OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

sSB-1371

AN ACT ESTABLISHING THE CONNECTICUT SAVES HEALTH CARE PROGRAM.

OFA Fiscal Note

State Impact: See below

Municipal Impact: See below

Explanation

This bill makes various changes to the health care system in Connecticut. Due to various internal incongruities, a determination of the fiscal impact of the bill is not possible.

Sections 1 through 8 of the bill establish the Connecticut Saves Health Care Commission to implement and administer the Connecticut Saves Health Care (CSHC) program. The commission must arrange and procure health insurance policies for enrollees in CSHC, negotiate and contract with insurers, determine benefits and cost sharing, reimburse providers, and credential providers. Although the bill allows the commission to delegate the reimbursement, credentialing and certain disease management functions to third party administrators, the bill does not provide the commission with staff to perform any the of commission's other responsibilities. As the bill does not place the commission within any state agency for administrative purposes, it is unclear how the commission, which is composed of 12 appointed (and apparently uncompensated) members, can carry out the responsibilities detailed in the bill.

This commission must establish arrangements with the Department of Revenue Services to have employer and individual contributions to pay for benefits sent automatically to the department, which will then turn the contributions over to the Comptroller. Depending upon the collection mechanisms, these agencies would incur administrative costs. It is unclear what the Comptroller's subsequent responsibilities are, as the bill requires the commission to make payments to reimburse health care providers.

The health insurance policies developed by the commission must be actuarially equivalent to the average employer sponsored insurance policy in New England. The bill allows the commission to subsidize reinsurance and establish risk corridors to lower the cost of premiums. As the bill does not specify the amount appropriated to the commission for this purpose, the fiscal impact cannot be known.

Section 8 of the bill requires that, on or after July 1, 2008, any eligible individual shall be enrolled in CSHC by default when certain actions take place. Eligible individuals are any state resident under the age of 65. There are approximately 2. 95 million such individuals in Connecticut. The bill requires the commission to procure insurance policies for enrollees in the program. Assuming that health insurance policies procured under the terms of the bill would cost between $4,000 and $6,000 annually, the total cost of the policies would be between $11,800,000,000 and $17,700,000,000. As the premiums and cost sharing is to be determined by the commission, the net state cost of this provision is not known.

Under the bill, currently insured individuals would be enrolled in this program. This would include all state and municipal employees under the age of 65. It is unclear how this enrollment would comply with current collective bargaining agreements. The bill also does not exempt individuals currently eligible for Medicaid benefits from this default enrollment. As federal law requires that Medicaid be the payer of last resort, CSHC would thus pick up the cost of services for all HUSKY A and B members, as well as those Medicaid fee-for-service enrollees under the age of 65. The state would therefore lose the 50% federal match (65% for HUSKY B) for the cost of these services. Medicaid may then serve as a wrap around policy for services available under the Medicaid program but which are not included in the CSHC plan.

Section 9 of the bill requires the Department of Social Services (DSS) to screen every eligible individual for Medicaid eligibility. Given that approximately 2. 95 million residents are eligible for this program, DSS would incur considerable administrative staff costs for this screening.

This section also requires each state agency providing information required in the bill to train and monitor all staff and contractors who have access to the information. This will result in increased costs to all such agencies. The extent of these costs will be dependent upon the level of training and monitoring necessary to meet the privacy and security requirements.

This section also requires DSS to develop and operate the information infrastructure required by the bill, within available appropriations. The bill provides no such appropriations.

Section 10 implements several expansions of eligibility for the HUSKY program. Given the default enrollment of HUSKY clients in the CSHC plan implemented in section 8 of this bill, the implications of these expansions are not clear.

Section 11 requires the Department of Public Health to expand school based health centers (SBHC's) to ensure access to all public school children, on or before 9/1/09. These clinics must provide physical, dental and behavioral health care. A significant cost will be incurred by the DPH to comply with this mandate.

While Section 20 appropriates an amount (unspecified) to DPH in FY 08 for this purpose, no funding has been included within the Governor's recommended FY 08 budget to expand SBHC's1.

SBHC services are currently available in 72 schools within Connecticut. Establishing a comprehensive SBHC, with dental care, in each of the remaining 1,008 public schools would result in a state expense of approximately $356,000,000, based upon a 75%2 state contribution and operation on a school-year basis. This would rise to $391,000,000 if services were available throughout the year3. In practice, however, costs would be mitigated as many school districts are not able to accommodate SBHC's within their present building capacity. Future indeterminate capital costs would be incurred to provide needed space.

An additional estimated state cost of $17,400,000 would be incurred to enhance service delivery at existing sites to the comprehensive SBHC-model standard of care. Further significant costs would be associated with supporting additional regulatory, program, fiscal and administrative staff required to implement the program expansion.

To the extent that increased services lead to enhanced billings to the HUSKY programs, DSS will experience increased utilization and corresponding increases in costs. However, these costs would be partially mitigated to extent that the use of higher cost medical care is averted. Studies have shown that use of SBHC services leads to reduced emergency department visits, and reduced Medicaid expenditures related to inpatient care and pharmaceutical use.

Section 12 requires the Department of Public Health to establish sufficient primary care clinics to ensure access to all state residents. The primary care clinics must be licensed and provide physical and behavioral health care, including dental care, and urgent but non-emergency care. A significant cost will be incurred by the DPH to comply with this mandate.

While Section 21 appropriates an amount (unspecified) to DPH in FY 08 for this purpose, no primary care clinic expansion funding has been included within the Governor's recommended FY 08 budget. However, $25. 8 million in bond funds were allocated in October 2006 to expand medical and dental facilities at the state's thirteen Community Health Centers (CHC's). 4

Of those health care facilities regulated by the department, CHC's5 provide services most closely aligned with those described in Section 12(a). The average annual cost of operating a CHC is estimated at $8,000,000. One medically underserved area6 in Connecticut is presently without federally qualified health center (FQHC) or FQHC look-alike services. Establishing a new CHC would require an indeterminate significant capital investment. An additional significant cost would be incurred by the department should it provide an operating subsidy comparable to that historically provided to other CHC's7

Section 12(b) requires the DPH to arrange for or offer incentives to certain health care providers serving primary care clinics. Associated costs would depend upon the types of incentives offered and the number of participating providers, which cannot be determined in advance. For comparison purposes, the DPH currently oversees a State Loan Repayment Program, under which awards of up to $30,000 are made to primary care providers who commit to provide full-time clinical services for a period of two years. The program currently has 21 participants, with available funding for 7 additional professionals.

To the extent that increased services lead to enhanced billings to the medical assistance programs operated by the Department of Social Services, the department will experience increased utilization and corresponding increases in costs. However, these costs would be partially mitigated to extent that the use of higher cost medical care is averted due to greater utilization of preventative health care.

Section 13 requires the Department of Public Health to adopt regulations to implement Sections 11 and 12 and establish requirements for primary care clinics. The agency can do within its normally budgeted resources.

Section 14 requires the Department of Public Health to publish “Plans for a Healthy Connecticut” by 1/1/08 and biennially thereafter. The department will incur an FY 08 cost of $147,000 to support the salaries of one Principal Health Care Analyst and one Lead Planning Analyst needed to compile data needed for this report, as well as associated other expenses and equipment Ongoing costs of $142,500 in FY 09 and subsequent years would be associated with this staffing expansion.

Additional fringe benefits costs of $48,160 in FY 08 and $84,280 in FY 09 would also be incurred. 8

Section 15 creates a Blue Ribbon Commission to study the new CSHC program. The committee must report its finding to the General Assembly by January 30, 2008. The staff of the legislative Insurance and Real Estate committee shall serve as administrative staff. The legislature and any department whose personnel may be appointed to the Commission will incur minimal administrative expenses.

Sections 16 through 21 make various unspecified appropriations. As no funds are actually appropriated, these sections have no fiscal impact.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

1 $7,709,364 is recommended for grants to existing school based health centers, located in about 20 communities. An additional approximate $290,000 in federal funding is provided to SBHCs annually.

2 As recommended by the SBCH Ad Hoc Committee to Improve Health Care Access. Of the 19,881 children who utilized SBHC services in FY 05, 44% were enrolled in Medicaid, 29% had no health insurance, 26% were privately insured and 1% had unkown insured status. SBHC's have experienced significant challenges related to billing third party insurers, including Medicaid.

3 Per the Report of the SBHC Ad Hoc Committee (December 2006), the cost of operating a comprehensive SBHC, including dental care, on a school year basis is $471,603; this rises to $517,727 on a full-year basis.

4 CHC's provide services at over 80 locations across the state.

5 Licensed as outpatient clinics.

6 As defined by the federal government for purposes of determining eligibility to receive grants under Section 330 of the Public Health Service Act. The community is Danbury.

7 In FY 07, the DPH provided the thirteen CHC's operating subsidies ranging from $102,974 to $925,829 (average $387,055).

8 The fringe benefit costs for state employees are budgeted centrally in the Miscellaneous Accounts administered by the Comptroller. The estimated first year fringe benefit rate for a new employee as a percentage of average salary is 25. 8%, effective July 1, 2006. The first year fringe benefit costs for new positions do not include pension costs. The state's pension contribution is based upon the prior year's certification by the actuary for the State Employees Retirement System (SERS). The SERS 2006-07 fringe benefit rate is 34. 4%, which when combined with the non pension fringe benefit rate totals 60. 2%.