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April 19, 2022 HB 22-1370
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Fiscal Note
Drafting Number:
Prime Sponsors:
LLS 22-0251
Rep. Jodeh; Sirota
Sen. Winter; Buckner
Date:
Bill Status:
Fiscal Analyst:
April 19, 2022
House Health & Insurance
Erin Reynolds | 303-866-4146
Erin.Reynolds@state.co.us
Bill Topic: COVERAGE REQUIREMENTS FOR HEALTH -CARE PRODUCTS
Summary of
Fiscal Impact:
☐ State Revenue
☒ State Expenditure
☒ State Diversion
☐ TABOR Refund
☐ Local Government
☐ Statutory Public Entity
The bill modifies prescription drug coverages, prohibits changes in a carrier’s
prescription drug coverage formulary during the plan year, and requires reporting and
analysis on prescription drug rebates by the Division of Insurance and the Department
of Health Care Policy and Financing. It increases state expenditures and diversions
on an ongoing basis beginning in FY 2022-23.
Appropriation
Summary:
For FY 2022-23, the bill requires an appropriation of $420,226 to multiple state
agencies.
Fiscal Note
Status:
The fiscal note reflects the introduced bill. This analysis is preliminary and will be
updated following further review and any additional information received.
Table 1
State Fiscal Impacts Under HB 22-1370
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue - -
Expenditures General Fund $118,321 $82,870
Cash Funds $252,667 $183,782
Federal Funds $49,238 $49,238
Centrally Appropriated $55,213 $53,748
Total Expenditures $475,439 $369,638
Total FTE 1.7 FTE 2.0 FTE
Diversions General Fund ($307,880) ($237,530)
Cash Funds $307,880 $237,530
Net Diversion $0 $0
Other Budget Impacts
General Fund Reserve $17,748 $12,431 Page 2
April 19, 2022 HB 22-1370
Summary of Legislation
Beginning January 1, 2023, the bill requires health insurance carriers that offer an individual or small
group health benefit plan to Coloradans to offer at least 25 percent of its plans on the Colorado Health
Benefit Exchange and at least 25 percent of its plans not on the exchange in each bronze, silver, gold,
and platinum benefit levels in each service area as copayment-only payment structures for all
prescription drug cost tiers. The Commissioner of Insurance in the Department of Regulatory
Agencies (DORA) may promulgate rules to implement and enforce this policy.
Also beginning in 2023, the bill requires the Department of Health Care Policy and Financing (HCPF),
in collaboration with the administrator of the All-Payer Claims Database, to conduct an annual
analysis of the prescription drug rebates received in the previous calendar year, by carrier and
prescription drug tier, and make the analysis available to the public.
Starting in 2024, a carrier or pharmacy benefit manager is prohibited from modifying or applying a
modification to the current prescription drug formulary during the current plan year, such as
eliminating a prescription drug from the formulary or moving a prescription drug to a higher
cost-sharing tier.
For each health benefit plan issued or renewed on or after January 1, 2024, the bill requires each carrier
or pharmacy benefit manager demonstrate to the Division of Insurance that:
100 percent of the estimated rebates received or to be received in connection with dispensing or
administering prescription drugs included in the carrier's prescription drug formulary are used
to reduce costs for the employer or individual purchasing the plan;
for small group and large employer health benefit plans, all rebates are used to reduce employer
and individual employee costs; and
for individual health benefit plans, all rebates are used to reduce consumers' premiums and
out-of-pocket costs for prescription drugs to the extent practicable.
The Commissioner of Insurance is required to promulgate rules to implement prescription drug
pass-through requirements for carriers. Each carrier or pharmacy benefit manager is required to
report annually specified prescription drug rebate information to the commissioner.
Finally, the bill repeals and reenacts the current requirements for step therapy and requires a carrier
to use clinical review criteria to establish the step-therapy protocol.
State Diversions
This bill diverts about $310,000 from the General Fund in FY 2022-23 and about $240,000 in FY 2023-24
and ongoing. This revenue diversion occurs because the bill increases costs in DORA, Division of
Insurance, which is funded with premium tax revenue that would otherwise be credited to the General
Fund.
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April 19, 2022 HB 22-1370
State Expenditures
The bill increases state cash fund expenditures in DORA by about $310,000 in FY 2022-23 and about
$240,000 in FY 2023-24 and ongoing from the Division of Insurance Cash Fund. It will also increase
state expenditures in the Department of Health Care Policy and Financing by about $170,000 in
FY 2022-23 and by about $130,000 in FY 2023-24 from the General Fund and federal funds.
Expenditures are shown in Table 2 and detailed below.
Table 2
Expenditures Under HB 22-1370
FY 2022-23 FY 2023-24
Department of Regulatory Agencies
Personal Services $157,972 $181,082
Operating Expenses $2,295 $2,700
Capital Outlay Costs $12,400 $0
Contractor Costs $80,000 $0
Centrally Appropriated Costs
1
$55,213 $53,748
FTE – Personal Services 1.7 FTE 2.0 FTE
DORA Subtotal (DOI Cash Fund) $307,880 $237,530
Department of Health Care Policy and Financing
Personal Services $91,809 $56,358
Operating Expenses $75,750 $75,750
HCPF Subtotal $167,559 $132,108
General Fund $118,321 $82,870
Federal Funds $49,238 $49,238
Total Cost $475,439 $369,638
Total FTE 1.7 FTE 2.0 FTE
1
Centrally appropriated costs are not included in the bill's appropriation.
Department of Regulatory Agencies. The Division of Insurance in DORA will have new staffing and
contractor costs to monitor and enforce provisions against carriers and to collect and audit compliance
data. First-year staffing costs are prorated for a September 1 start date. Standard operating and capital
outlay costs are included.
Staff. The division requires 1.0 FTE rate and financial analyst to create a template for formulary
review and to review changes in prescription drug formularies for roughly 100 drugs lists for the
individual and small group market and roughly 200 drugs lists for the large group market. The
position will also provide support to carriers in correcting errors to their submissions. In addition,
the bill’s rebate provision requires the division to collect data from carriers and perform an
analysis to determine the feasibility of applying rebates to reduce a person's cost sharing at the
point of sale, which necessitates 1.0 FTE actuary to review data submissions from carriers, perform Page 4
April 19, 2022 HB 22-1370
research to verify carrier attestations regarding rebates, and to review filings submitted by carriers
indicating they are in compliance and using rebates to reduce consumers' costs. Finally, the
division requires 0.1 FTE rate and financial analyst for rulemaking related to regulations
regarding carriers offering copayment-only plans, changes in step therapy protocol, and to create
a step therapy protocols exception request form.
Contractor costs. The division requires 200 hours of a contractor at $400 per hour to assist in
evaluating how rebates may be applied to reduce a covered persons defined cost sharing for each
prescription drug at the point of sale and determine how rebates may be applied to reduce defined
cost sharing and the impact on premiums.
Legal services. Preliminarily, legal services costs for rulemaking are assumed to be accomplished
within the division’s existing legal services budget.
Health Care Policy and Financing. HCPF will have contract costs for the Center for Improving Value
in Health Care (CIVHC), the administrator of the All-Payer Claims Database, to conduct prescription
drug rebate analyses each year, estimated at $91,809 in FY 2022-23, and $56,358 in FY 2023-24 and
ongoing, paid from the General Fund. In addition, since CHP+ is operated as a carrier and health
benefit plan subject to the Colorado Insurance Code, HCPF will require contractor services to
reevaluate CHP+ parity compliance, specifically related to cost-sharing requirements and treatment
limits, estimated at a one-time cost $151,500, paid over two years ($75,750 per year), with 65 percent
federal funds and 35 percent General Fund.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs associated
with this bill are addressed through the annual budget process and centrally appropriated in the Long
Bill or supplemental appropriations bills, rather than in this bill. These costs, which include employee
insurance and supplemental employee retirement payments, are shown in Table 2.
Statutory Public Entity
Because the bill codifies into statute existing regulations on the plan types and designs the Health
Benefit Exchange must offer, there is no fiscal impact to Connect for Health Colorado.
Effective Date
The bill takes effect 90 days following adjournment of the General Assembly sine die, assuming no
referendum petition is filed. Section 1 of the bill applies to health benefit plans issued or renewed on
or after January 1, 2023. Sections 2 through 6 of this act apply to health benefit plans issued or renewed
on or after January 1, 2024.
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April 19, 2022 HB 22-1370
State Appropriations
For FY 2022-23, the bill requires the following appropriations totaling $420,226:
$252,667 to the Department of Regulatory Agencies from the Division of Insurance Cash Fund and
1.7 FTE; and
$167,559 to the Department of Health Care Policy and Financing of which $118,321 is General
Fund and $49,238 is federal funds.
State and Local Government Contacts
Connect for Health Colorado Health Care Policy and Financing
Information Technology Law
Regulatory Agencies
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.