LEGISLATIVE FISCAL ESTIMATE
[Third Reprint]
SENATE, No. 1192
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: JUNE 4, 2025
SUMMARY
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Synopsis: |
Requires prescription drug coverage for serious mental illness without prior authorization or utilization management, including step therapy. |
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Type of Impact: |
Annual State and local expenditure increases; annual State revenue increases. |
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Agencies Affected: |
Department of Human Services; State Health Benefits Program; School Employees’ Health Benefits Program, local governments, and school districts. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
Annual |
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State Expenditure Increase |
Indeterminate |
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State Revenue Increase |
Indeterminate |
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Local Government Expenditure Increase |
Indeterminate |
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School District Expenditure Increase |
Indeterminate |
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· 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 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.
· 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, 18 years of age or older, without the imposition of any prior authorization or other utilization management requirements, including step therapy. Under the bill, the prescriber is required to be: (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, 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 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 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, 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 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.
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Section: |
Human Services |
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Analyst: |
Principal Research Analyst |
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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.).