SB 0754 - Fiscal Note

Fiscal Note - SB 0754 - Requires HMOs to cover the costs of second opinions

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 2566-11

BILL NO. HCS for SS for SCS for SB 754

SUBJECT: Health Care: Medical Procedures and Personnel

TYPE: Original

DATE: April 27, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	$0 to $144,456	$0 to $144,456	$0 to $144,456
Insurance Dedicated	$1,700 to $5,100	$0	$0
Total Estimated Net Effect on All State Funds	$1,700 to $149,556	$0 to $144,456	$0 to $144,456

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 5 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials from the Office of Administration, the Department of Public Safety - Missouri State Highway Patrol, the Department of Transportation, and the Department of Conservation assume this proposal would not fiscally impact their agencies.

Department of Insurance (INS) officials state there are currently 2 health service corporations and 32 HMOs offering policies affected by this proposal. INS states that each insurer may submit one to three policy form amendments (individual; employer; group) to comply with the provisions of this proposal. INS states that policy form filings are to be accompanied by a $50 filing fee. Based on the estimated range of new policy filings, $1,700 to $5,100 in new revenue would be generated for the Insurance Dedicated Fund in the first fiscal year only. INS anticipates that current appropriations and staff would be able to absorb the work duties in this proposal. However, INS states that if additional proposals are approved during the legislative session, INS may need to request an increase in appropriations due to the combined effect of multiple proposals.

Officials from the Missouri Consolidated Health Care Plan (HCP) state the proposal would allow HCP members to seek a second opinion under any circumstances thus allowing second opinions for any diagnosis. HCP states that traditionally the second opinion option would be used for surgical procedures or medical procedures such as a MRI. HCP states the proposal would also make it very difficult for the primary care physician to coordinate the overall care of a patient. HCP states there is a significant potential for increasing physician and diagnostic cost but it is very difficult to predict an absolute amount.

The Department of Social Services - Division of Medical Services (DMS) officials assume no additional costs for the second opinion language in this proposal. Current Medicaid managed care contracts stipulate that members have a right to second opinions, and health plans would have policies and procedures for rendering second opinions both in-plan and out-of-plan when requested by a member. DMS states that Section 208.152, RSMo, states that certain elective surgical procedures require a second medical opinion be provided prior to surgery. A third surgical opinion, provided by a third provider, would be allowed if the second opinion fails to confirm the primary recommendation that there is a medical need for the specific surgical operation, and if the member desires the third opinion.

DMS states the Missouri's Medicaid contracts with managed care plans currently require the plans to pay 90% of clean claims to their providers within thirty days of receipt of claims. DMS states this is mandated by the federal Balanced Budget Act. DMS assumes that administrative costs built in to the capitation payments bid by the plans would increase if plans are required to pay 100% of clean claims within forty-five days to their providers. The cost impact to DMS would be incurred when MC+ contracts are rebid. DMS states that the fifteen plans with MC+ contracts average 9% administrative cost built in to the capitation payments. DMS assumes that any costs incurred by managed care contractors because of mandated Federal or State laws would have an effect on the administrative costs included in the future bids. DMS states while that it is not possible to predict capitation payment amounts that would be bid in future contracts, they conservatively estimate a 1% increase in capitation payments due to increased administrative cost. DMS estimates that the fiscal impact of this proposal would be $1,417,153 annually.

Oversight assumes there would be no fiscal impact due to DMS's contract requiring that 90% of clean claims be paid within thirty days and 99% within ninety days. DMS was not able to provide any information regarding how many clean claims were paid within forty-five days, sixty days, or ninety days. Oversight assumes that all clean claims would be paid within forty-five days within the current contract bid amounts.

Officials from the Department of Mental Health (DMH) state that in FY97, DMH received $1,852,000 in insurance claims. DMH does not maintain statistics for the time that elapses between claim and receipt of insurance money. DMH assumes that this proposal would either (1) allow DMH to receive insurance claims in a more timely manner or (2) increase revenues because of interest. DMH estimates that 80% of insurance claims received are received after thirty days. Of this 80%, DMH assumes that claims are received throughout the year (some at one month, some at twelve months or an average of 6.5 months). Therefore, DMH could receive up to $144,456 in additional revenues ($1,852,000 x 80% x 18% x 6.5/12) which would be deposited into the General Revenue Fund.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
GENERAL REVENUE FUND
Income - Department of Mental Health
Interest received on late payments	$0 to	$0 to	$0 to
	$144,456	$144,456	$144,456
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	$0 to	$0 to	$0 to
	$144,456	$144,456	$144,456
INSURANCE DEDICATED FUND
Income - Department of Insurance
Filings fees	$1,700 to $5,100	$0	$0
ESTIMATED NET EFFECT ON
INSURANCE DEDICATED FUND	$1,700 to $5,100	$0	$0
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business

Small businesses would be expected to be fiscally impacted to the extent that they may incur increased costs for medical services not covered under their current policies due to the requirements of this proposal.

DESCRIPTION

This proposal would require health services corporations and health maintenance organizations to provide coverage for second opinions. If another primary physician or specialist capable of providing a second opinion is not available with the HMO's network, the HMO would be required to arrange a referral at no greater cost to the patient than if the benefit were obtained

from a participating doctor. This proposal would also prohibit physicians from performing more than three major surgeries within a twenty-four hour period. Rural physicians would be exempt from this restriction if emergency surgery is required and no other surgeon is available.

This proposal would also require insurers and nonprofit health service plans to pay interest on any health insurance claim that is not paid within 30 days unless the insurer or plan sends a notice within 45 days that it refuses to pay the claim or that additional information is necessary. The interest and notice provisions would not apply if there is a legitimate need for additional

information. The proposal would also include similar provisions for health maintenance organizations that fail to reimburse a provider within 45 days of receiving a claim.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Department of Insurance

Missouri Consolidated Health Care Plan

Department of Social Services

Department of Conservation

Office of Administration

SOURCES OF INFORMATION

Department of Transportation

Department of Public Safety

Missouri State Highway Patrol

Jeanne Jarrett, CPA

Director

April 27, 1998