LEGISLATIVE FISCAL ESTIMATE

[Second Reprint]

SENATE, No. 1192

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: MARCH 24, 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 and local expenditure increases; annual State revenue increases.

Agencies Affected:

Department of Human Services; State Health Benefits Program; School Employees’ Health Benefits Program, local governments, and school districts.

 

 

Office of Legislative Services Estimate

Fiscal Impact

  Annual 

 

State Expenditure Increase

Indeterminate

 

State Revenue Increase

Indeterminate

 

Local Government Expenditure Increase

Indeterminate

 

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), the State Health Benefits Program (SHBP), and the School Employees’ Health Benefits Program (SEHBP) by an indeterminate amount.  Annual expenditures for local governments and school districts would also increase by an indeterminate amount annually.

·         These expenditure increases would be due to the bill’s prohibition on utilization management requirements for the coverage of prescription drugs for serious mental illness.  Instead, health care providers would be allowed to select drugs for patients with these conditions without any restrictions.

·         There is a potential for annual cost savings to public sector employers if the bill’s provisions were to cause 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, the State Health Benefits Program, the School Employees' Health Benefits Program, and the NJ FamilyCare Program to cover a prescription drug prescribed for serious mental illness to covered persons without the imposition of any prior authorization or other utilization management requirements, including step therapy.

 

 

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, the SHBP, and the SEHBP by an indeterminate amount.  Annual expenditures for local governments and school districts would also increase by an indeterminate amount annually.  These expenditure increases would be due to the bill’s prohibition on utilization management requirements for the coverage of prescription drugs for serious mental illness.  Instead, health care 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 to public sector employers 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 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 imposed under each program for serious mental illness, by drug type. 

      The OLS notes that in response to FY 2024 and FY 2025 Interdepartmental Accounts Discussion Points, the Department of the Treasury indicated that the SHBP and SEHBP saved $77.1 million in Plan Year 2022 from prior authorization services, that step therapy protocols through the pharmacy benefit program reduced costs by $19.8 million in that plan year, and that generic drug substitutions save these programs about $29.0 million on average each year.

      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.

 

 

Sections:

Human Services Section & State Government Section

Analysts:

Sarah Schmidt

Principal Research Analyst

 

Anna Harris

Associate Fiscal 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.).