ASSEMBLY BUDGET COMMITTEE
STATEMENT TO
ASSEMBLY, No. 5603
STATE OF NEW JERSEY
DATED: JUNE 17, 2019
The Assembly Budget Committee reports favorably Assembly Bill No. 5603.
Assembly Bill No. 5603 increases the HMO assessment from two percent to three percent on net written premiums of health maintenance organizations, beginning in Fiscal Year 2020. This assessment is statutorily allocated to the Health Care Subsidy Fund for the purpose of providing charity care payments to hospitals in accordance with the formula used for the distribution of charity care subsidies.
FISCAL NOTE:
The Office of Legislative Services estimates that the bill will grow annual HMO premiums assessment revenue by about $100 million starting in FY 2020. However, because of the mechanics of the Executive’s federal revenue maximization initiative, the estimated net effect of the bill on the State budget will be an annual increase of approximately $66 million in federal Medicaid matching fund revenue. This is so because the State’s Medicaid managed care organizations are the primary payers of the HMO assessment. After the assessment increases, the reimbursement rates the State pays the Medicaid managed care organizations will also increase, resulting in the State ultimately paying the higher assessment to itself with the Medicaid managed care organizations serving as conduits. The higher State Medicaid expenditures, in turn, will qualify for federal Medicaid matching funds at a rate of 66 percent. The additional $66 million in federal matching funds reflects the anticipated net impact of the bill on State finances.
Disaggregating the components of the projected $66 million annual net State revenue increase thus yields an annual State expenditure increase of $100 million and an annual State revenue gain of $166 million, of which $100 million reflects the amount the State pays to itself with the Medicaid managed care organizations serving as conduits and federal matching fund revenue accounting for the remaining $66 million.