Bill Summary – FastDemocracy

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.
      Office of Legislative Services                                    Legislative Budget and Finance Office
           State House Annex                                                    Phone (609) 847-3105
              P.O. Box 068                                                       Fax (609) 777-2442
      Trenton, New Jersey 08625                                                  www.njleg.state.nj.us
                                               FE to S3533
                                                    2
   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.).