LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 7 SLS 201ES 8
Bill Text Version: ENGROSSED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 14, 2020 6:57 PM Author: TALBOT
Dept./Agy.: LA Dept. of Insurance/Office of Group Benefits
Subject: Surprise Billing Analyst: Zachary Rau
HEALTH/ACC INSURANCE EG INCREASE SG EX See Note Page 1 of 2
Provides relative to surprise billing. (Item #37)
Proposed law provides definitions associated with surprise billing and for an independent dispute resolution process
regarding the practice, including applicability and duties of the LA Dept. of Insurance. Proposed law sets the criteria for
determining a reasonable fee in dispute resolution Proposed law provides for payment for independent dispute resolution
entity who is arbitrating a surprise billing case. Effective January 1, 2021.
EXPENDITURES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. INCREASE INCREASE INCREASE INCREASE INCREASE
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total
REVENUES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. INCREASE INCREASE INCREASE INCREASE INCREASE
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total
EXPENDITURE EXPLANATION
Proposed law will increase expenditures for the Office of Group Benefits estimated to total $7.4 M in FY 21 with a phase-up to $72.5 M by
FY 25 (see narrative below). Furthermore, LDI reports that proposed law may increase claims expenditures for the health insurance
industry by an estimated $54 M-$90 M and premiums by an estimated $64 M-$106 M in FY 21 (see narrative on Page 2).
Office of Group Benefits (Self-Generated Revenue Impact)
The Office of Group Benefits (OGB) anticipates increased SGR expenditures associated with this measure totaling approximately $10.7 M
in FY 21 with a phase-up of expenditures to $62.8 M in FY 25, based upon an analysis conducted by OGB staff and Blue Cross Blue Shield
of LA, OGB’s third-party administrator.
OGB’s estimate is derived from its Calendar Year 2019 paid claims in radiology, anesthesiology, certified registered nurse anesthetist
(CRNA), pathology, emergency medicine, plastic surgery, neurological surgery, and orthopedic surgery, per an analysis of the Brookings
Institution on the fiscal impact of similar legislation in the state of New York. Next, OGB staff applied a 3% medical inflation factor to
determine standard claims growth in each of the aforementioned areas, and divided them by membership totals for the self-funded plans
(171,130, excluding Medicare Primary plan members) and 12 to determine a per-member per-month rate for each service area, then
combined them into a blended PMPM rate for CY 19 of $23/month. Annual estimated per member per month rates for each CY are as
follows: CY 20 - $23.69; CY 21 - $24.40; CY 22 - $25.13; CY 23 - $25.88; CY 24 - $26.66; CY 25 - $27.46.
Then, to obtain gross cost increases associated with this measure, OGB staff multiplied the CY 19 claims individual claims PMPMs by the
standard medical inflation factor of 3% and the following inflation factors by area: radiology, anesthesiology, CRNA - 15%; pathology -
20%; emergency medicine - 30%; plastic surgery - 7%; neurological and orthopedic surgery - 5%. These inflation rates are associated
with the “Usual and Customary” definition included in this measure Applying a similar methodology to the standard PMPM rate, OGB’s
annual estimated, increased per member per month rates for each CY are as follows: CY 20 - $26.89; CY 21 - $31.58; CY 22 - $37.24; CY
23 - $44.12; CY 24 - $52.50; CY 25 - $62.76.
(Expenditure Impact cont. on Pg. 2)
REVENUE EXPLANATION
The Office of Group Benefits anticipates requiring member premium increases beginning in FY 22 to defray costs associated with the
proposed legislation, which will materialize in the form of an SGR increase. The extent of this increase is indeterminable, but is anticipated
to be significant in nature.
Senate Dual Referral Rules House
x 13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Evan Brasseaux
x 13.5.2 >= $500,000 Annual Tax or Fee x 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} or a Net Fee Decrease {S} Staff Director
 LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 7 SLS 201ES 8
Bill Text Version: ENGROSSED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 14, 2020 6:57 PM Author: TALBOT
Dept./Agy.: LA Dept. of Insurance/Office of Group Benefits
Subject: Surprise Billing Analyst: Zachary Rau
CONTINUED EXPLANATION from page one: Page 2 of 2
(Expenditure Impact cont. from Pg. 1)
The difference of the increased PMPM rate less the standard growth PMPM rate yields the annual anticipated cost for OGB by calendar year
after multiplying by the member population of 171,130 and 12 months:
Increased Rate Std. Rate Margin Member Pop. Months Marginal Cost
CY 20 $26.89 $23.69 $3.20 171,130 12 $6,571,392
CY 21 $31.58 $24.40 $7.18 171,130 12 $14,744,561
CY 22 $37.24 $25.13 $12.11 171,130 12 $24,868,612
CY 23 $44.12 $25.88 $18.24 171,130 12 $37,456,934
CY 24 $52.50 $26.66 $25.84 171,130 12 $53,063,990
CY 25 $62.76 $27.46 $35.30 171,130 12 $72,490,668
Based upon the aforementioned marginal cost, the impact by FY is as follows:
FY 21 - $7,372,281 (effective for half of FY 21)
FY 22 - $19,806,586
FY 23 - $31,162,773
FY 24 - $45,260,462
FY 25 - $62,777,329
Note: For reference, the most recent total out-of-network claims universe for OGB totals $16.8 M from the period 3/2019 to 2/2020.
LA Dept. of Insurance (Self-Generated Revenue Impact)
The LA Dept. of Insurance anticipates a one-time SGR expenditure of $66,000 associated with IT costs to design and code the
requirements of the dispute resolution process this measure, including creating new electronic process, new regulatory management
screens, and a new industry access module.
Private Insurance Impact
Pursuant to LA R.S. 24:603.1, the following is the projected private insurance impact of the proposed legislation. Based upon an actuarial
analysis prepared by LDI, proposed law is anticipated to shift expenditures associated with claims ($54 M - $90 M) and premium increases
($64 M - $106 M) for private insurers and the insured in FY 21 with a phase-up to an estimated $132 M - $219 M (claims) and $154 M -
$257 M (premiums) by FY 25. LDI bases this analysis on the following assumptions: the calculations apply on a fiscal year basis; an
insured population of 750,000; a stationary insured population; a PMPM totaling $12-$20; coverage being in effect for half of FY 21
(proposed measure is effective January 1,2021); medical cost inflation of 5% annually; and a premium loss ratio of 85%. Based upon the
aforementioned assumptions, the estimated annual cost increases for insurance providers associated with claims are as follows (numbers
have been rounded for clarity):
FY 21 - $54 M (750K members * $12 PMPM * 6 months) - $90 M (750K members * $20 PMPM * 6 months)
FY 22 - $113 M (750K members * $12 PMPM * 12 * 1.05) - $198 M (750K members * $20 PMPM * 12 * 1.05)
FY 23 - $119 M - $198 M
FY 24 - $125 M - $209 M
FY 25 - $132 M - $219 M
Based upon the aforementioned assumptions, the estimated annual cost increases for the insured associated with premiums
are as follows:
FY 21 - $64 M (750K members*$12 PMPM* 6 /.85 LR) - $106 M (750K members*$20 PMPM* 6 /.85 LR)
FY 22 - $133 M (750K members*$12 PMPM*12*1.05 /.85 LR) - $222 M (750K members*$20 PMPM*12 *1.05 /.85 LR)
FY 23 - $140 M - $233 M
FY 24 - $147 M - $245 M
FY 25 - $154 M - $257 M
Note: per discussions with LDI staff, the state is not required to fund increased costs for the health insurance exchanges because this
measure does not create a new benefit and amends an administrative process, therefore these cost estimates include increased costs
associated with exchange plans for private insurers offering coverage on the exchanges.
Senate Dual Referral Rules House
x 13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Evan Brasseaux
x 13.5.2 >= $500,000 Annual Tax or Fee x 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} or a Net Fee Decrease {S} Staff Director