LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 394 SLS 22RS 623
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 6, 2022 8:52 AM Author: BERNARD
Dept./Agy.: Office of Group Benefits and Dept. of Insurance
Subject: Cover of FDA Approved Drugs Analyst: Patrice Thomas
INSURANCE POLICIES EN INCREASE SG EX See Note Page 1 of 2
Requires coverage for drugs under certain conditions and the drug is approved by the United States Food and Drug
Administration. (1/1/23)
Proposed law prohibits a health benefit plan delivered or issued for delivery from limiting or excluding coverage of a drug approved by the
United States Food and Drug Administration (FDA) for a minor based on if the drug was prescribed for a use different from what the drug
was approved for by the FDA. Proposed law makes the health care provider responsible for submitting documentation to support
compliance with the proposed law if requested by the health insurance insurer. Proposed law provides the health coverage plan is not
required to provide coverage for all of the following: (1) treatment for a condition or disease is excluded under the terms of the health
coverage plan; (2) experimental drugs not approved by the FDA; and (3) drug is not listed on the health coverage plan formulary or
preferred drug list. Proposed law provides that coverage can be subject to annual deductibles, coinsurance, copayment provisions, and
prior authorization. Proposed law effective January 1, 2023.
EXPENDITURES 2022-23 2023-24 2024-25 2025-26 2026-27 5 -YEAR TOTAL
State Gen. Fd. INCREASE INCREASE INCREASE INCREASE INCREASE
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 2022-23 2023-24 2024-25 2025-26 2026-27 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
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 $0 $0 $0 $0 $0 $0
EXPENDITURE EXPLANATION
Proposed law will significantly increase Self-Generated Revenue expenditures within the Office of Group Benefits (OGB) beginning in FY 23
and subsequent fiscal years (see narrative below). Furthermore, proposed law will increase claims expenditures for the health insurance
industry by an estimated $1.6 M - $2.7 M and premiums by an estimated $1.8 M - $3.2 M in FY 23 (see Expenditure Explanation on Page
2). Proposed law has no impact on health insurance policies issued under the insurance exchanges.
Office of Group Benefits Impact (Self-Generated Revenue Impact)
Proposed law significantly increases expenditures within the Office of Group Benefits (OGB). If certain conditions apply and are medically
necessary, the proposed law prohibits health plans, including OGB, from limiting or excluding coverage of a pharmacy drug approved by
the United States Food and Drug Administration (FDA) for a minor based on if the drug was prescribed for a use different from what the
drug was approved for by the FDA. Based upon the assumptions listed below, the expenditures to cover this benefit range are as follows:
FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 Total
Low $202,586 $412,870 $420,715 $428,709 $436,854 $2,104,320
High $354,526 $722,524 $736,252 $750,241 $764,496 $3,682,565
*FY 22-23 represent 6 months of estimated claims expenditures
Unless OGB Fund Balance is utilized, SGF appropriation will be required to cover the state portion of the increase in premium costs, which
is approximately 40%. As of March 2022, the OGB Fund Balance was $369 M.
The expenditure estimate is based upon the following assumptions: The expenditure estimate is based on the following assumptions: (1)
As of 4/01/2022, the current OGB member population in the five self-funded health plans is 212,212. Excluding Medicare primary plan
members, membership used for expenditure calculations is 165,674. Membership will remain constant. (2) The coverage will become
effective on 1/01/2023. (3) No change in OGB self-funded health plan membership in future fiscal years from current levels. (4) The per
member per month (PMPM) cost estimate provided by BCBSLA ranges from a low of $0.20 PMPM to a high of $0.35 PMPM as a result of
not limiting or excluding coverage of a pharmacy drug approved by the FDA under this measure. (5) In future fiscal years, a medical
inflation factor of 1.9%.
See EXPENDITURE EXPLANATION on Page 2
REVENUE EXPLANATION
The Office of Group Benefits (OGB) does not anticipate the proposed law to require premium increases, therefore there is no impact self-
generated revenues collected from premiums. OGB has indicated the estimated costs associated with not limiting or excluding coverage of
pharmacy drugs approved by the FDA may be absorbed by the existing fund balance reserve. However, to the extent other legislative
instruments that are enacted expand covered medical and pharmacy benefits, the cumulative impact may be significantly material and
require OGB to increase premiums in order to maintain an actuarially sound fund balance of $250 M.
Senate Dual Referral Rules House
x 13.5.1 >= $100,000 Annual Fiscal Cost {S & H} x 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
13.5.2 >= $500,000 Annual Tax or Fee Evan Brasseaux
6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} or a Net Fee Decrease {S} Interim Deputy Fiscal Officer
 LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 394 SLS 22RS 623
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 6, 2022 8:52 AM Author: BERNARD
Dept./Agy.: Office of Group Benefits and Dept. of Insurance
Subject: Cover of FDA Approved Drugs Analyst: Patrice Thomas
CONTINUED EXPLANATION from page one: Page 2 of 2
EXPENDITURE EXPLANATION Continued from Page 1
Based on the aforementioned methodology, the assumption that coverage will only be in place for 6 months in FY 23 due to January 1,
2023, the effective date, and medical inflation (MI) factor of 1.9% compounding annually, below are expenditure calculations utilized to
project the cost within OGB as a result of the proposed law utilizing the assumptions listed on page one.
Expenditure Calculations
FY 23 (Low) = $405,172 = 165,674 members x $0.20 PMPM x 12 months x 1.9% MI ($162,069 SGF)
FY 23 (High) = $709,052 = 165,674 members x $0.35 PMPM x 12 months x 1.9% MI ($283,621 SGF)
FY 24 (Low) = $412,870 = $405,172 x 1.9% MI ($165,148 SGF)
FY 24 (High) = $722,524 = $709,052 x 1.9% MI ($289,010 SGF)
FY 25 (Low) = $420,715 = $412,870 x 1.9% MI ($168,286 SGF)
FY 25 (High) = $736,252 = $722,524 x 1.9% MI ($294,501 SGF)
FY 26 (Low) = $428,709 = $420,715 x 1.9% MI ($171,484 SGF)
FY 26 (High) = $750,241 = $736,252 x 1.9% MI ($300,096 SGF)
FY 27 (Low) = $436,854 = $428,709 x 1.9% MI ($174,742 SGF)
FY 27 (High) = $764,496 = $750,241 x 1.9% MI ($305,798 SGF)
Total (Low) = $2,104,320 ($ 841,728 SGF)
Total (High) = $3,682,565 ($1,473,026 SGF)
Insurance Exchanges Impact (State General Fund Impact)
Proposed law does not mandate an additional benefit to plans issued on the insurance exchange; therefore, there is no impact on SGF
expenditures as a result of this measure.
PRIVATE INSURANCE IMPACT
Pursuant to R.S. 24:603.1, the information below is the projected private insurance impact of the proposed law. Based upon an actuarial
analysis prepared by LDI, the proposed law is anticipated to increase expenditures associated with claims by $1.6 M - $2.7 M and premium
increases by $1.8 M - $3.2 M for private insurers and the insured in FY 23 with phase-up costs of an estimated $1.8 M - $3.2 M claims and
$2.2 M - $3.9 M premiums by FY 27. LDI bases this analysis on the following assumptions: the calculations are on a fiscal year basis; the
exchange population is approximately 650,000 and the insured population is assumed to be stationary; medical cost inflation is 5%; the
premium loss ratio is 85%; and the estimated cost is between $0.20 PMPM and $0.35 PMPM over the entire insured population. Based
upon the aforementioned assumptions, the estimated annual cost increases for insurance providers associated with claims are as follows:
Aggregate Cost Determination Aggregate Extra Premium Determination
(exchange population x PMPM cost x 12 months) (PMPM cost x 12 months)/medical loss ratio
FY 23 (Low) - 650,000 x $0.20 PMPM x 12 months = $1,560,000 FY 23 (Low) - ($0.20 PMPM x 12 months)/85% = $2.82
FY 23 (High) - 650,000 x $0.35 PMPM x 12 months = $2,730,000 FY 23 (High) - ($0.35 PMPM x 12 months)/85% = $4.94
FY 24 (Low) - $1,560,000 x 5% MI = $1,638,000 FY 24 (Low) - $2.82 x 5% MI = $2.96
FY 24 (High) - $2,730,000 x 5% MI = $2,866,500 FY 24 (High) - $4.94 x 5% MI = $5.19
FY 25 (Low) - $1,638,000 x 5% MI = $1,719,900 FY 25 (Low) - $2.96 x 5% MI = $3.11
FY 25 (High) - $2,866,500 x 5% MI = $3,009,825 FY 25 (High) - $5.19 x 5% MI = $5.45
FY 26 (Low) - $1,719,900 x 5% MI = $1,805,895 FY 26 (Low) - $3.11 x 5% MI = $3.27
FY 26 (High) - $3,009,825 x 5% MI = $3,160,316 FY 26 (High) - $5.45 x 5% MI = $5.72
FY 27 (Low) - $1,805,895 x 5% MI = $1,896,190 FY 27 (Low) - $3.27 x 5% MI = $3.43
FY 27 (High) - $3,160,316 x 5% MI = $3,318,332 FY 27 (High) - $5.72 x 5% MI = $6.01
Senate Dual Referral Rules House
x 13.5.1 >= $100,000 Annual Fiscal Cost {S & H} x 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
13.5.2 >= $500,000 Annual Tax or Fee Evan Brasseaux
6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} or a Net Fee Decrease {S} Interim Deputy Fiscal Officer