employee health plan. The cost is indeterminate as it would depend on the price the state is able to secure as a result of the bill's provision when it negotiates rates with providers. The bill would inhibit the state's ability to assure the lowest price paid for services.

The bill may result in a cost to certain fully-insured municipalities when they enter into contracts with insurance companies or providers for the delivery of services on or after October 1, 2011. The cost is indeterminate as it would depend on the price municipalities are able to secure as a result of the bill's provision when they negotiate rates with providers. The bill would inhibit municipalities' ability to assure the lowest price paid for services. Due to federal law, municipalities with self-insured health plans are exempt from state health insurance benefit mandates.

The state employee health plan and many municipal health plans are recognized as “grandfathered” health plans under the Patient Protection and Affordability Care Act (PPACA). It is unclear what effect the adoption of certain health mandates will have on the grandfathered status of the state employee health plan or grandfathered municipal plans PPACA1.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

It is unclear what effect the PPACA will have on health care contracts and therefore what the net impact to the state and municipalities will be as a result of the bill's provisions.

The federal health care reform act requires that, effective January 1, 2014; all states must establish a health benefit exchange, which will offer qualified plans that must include a federally defined essential benefits package. While states are allowed to mandate benefits in excess of the basic package, the federal law appears to require the state to pay the cost of any such additional mandated benefits. The extent of these costs will depend on the mandates included in the federal essential benefit package, which have not yet been determined. However, neither the agency nor mechanism for the state to pay these costs has been established.

1 According to the PPACA, compared to the plans' policies as of March 23, 2010, grandfathered plans who make any of the following changes within a certain margin may lose their grandfathered status: 1) Significantly cut or reduce benefits, 2) Raise co-insurance charges, 3) Significantly raise co-payment charges, 4) Significantly raise deductibles, 5) Significantly lower employer contributions, and 5) Add or tighten annual limits on what insurer pays. (www. healthcare. gov)