LEGISLATIVE FISCAL ESTIMATE

[Second Reprint]

ASSEMBLY, No. 4838

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: DECEMBER 26, 2025

 

 

SUMMARY

 

Synopsis:

Requires prescription drug coverage for serious mental illness without prior authorization or utilization management, including step therapy.

Type of Impact:

Annual State expenditure and revenue increases; annual expenditure increases for certain local governments and school districts.

Agencies Affected:

Department of Human Services; local governments; school districts.

 

 

Office of Legislative Services Estimate

Fiscal Impact

  Annual 

 

State Expenditure Increase

Indeterminate

 

State Revenue Increase

Indeterminate

 

Local Government and School District Expenditure Increase

Indeterminate

 

 

 

 

·       The Office of Legislative Services (OLS) concludes that this bill would increase annual State expenditures for prescription drugs under the NJ FamilyCare program (the State’s Medicaid and Children’s Health Insurance Program) by an indeterminate amount.  Higher NJ FamilyCare expenditures would increase annual State revenue by an indeterminate amount from federal Medicaid and Children’s Health Insurance Program matching funds.

·       These expenditure increases would be due to the bill’s prohibition on utilization management requirements for the coverage of prescription drugs prescribed by certain providers to covered persons who are 18 years of age or older for serious mental illness.  Instead, these providers would be allowed to select drugs for patients with these conditions without any restrictions.  

·       The OLS notes that local governments and school districts that purchase health insurance in the private market would also experience an annual indeterminate expenditure increase.

·       There is a potential for annual cost savings if the bill’s provisions were to cause positive health outcomes that reduce future treatment costs.

BILL DESCRIPTION

 

      This bill requires health insurance carriers and the NJ FamilyCare Program to cover a prescription drug prescribed for serious mental illness to covered persons, 18 years of age or older, without the imposition of any prior authorization or other utilization management requirements, including step therapy.   Under the bill, these provisions do not apply to any entity contracted to administer health benefits in connection with the State Health Benefits Program or School Employees’ Health Benefits Program.  The bill requires that the prescriber is: (1) a psychiatrist; or (2) an obstetrician or gynecologist, during the postpartum period.  However, if the covered person has been stable and appropriately treated for a serious mental illness using a drug prescribed by these types of providers for a period of six months, another prescriber may continue prescribing that drug without prior authorization or utilization management requirements.

 

 

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 NJ FamilyCare program.  Local governments and school districts that purchase insurance in the private market would also experience an annual expenditure increase.  These expenditure increases would be due to the bill’s prohibition on utilization management requirements for the coverage of prescription drugs prescribed by certain providers to covered persons who are 18 years of age or older for serious mental illness.  Instead, these providers would be allowed to select drugs for patients with these conditions without any restrictions.  The OLS notes that there is a potential for annual cost savings if the bill’s provisions were to cause positive health outcomes that reduce future treatment costs.

      Types of utilization management requirements that are intended to contain costs include: prior authorization, which requires a health care provider to obtain approval from the program before coverage of a prescription drug is allowed; step therapy, which requires less expensive medications to be prescribed before approving more expensive medications; and quantity limits, which place restrictions on the amount of a specific medication an enrollee can be prescribed over a certain time period.   

      The fiscal impact of the bill would be affected by several unknown variables, such as: the number of program enrollees, 18 years of age or older, currently using prescription drugs for serious mental illness; the number of program enrollees denied coverage of prescription drugs for serious mental illness due to existing utilization management requirements; and the types of utilization management requirements that are imposed for serious mental illness, by drug type. 

      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.

Section:

Human Services

Analyst:

Sarah M. Schmidt

Principal 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.).