SENATE 2·07:

AN ACT TO PROMOTE COST CONTAINMENT, TRANSI'ARENCY ANI) EFFICIENCY IN THE PROVISION OF QUALITY HEALTH INSURANCE FOR INIJIVlDlJALS AND SMALL nUSINF:SSES

SPONSORS:

Senator Panagiotakos

PROPOSED LEGISLATION:

• Directs the Division of Health Care Finance and Policy to conduct a cost analysis of all mandated benefits at least once every 4 years. In conjunction with that analysis, the division. in consultation with the Department of Public lIealth and the UMass Medical School, will do a clinical review of all mandated benefits to ensure on-going clinical efficacy. The division may tile legislation as necessary to amend or repeal mandates that no longer meet this standard.

• Directs the commissioner of insurance. in consultation with the secretary of administration and finance and the secretary of health and human services. to apply for and accept any federal financing available in the Patient Protection and Affordable Care Act to establish or supplement a state sponsored high-risk pool. The commissioner must tile a copy of the application with the appropriate legislative committees.

• Establishes a High-Risk Reinsurance Trust Fund for the purposes of reimbursing carriers for some high-cost claims. The Trust Fund is funded by assessments on carriers consistent with the Health Safety Net Fund. and any federal dollars available as a result of the application previously described. The commissioner of insurance will oversee the Fund.

• Requires health care providers to report annually on standard quality information as determined by the department of public health.

• Requires the Division of Health Care Finance and Policy to collect the information necessary to annually report the adjusted total medical expenses by provider groups, the relative prices paid to provider groups, and hospital inpatient and outpatient expenses, all according to a uniform methodology developed by the Division. This information will be released publicly in conjunction with the annual hearing on health care cost trends. Would apply to care funded by both private and public payers, and the division shall coordinate with eMS to include Medicare costs into the calculations.

• Provides information sharing with the Connector Authority in order to determine eligibility for individual coverage beginning in January I, 2012.

• Amends the "Unfair Methods of Competition and Unfair and Deceptive Acts and Practices in the Business of Insurance" statute by prohibiting carriers from entering into a contract that

establishes a price to be paid to a provider based 011 a price, or an average price, paid to any other provider. Also prohibits inappropriate market practices that seek to separate individual employees from employer ... ponsorcd group coverage.

• Amends the definition of "eligible individual" for the purposes of purchasing individual coverage to prohibit individuals who arc seeking individual coverage to lower costs of employer sponsored group coverage fix which they are eligible.

• Inserts definitions into chapter 176J of "direct premiums earned", "direct claims incurred", and "medical loss ratio" lor usc ill the medical loss ratio guarantee program described below.

• Requires all carriers to establish an age rating factor for coverage in the merged market that applies the rate adjustment on a year-to-year basis.

• Authorizes the commissioner of insurance to conduct an examination of rating factors used in small group plans and adopt changes by regulation on an annual basis. Also authorizes the commissioner to biennially set a limit on the effect of rating factors on the final premium rate charged to individuals or small groups, so long as the limit does not result in an increase to the base premium rate in excess of 1%.

• Establishes a phased-in annual open enrollment tor individuals purchasing individual coverage.

Exemptions are provided under federal HlPPA law and for those who are granted a waiver by the Office of Patient Protection. Requires the Office of Patient Protection to administer a waiver program tor individuals seeking coverage outside of the mandatory open enrollment dates.

• Authorizes carriers to discontinue products that fall below certain enrollment levels.

Commissioner of Insurance oversees the process.

• Establishes a new prior approval process for all plans offered to individuals and small groups under chapter I 76J, effective from 20 10 to 2012. Carriers must file changes to plans at least 90 days before their proposed effective date. The carrier must submit comprehensive information to the division of insurance on carrier administrative costs and ajustification for increases in these costs. If a carrier submits rates that increase by an amount exceeding 150% of medical inflation, the Commissioner shall presumptively disapprove the tiling. If a carrier submits rates with a limit on medical loss ratio (MLR) of at least 88% and no more than 1% for profit or surplus, then the Commissioner would not presumptively disapprove the rates regardless of the overall increase. A carrier submitting rates with a 88% MLR guarantee would be required to issue rebates to all policy holders if it did not meet this standard at the end of the applicable 12 month period. The commissioner of insurance or the attorney general may conduct public hearings on any part of this section. The MLR standard increases to 90% in the second year.

• Beginning in 2012, establishes a new prior review process for all plans offered to individuals and small groups under chapter 176J. Carriers must file changes to plans at least 90 days before their proposed effective date. The carrier must submit comprehensive information to the

division of insurance on carrier administrative costs.

• Requires carriers to offer at least one selective or tiered network product with a base premium rate at least 10% lower than a comprehensive network product. Allows the commissioner of insurance to determine network adequacy based on the carrier's overall tiered network. regardless of tier. Requires carriers to report on the methodology used for any tiered or selective network. Also requires an annual report on the utilization trends of individuals and groups in these plans.

• Establishes that the Connector will be the sole entity authorized to sell new nongroup (i.c .. individual) health plans beginning in January I. 2012. Requires that carriers sell new individual coverage solely through the Connector. beginning in 2012. Carriers may continue to sell individual coverage outside of the Connector, but only on a renewal basis.

• Authorizes carriers to discontinue individual coverage products only available on a renewal basis from before the merger of the market in 2007, under the oversight of the Commissioner of Insurance.

• Requires the bureau of managed care to establish by regulation as condition of accreditation that carriers use uniform standards and methodologies for provider credentialing.

• Requires carriers to provide all policyholders with information on the total medical expenses, relative prices, and quality measurements for all providers in the plan's network.

• Requires all carriers and third-party administrators to submit annual financial statements to the division of insurance on all components of administrative costs, as delineated by group size and type of product. Also requires carriers that provide administrative-only services to self-insured costumers to annually report on enrollment. benefits, and costs of those plans. The division will make all information available publicly and submit a summary report. Finally, if a carrier reports a risk-based capital ratio that exceeds 700%, the division shall hold a public hearing and require the carrier to submit documentation on the continued need for such a surplus.

• Establishes a small group wellness incentive program at the connector authority. The program will provide subsides and technical assistance to small groups to implement evidence-based employee health and well ness programming. The Connector may offer a subsidy to small groups equal to up to 5% of eligible employer health care costs as determined by the federal government for the purposes of a small business federal health care tax credit authorized in the Patient Protection and Affordable Care Act.

• Formalizes current activities at the department of public health to provide informational tools, trainings, and direct assistance to businesses seeking to establish evidence-based wellness programming. Also directs the department to offer technical assistance to businesses applying for federal grants available through the federal Patient Protection and Affordable Care act for the purposes of implementing employee wellness programs.

• Establishes a Commission to examine proposals to reform the merged market and reduce

prcmunns. lhc Commission shall study, .ind make rcconuucndat ions. 011 the establishment of a reinsurance pool for carriers. lhc ('OlllllIissioll shall also study insurance rating factors and the potential impact of limiting their application to a certain percentage."! he Conunission's report is required no later than September 30, 20 I O.

• Directs the small business development center to develop and implement a free. confidential. assistance and counseling program for businesses seeking to purchase small group health insurance. The program is required to coordinate and support existing chambers of commerce and small business associations to develop common materials. conferences, and educational seminars tor small businesses.

• Authorizes a process by which a provider shall contract with a carrier to provide supplemental funding for the purposes of providing premium relief. Hospitals that fall within two tiers based on operating margin and percentage of private pay must contribute an amount based on a percentage of the provider's net patient revenue. The statewide amount cannot exceed $100 million. The division of health care finance and policy shall establish a waiver process that will exempt providers with less than 25 days of cash on hand or providers that have made contract concessions with the carriers in an amount equal to or greater than the calculated contribution amount. The provider and carrier must submit the contract to the division of insurance following its execution. The division shall issue a public report by October I. 20 I 0 detail ing the providers that have entered into such contracts, the amount of funding provided, and the aggregate premium relief provided.

• Requires the secretary of administration and finance, in consultation with the executive director of the connector, to study requirements contained in the federal Patient Protection and Affordable Care Act to establish certain small business health options programs through the state exchange. The study shall include an accelerated implementation plan for a pilot program to be administered by the connecter no later than January 1.2011.

• Directs the division of insurance, in consultation with the division of health care finance and policy, to establish a uniform methodology for calculating and reporting by carriers of medical loss ratios by October I, 20 I O.

• Directs the division of health care finance and policy, in consultation with the division of insurance, to establish a uniform methodology for calculation and reporting by carriers of health status adjusted total medical expenses of provider groups by October I, 20 10.

• Directs the division of health care finance and policy, in consultation with the division of insurance, to establish a uniform methodology for calculation and reporting by carriers of the relative prices paid to hospitals and physician groups by October I, 20 I O.

• Directs the division of health care finance and policy, in consultation with the division of insurance, to establish a uniform methodology for calculation and reporting of hospital costs, including inpatient and outpatient, direct and indirect by October I. 2010.

• Directs the department of public health to establish a uniform and standard set of quality

IIICaSUI"I':l1Icllts lor health care providers. lhcrc xhall he established a statewide udvisorv committee to rccouuucnd measures that are alreadv recognized bv state .uid national ()rg_an izat i( HIS.

• Allows individuals to renew coverage in 2010 outside olthe open enrollment dates for a term IIf less than I year until the next open enrollment period in 20 I I.

• Establishes two administrative ... implification , .. orking groups to identify ways to streamline data requests and establish uniform eligibility, claims appeals. and authorization processes lor health care carriers and providers.

• For the purposes of decreasing administrative cost authorizes the commissioner of insurance to limit the number of health benefit plans that a health care payer may maintain in the commonwealth.

ESTIMATED COST:

This bill will have no additional cost to the Commonwealth.

(KC)