LEGISLATIVE FISCAL ESTIMATE

ASSEMBLY COMMITTEE SUBSTITUTE FOR

ASSEMBLY, No. 1825

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: MARCH 4, 2025

 

 

SUMMARY

 

Synopsis:

Establishes certain guidelines for health insurance carriers concerning step therapy protocols.

Type of Impact:

Annual State expenditure and revenue increase; annual local expenditure increase.

Agencies Affected:

Division of Pensions and Benefits-Department of the Treasury; Department of Human Services; local entities.

 

 

Office of Legislative Services Estimate

Fiscal Impact

  Annual 

 

State Expenditure Increase

Indeterminate

 

Local Expenditure Increase

Indeterminate

 

State Revenue Increase

Indeterminate

 

 

 

 

·         The Office of Legislative Services (OLS) concludes that this bill would increase annual State expenditures for prescription drugs under the New Jersey State Health Benefits Program, the School Employees’ Health Benefits Program, and the NJ FamilyCare program (the State’s Medicaid and Children’s Health Insurance Program) by an indeterminate amount.  Generally, the expenditure increase would result as the bill would regulate the use of prescription drug step therapy protocols for patients covered under these plans and ease the overriding of the protocols in favor of drugs selected by health care providers.

·         The bill would result in indeterminate increases in annual expenditures for local government employers that provide employee coverage through the State Health Benefits Program or the School Employees’ Health Benefits Program.

·         There is the potential for annual cost savings to the State Health Benefits Program, School Employees’ Health Benefits Program, and NJ FamilyCare program if the bill’s regulations were to result in positive health outcomes that reduce future treatment costs.

·         Higher NJ FamilyCare expenditures would increase annual State revenue by an indeterminate amount from federal Medicaid and Children’s Health Insurance Program matching funds. 

 

 

BILL DESCRIPTION

 

      This bill requires health insurance carriers and utilization review organizations to meet certain guidelines in the administration and review of step therapy protocols.  These protocols establish the specific sequence in which prescription drugs for a specified medical condition, and medically appropriate for a particular patient, are covered by a health benefits plan.

      In addition, the bill provides guidelines for the review and approval of step therapy exceptions, which means the overriding of a step therapy protocol in favor of immediate coverage of the health care provider’s selected prescription drug.

      Health benefits plan under the bill includes the New Jersey State Health Benefits Program, the School Employees’ Health Benefits Program, and Medicaid.

      The Department of Human Services is required to apply for any State plan amendments or waivers necessary to implement the provisions of the bill and secure federal financial participation for State Medicaid expenditures under the federal Medicaid program.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS concludes that this bill would increase annual State expenditures for prescription drugs under the New Jersey State Health Benefits Program, the School Employees’ Health Benefits Program, and the NJ FamilyCare program by an indeterminate amount.  Generally, the expenditure increase would result as the bill would regulate the use of prescription drug step therapy protocols and ease the overriding of the protocols in favor of drugs selected by health care providers.  Additionally, the fiscal impact of the bill would be affected by several unknown variables, such as:  the number of enrollees currently using step therapy drugs, the cost differentials between first line drugs and second line drugs; and the current impact of step therapy protocols, by drug, on expenditures.  The OLS notes that the Department of Human Services may also incur additional annual costs related to its administrative responsibilities under the bill.

      The bill would result in indeterminate increases in annual expenditures for local government employers that provide employee coverage through the State Health Benefits Program or the School Employees’ Health Benefits Program.

      Increased NJ FamilyCare program expenditures would result in an annual, indeterminate increase in State revenue in the form of federal Medicaid and Children’s Health Insurance Program matching funds.  For reference, on average, the federal government provides $0.64 in matching funds for every $1.00 in qualifying State NJ FamilyCare expenditures.

      There is the potential for annual cost savings to the State Health Benefits Program, the School Employees’ Health Benefits Program, and the NJ FamilyCare program if the bill’s regulations were to result in positive health outcomes that reduce future treatment costs.

      The OLS notes that health benefits plans purchased in the commercial market are exempt under the bill, so local government employers that procure these plans for their employees would not be affected by the bill’s provisions.

 

 

Sections:

Commerce, Labor and Industry Section & Human Services Section

Analysts:

John Gaudioso

Assistant Fiscal Analyst

 

Sarah Schmidt

Lead Research Analyst

Approved:

Thomas Koenig

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.).