LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

SENATE, No. 3

STATE OF NEW JERSEY

217th LEGISLATURE

 

DATED: FEBRUARY 10, 2017

 

 

SUMMARY

 

Synopsis:

Requires health insurance coverage for treatment of substance use disorders; places certain restrictions on the prescription of opioid and certain other drugs; concerns continuing education related thereto.

Type of Impact:

Expenditure increase to the State and to local governments (including school districts).

Agencies Affected:

Division of Pensions and Benefits in the Department of the Treasury; local government entities (including school districts).

 

Office of Legislative Services Estimate

Fiscal Impact

FY 2017

FY 2018

FY 2019

 

State Cost

Indeterminate Increase – See comments below

 

Local Cost

Indeterminate Increase – See comments below

 

 

 

 

·         The Office of Legislative Services (OLS) concludes that State and local expenditures for employee health benefits may increase by indeterminate amounts.  To the extent that inpatient and outpatient treatment of substance use disorders at in-network facilities is provided without prior authorization or other prospective utilization management requirements, costs to the State Health Benefits Program (SHBP) and the School Employees’ Health Benefits Program (SEHBP) will likely increase.  It has been shown that prior authorization and utilization management reduces health care costs by curtailing unnecessary and inappropriate treatment.  

·         Local governments and school districts that do not participate in the SHBP and the SEHBP may experience significant expenditure increases if their plans do not cover treatment of substance abuse disorder to the extent mandated by the bill.

·         The fiscal impact of the provisions restricting and regulating prescriptions for opioids is indeterminate, given that it depends on the price of the opioids; the volume of opioids being prescribed; and how restrictions that would be imposed would affect either the price or the volume.

·         The cost to the State and local governments of prescription drugs also includes pharmacy dispensing fees.  The bill will increase the number of prescriptions for the same opioid dosage, thereby increasing  dispensing fees. However, if shorter-duration prescriptions actually reduce total dosages prescribed, savings may be realized.

·         To the extent that physicians charge patients for a return consultation (follow-up visit) after the first five days of prescribing an opioid, or each additional time a prescription is needed, the SHBP/SEHBP could incur additional office visit costs.

·         This bill would require health insurance plans to provide unlimited benefits for inpatient and outpatient treatment of substance use disorders at in-network facilities for treatment of substance use disorders; would place certain restrictions on the prescription of opioid and certain other drugs; and would require health care providers to attend related continuing education classes.

 

 

BILL DESCRIPTION

 

      Senate Bill No. 3 (1R) of 2017 requires health insurance coverage for substance use disorders and regulates opioids and certain other prescription drugs in several ways. The bill requires health insurance carriers, and the State Health Benefits Program and the School Employees’ Health Benefits Program, to adhere to certain coverage requirements for treatment of substance use disorders.  The bill also places certain restrictions on the prescription of opioids, and requires certain notifications when prescribing Schedule II controlled dangerous substances used to treat chronic or acute pain.  The bill also requires certain health care professionals to receive training on topics related to prescription opioid drugs. 

      Specifically, the bill requires insurers to provide unlimited benefits for inpatient and outpatient treatment of substance use disorders at in-network facilities.  The bill specifies that the services for the treatment of substance use disorders must be prescribed by a licensed physician, licensed psychologist, or licensed psychiatrist and provided by licensed health care professionals or licensed or certified substance use disorder providers in licensed or otherwise State-approved facilities, as required by the laws of the state in which the services are rendered.

      The bill provides that the benefits, for the first 180 days per plan year of inpatient and outpatient treatment of substance use disorder, would be provided when determined medically necessary by the covered person’s physician, psychologist or psychiatrist without the imposition of any prior authorization or other prospective utilization management requirements.  If there is no in-network facility immediately available for a covered person, insurers must provide necessary exceptions to their network to ensure admission in a treatment facility within 24 hours.

      The benefits for the first 28 days of an inpatient stay during each plan year must be provided without any retrospective review or concurrent review of medical necessity and medical necessity as determined by the covered person’s physician.  The benefits for days 29 and thereafter of inpatient care would be subject to concurrent review as defined in the bill.  The insurer cannot initiate concurrent review more frequently than two-week intervals. 

      The benefits for the first 28 days of intensive outpatient or partial hospitalization services must be provided without any retrospective review of medical necessity and medical necessity as determined by the covered person’s physician.  The benefits for days 29 and thereafter of intensive outpatient or partial hospitalization services would be subject to a retrospective review of the medical necessity of the services.

      The bill specifies that benefits for inpatient and outpatient treatment of substance use disorder after the first 180 days per plan year would be subject to the medical necessity determination of the insurer and may be subject to prior authorization or retrospective review and other utilization management requirements.

      Under the bill, the benefits for outpatient visits would not be subject to concurrent or retrospective review of medical necessity or any other utilization management review.

      The benefits for outpatient prescription drugs used to treat substance abuse disorder must be provided when determined medically necessary by the covered person’s physician, psychologist or psychiatrist without the imposition of any prior authorization or other prospective utilization management requirements.

      The bill also places certain restrictions on how opioids and other Schedule II controlled substances may be prescribed.  In cases of acute pain, the bill provides that a practitioner cannot issue an initial prescription for an opioid drug in a quantity exceeding a five-day supply.  Any prescription for acute pain must be for the lowest effective dose of immediate-release opioid drug.  In cases of acute or chronic pain, prior to issuing an initial prescription of a course of treatment that includes a Schedule II controlled dangerous substance or any other opioid drug, a practitioner must document the patient’s medical history, develop a treatment plan, conform with a monitoring requirement, limit the supply of opioid drug prescriptions, and comply with State and federal laws.

      The bill also would require certain health care professionals to receive training on topics related to prescription opioid drugs.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      Senate Bill No. 3 (1R) of 2017 would require the SHBP, the SEHBP and other insurance plans to provide the first 180 days of inpatient and outpatient treatment of substance abuse disorder, when determined medically necessary by the covered person’s physician, psychologist, or psychiatrist, without prior authorization or other initial utilization management (UM) requirements.  If there is no in-network facility immediately available, the contract must provide exceptions to the network to ensure admission to a treatment center within 24 hours. 

      This bill would also limit concurrent or retrospective review of medical necessity or any utilization management review for substance use disorder services. Prior authorization and utilization management are used by the SHBP and the SEHBP to contain costs.  Currently, some specialty outpatient services require pre-approval and all inpatient substance use disorder services require pre-approval, whether or not the provider is in-network or out-of-network.       

      The OLS does not have information regarding how much the State pays Aetna and Horizon to provide utilization management services and the total cost for substance use disorder services. Therefore, the OLS is not able to determine the potential costs to the SHBP and the SEHBP of limiting utilization management for substance use disorder services.

      According to the Centers for Medicare and Medicaid Services in the United States Department of Health and Human Services, “the components of UM that relate to certifying the necessity of the health care services provided includes, precertification, concurrent review, and discharge planning to ensure that care is both medically necessary and covered for payment.”  In a 2001 State of New Jersey, State Health Benefits Program and Consultant Review, commissioned by the State and conducted by Mercer Human Resource Consulting, the reported Horizon Utilization Management Return on Investment (ROI) was 3.6:1.  This means that for every dollar the SHBP/SEHBP spends on UM, the SHBP/SEHBP saves $3.60 in program costs.  A June 2016 study by Accenture Consulting (formerly Anderson Consulting and a division of Arthur Anderson) and entitled, Risk Based. Data Driven. The New Face of Utilization Management, concluded that health care organizations employing network-centric utilization management can save in administrative and medical cost savings combined, with a 60 percent to 80 percent annual reduction in the number of billing codes requiring review, and a 17 percent to 40 percent reduction in administrative costs resulting from fewer billing codes.  

      The OLS notes that it is reasonable to assume that limiting UM practices would increase health care benefit costs accordingly.

      The fiscal impact of the provisions regulating prescriptions for opioids depends on the price of the opioids, the volume of opioids being prescribed, and how restrictions that would be imposed would affect either the price or the volume.  If opioid prescriptions are restricted, prescription drug costs to the SHBP/SEHBP would be reduced accordingly due to fewer prescriptions.  If the number of people who need opioid prescriptions increases, even under the restrictions, opioid prescription costs to the SHBP/SEHBP could increase due to the increased new volume prescribed, although to a lesser degree because of the restrictions.  Additionally, if the usage is restricted, prices may be increased by manufacturers to make up for the volume lost under the restrictions.  Finally, if the prices do not change under the restrictions and the same number of opioids are prescribed after the restrictions are imposed, the bill could be cost neutral. 

      The cost to the State of prescription drugs also includes pharmacy dispensing fees.  The bill will increase the number of prescriptions for the same opioid dosage, therefor increasing dispensing fees. However, if shorter-duration prescriptions actually reduce total dosages prescribed, savings may be realized. 

      To the extent that physicians charge patients for a return consultation after the first five days, or each additional time a prescription is needed, the SHBP/SEHBP could incur additional office visit costs.   

      Local governments that participate in the SHBP and SEHBP will experience indeterminate expenditure increases, due to the same factors affecting State costs as discussed above.  Local governments that do not participate in the SHBP and SEHBP will not only be affected by these factors, but may also experience increased expenditures if their health insurance plans do not provide the level of coverage for substance use disorders mandated by the bill.  The OLS does not have information on which to base an estimate of potential cost increases for these local governments.

 

Section:

State Government

Analyst:

Kimberly M. Clemmensen

Senior Fiscal Analyst

Approved:

Frank W. Haines III

Legislative Budget and Finance Officer

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).