LEGISLATIVE FISCAL ESTIMATE

SENATE, No. 3533

STATE OF NEW JERSEY

221st LEGISLATURE

DATED: NOVEMBER 25, 2024

SUMMARY

Synopsis:	Establishes certain guidelines for health insurance carriers concerning step therapy protocols.
Type of Impact:	Annual State expenditure and revenue increase.
Agencies Affected:	Department of Human Services; Department of Banking and Insurance.

Office of Legislative Services Estimate
Fiscal Impact	Annual
State 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 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 by Medicaid managed care organizations and ease the overriding of the protocols in favor of drugs selected by health care providers.

· There is the potential for annual cost savings to the NJ FamilyCare program if the bill’s regulations 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 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.

      Carriers and utilization review organization are to report to the Department of Banking and Insurance certain information concerning the number and nature of step therapy exceptions requested, appealed, denied, and granted.

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 by an indeterminate amount.  Generally, the expenditure increase would result as the bill would regulate the use of prescription drug step therapy protocols by Medicaid managed care organizations 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 Banking and Insurance may also incur additional annual costs related to its administrative responsibilities under the bill.

      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 NJ FamilyCare program if the bill’s regulations were to cause positive health outcomes that reduce future treatment costs.

      The bill does not apply to the State Health Benefits Program or the School Employees’ Health Benefits Program.  As a result, the bill would not affect annual expenditures for employee health benefits by the State, local governments, or school districts participating in these plans.  However, local governments and school districts that do not participate in these plans would potentially be exposed to an indeterminate annual cost increase due to the bill, all other factors being equal.

Sections:	Human Services Section & Commerce, Labor and Industry Section
Analysts:	Sarah Schmidt Lead Research Analyst John Gaudioso Assistant 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.).