COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 0363-01
Bill No.: SB 121
Subject: Health Care; Health Care Professionals; Insurance - Medical; Medical Procedures and Personnel; Physicians
Type: Original
Date: January 23, 2001
FISCAL SUMMARY
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| All funds | $0 to ($15,105,067) | $0 to ($19,938,688) | $0 to ($21,932,557) |
| General Revenue* | (Unknown) | (Unknown) | (Unknown) |
| Insurance Dedicated | $1,450 | $0 | $0 |
| Total Estimated
Net Effect on All State Funds* |
(UNKNOWN) | (UNKNOWN) | (UNKNOWN) |
*Could exceed $20 million annually.
Net Effect on All Federal Funds* *Revenues and expenditures are expected to exceed $100,000 annually and would net to $0. Numbers within parentheses: ( ) indicate costs or losses. This fiscal note contains 5 pages. ASSUMPTION Officials from the Department of Transportation, the Department of Conservation, and the
Department of Public Safety - Missouri State Highway Patrol assume this proposal would not
fiscally impact their agencies. Officials from the Department of Social Services - Division of Medical Services (DMS) state
the proposal affects them because DMS administers a managed care program which contracts
with health maintenance organizations (HMO) for the purpose of providing health care services
through capitated rates. These HMOs would be subject to the regulations in this proposal. DMS states the proposal mandates that plans cannot prohibit or limit a health care provider
willing to accept the plan's operating terms and conditions, its schedule of fees, covered
expenses, utilization regulations and quality standards, from the opportunity to participate in that
plan. DMS states this is essentially "any willing provider" language. "Any willing provider"
language reduces a plan's ability to negotiate aggressive rates based on guaranteed volume
because the potential for guaranteed volume is reduced when the number of providers cannot be strictly controlled. This affects the entity paying the plans to operate the program which in the
case of the managed care program is DMS. DMS estimates there would be fiscal impact to DMS because of this proposal. The proposal
affects the shape of the plans' networks and also reduces the ability of the plans to negotiate
terms. DMS states it is not possible to estimate the amount of the impact at this time. The cost
impact would be incurred when bids are made by the plans because they would include the
increased cost in their bid. Capitation payments to managed care plans in FY2000 were over
$386 million. For the sake of perspective, an increase of just one percent in the cap rate would
result in an additional annual cost of $3.9 million. Missouri Consolidated Health Care Plan (HCP) officials state that competition fuels the
contract negotiations between a physician and a medical plan. Typically, providers give
discounts in exchange for patient volume. If everyone participates and the volume is no longer
guaranteed they may no longer participate and the prices would start to escalate. This would
result in significant cost to the plans that would recoup these costs through increased premiums.
A couple of years ago, several studies were done on this issue with a wide range of impacts. A
study by the Barents Group, LLC of KPMG Peat Marwick, LLP for the Alliance for Managed
Care states the impact to be about 15 percent. Another study done by Atkinson and Company
estimates the impact to be between 9.1 and 28.7 percent. In 2001 managed care is expected to cost a total of $271,759,520 for the state members and $35,111,520 for the Public Entities. Currently, the state contributes approximately 72% towards
ASSUMPTION (continued) the state member's premium. Therefore, the fiscal impact for the first year could be $18,126,080
for the state and $3,511,152 for the Public Entities. Oversight assumes a ten percent increase per year. Department of Insurance (INS) officials state that health insurers and HMOs would be required
to amend policy forms in order to comply with this proposal. INS states that they anticipate that
current appropriations and staff would be able to absorb the work for implementation of this
proposal. However, 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. INS states there are 29 HMOs may be required to file amendments to their policy form to comply
with this proposal resulting in revenue of $1,450. INS states that if multiple proposals pass
during the legislative session which require policy form amendments to be filed the insurers
would probably file one amendment for all required mandates. (10 Mo.) *Expected to exceed $100,000 annually. (10 Mo.) FISCAL IMPACT - Small Business Small business practices would expect to be fiscally impacted to the extent they would be able to
participate in more health plans. DESCRIPTION This proposal would require a health carrier to allow any willing provider to participate in its
network if that person satisfies all of the selection standards and shall be known as the "Patient
Freedom Act of 2001". Currently, Section 354.606, RSMo, deals with contracts between health
carriers and health care professionals. This proposal would provide that health carriers may not
develop selection criteria in such a way that it would deny a health care professional the
opportunity to become a participating provider if that professional meets all of the selection
criteria and would be willing to abide by all other terms and conditions. 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 Transportation Department of Social Services Missouri Consolidated Health Care Plan Department of Insurance Department of Conservation Department of Public Safety Missouri State Highway Patrol Jeanne Jarrett, CPA Director January 23, 2001
FUND AFFECTED
FY 2002
FY 2003
FY 2004 Federal*
$0
$0
$0 Total Estimated
$0
$0
$0
FUND AFFECTED
FY 2002
FY 2003
FY 2004 Local Government
$0 TO ($2,925,960)
$0 to ($3,862,267)
$0 to ($4,248,494)
FISCAL IMPACT - State Government
FY 2002
FY 2003
FY 2004
ALL FUNDS
Cost - All Funds
Increased state contributions
$0 to
($15,105,067)
$0 to
($19,938,688)
$0 to
($21,932,557)
ESTIMATED NET EFFECT ON ALL
FUNDS
$0 TO
($15,105,067)
$0 TO
($19,938,688)
$0 TO
($21,932,557)
GENERAL REVENUE FUND
Cost - Department of Social Services
Medical assistance payments*
(Unknown)
(Unknown)
(Unknown)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND*
(UNKNOWN)
(UNKNOWN)
(UNKNOWN)
*Expected to exceed $100,000 annually.
INSURANCE DEDICATED FUND
Income - Department of Insurance
Form filing fees
$1,450
$0
$0
ESTIMATED NET EFFECT ON
INSURANCE DEDICATED FUND
$1,450
$0
$0
FEDERAL FUNDS
Income - Department of Social Services
Medicaid reimbursements*
Unknown
Unknown
Unknown
Cost - Department of Social Services
Medical assistance payments*
(Unknown)
(Unknown)
(Unknown)
ESTIMATED NET EFFECT ON
FEDERAL FUNDS*
$0
$0
$0
FISCAL IMPACT - Local Government
FY 2002
FY 2003
FY 2004
POLITICAL SUBDIVISIONS
Cost - Political Subdivisions
Increased local contributions
$0 to
($2,925,960)
$0 to
($3,862,267)
$0 to
($4,248,494)
ESTIMATED NET EFFECT ON
POLITICAL SUBDIVISIONS
$0 TO
($2,925,960)
$0 TO
($3,862,267)
$0 TO
($4,248,494)