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OLR Bill Analysis
sHB 5042
AN ACT CONCERNING HEALTH CARE COST GROWTH.
SUMMARY
This bill expands the Office of Health Strategy’s (OHS) duties to
include, among other things, setting annual health care cost growth
benchmarks, health care quality benchmarks, and primary care
spending targets. (In doing so, it codifies several provisions of Executive
Order 5.) When developing these benchmarks and spending targets, the
executive director may hold informational public hearings and consider
certain specified information.
Under the bill, the executive director must publish annual reports on
the total health care expenditures in Connecticut and the health care
quality benchmarks, including how payers (e.g., insurers) and provider
entities (e.g., physician groups) meet or exceed these metrics. The bill
correspondingly requires payers and provider entities to provide the
executive director with specified health care cost and quality data. She
must annually report on these issues to the Insurance and Public Health
committees.
Additionally, the bill requires the executive director to identify (1)
payers and provider entities who exceed the health care cost growth and
quality benchmarks or fail to meet the primary care spending target and
(2) any other entities (e.g., drug manufacturers) that significantly
contribute to health care cost growth. The bill allows the executive
director to require these payers, providers, and entities to participate in
a public hearing and discuss, among other topics, ways to reduce their
contribution to future health costs.
The bill also allows the executive director to adopt implementing
regulations to carry out the bill’s provisions and OHS’s existing
statutory obligations. Finally, it makes minor and conforming changes. 2022HB-05042-R000056-BA.DOCX
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EFFECTIVE DATE: Upon passage
§ 2 — DEFINITIONS
Under the bill, “total medical expense” is the total cost of care for a
payer or provider entity’s patient population in a calendar year,
calculated as the sum of (1) all claims-based spending paid to providers
by public and private payers, net of pharmacy rebates; (2) all nonclaims
payments, including incentive and care coordination payments; and (3)
all per-capita patient cost-sharing amounts.
A “provider entity” is an organized group of clinicians that (1) come
together for contracting purposes or (2) is an established billing unit
with enough attributed lives (i.e., patients), collectively, to participate in
total cost of care contracts during any given calendar year, even if it is
not participating in these contracts. At a minimum, a provider entity
must include primary care providers. (The specific number of attributed
lives required to participate in a total cost of care contract is unclear
under the bill.)
A “payer” is a government (e.g., Medicaid and Medicare) or non-
government health plans, and any of their affiliates, subsidiaries, or
businesses acting as a payer that, during any calendar year, pays (1)
health care providers for health care services or (2) pharmacies or
private entities for prescription drugs that the OHS executive director
designates.
“Total healthcare expenditures” are the sum of all health care
expenditures in Connecticut from public and private sources for a given
calendar year, including all claims-based spending paid to providers,
net of pharmacy rebates; all patient cost-sharing amounts; and the net
cost of private health insurance.
“Net cost of private health insurance” is the difference between
premiums earned and benefits incurred, including the insurers’ cost of
paying bills; advertising; sales commissions and other administrative
costs; net additions or subtractions from reserves; rate credits and
dividends; premium taxes; and profits or losses. 2022HB-05042-R000056-BA.DOCX
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§ 1 — OHS DUTIES
The bill adds the following to OHS’s duties:
1. developing, innovating, directing, and overseeing health care
delivery and payment models in the state that reduce health care
cost growth and improve the quality of patient care;
2. setting an annual health care cost growth benchmark and
primary care spending target;
3. developing and adopting health care quality benchmarks;
4. developing strategies, in consultation with stakeholders, to
facilitate adherence with these benchmarks and targets;
5. enhancing the transparency of provider entities; and
6. monitoring the (a) development of accountable care
organizations and patient-centered medical homes and (b)
adoption of alternative payment methodologies in Connecticut.
Current law requires the office to perform various other duties,
including overseeing the State Innovation Model Initiative and related
successor initiatives. The bill specifies that it must also develop,
innovate, and direct these initiatives.
§ 3 — ANNUAL HEALTH CARE BENCHMARK S AND SPENDING
TARGETS
By July 1, 2022, the OHS executive director must publish on the
office’s website the following:
1. health care cost growth benchmarks and annual primary care
spending targets as a percentage of total medical expenses for the
calendar years 2021-2025, inclusive, and
2. annual health care quality benchmarks for calendar years 2022 to
2025.
She must also publish on the website each adopted health care cost
growth benchmark and annual primary care spending target. 2022HB-05042-R000056-BA.DOCX
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She must also develop, adopt, and post on the office’s website by July
1, 2025, and every five years after, the following:
1. annual health care cost growth benchmarks and annual primary
care spending targets for the next five calendar years for provider
entities and payers and
2. annual health care quality benchmarks for the next five calendar
years.
Developing Health Care Benchmarks and Spending Targets
In developing the health care cost growth benchmarks and primary
care spending targets, the bill requires the executive director to consider
(1) any historical and forecasted changes in median income for residents
and the potential gross state product growth rate; (2) the inflation rate;
and (3) the most recent annual health care expenditure report required
under the bill (see § 4).
For health care quality benchmarks, the executive director must
consider the following:
1. quality measures endorsed by nationally recognized
organizations, including the National Quality Forum, the
National Committee for Quality Assurance, the federal Centers
for Medicare and Medicaid Services and Centers for Disease
Control and Prevention, the Joint Commission, and other expert
organizations that develop health quality measures;
2. measures about health outcomes, overutilization,
underutilization, patient safety, and community or population
health; and
3. measures that meet standards of patient-centeredness and ensure
consideration of differences in preferences and clinical
characteristics within patient subpopulations.
Public Hearings and Modifying Benchmarks or Targets
The bill allows, but does not require, the executive director to hold 2022HB-05042-R000056-BA.DOCX
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informational public hearings on the health care benchmarks and
spending targets she sets. The hearings must be held at a time and place
she designates, and a notice must be prominently posted on the OHS
website and in a form and manner she prescribes.
Under the bill, the executive director may modify any benchmark or
spending target if she determines, after a hearing, that doing so is
reasonably warranted. The bill does not require her to hold an
additional public hearing on modifications to annual health care quality
benchmarks. For modifications to health care cost growth benchmarks,
an additional hearing is not required if the modifications are due to
inflation rates.
Authority to Contract
The bill allows the executive director to enter into necessary
contractual agreements with actuarial, economic, and other experts and
consultants to develop, adopt, and publish these health care
benchmarks and spending targets.
§ 4 — ANNUAL REPORTING REQUIREMENTS
Payer Reports
Beginning by August 15, 2022, the bill requires each payer to report
aggregated data annually to the OHS executive director, including
aggregated, self-funded data necessary for her to calculate (1) total
health care expenditures; (2) primary care spending as a percentage of
total medical expenses; and (3) net cost of private health insurance.
Payers must also disclose, upon request, payer data required for OHS to
adjust total medical expense calculations to reflect patient population
changes.
Additionally, the bill requires payers and provider entities, starting
by August 15, 2023, to report annually to the executive director on the
health care quality benchmarks she adopts.
Payers and provider entities must report the data described above in
a form and manner the executive director prescribes for the preceding
or prior years, upon her request, based on material changes to data 2022HB-05042-R000056-BA.DOCX
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previously submitted.
Annual OHS Health Care Expenditure Report
Beginning by March 31, 2023, the OHS executive director must
annually prepare and post on the office website a report on total health
care expenditures. The report must use the total aggregate medical
expenses that payers report, including a breakdown of population-
adjusted total medical expenses by payer and provider entities. It may
also include information on the following:
1. trends in major service category spending;
2. primary care spending as a percentage of total medical expenses;
and
3. the net cost of health insurance by payer by market segment,
including individual, small group, large group, self-insured,
student, and Medicare Advantage markets.
The bill also requires the executive director to annually request the
unadjusted total medical expenses for Connecticut residents from the
federal Centers for Medicare and Medicaid Services.
Annual OHS Health Care Quality Benchmark Report
The bill requires the executive director, by March 31, 2024, to
annually prepare and post on the office’s website a report about health
care quality benchmarks reported by payers and provider entities.
Authority to Contract
The bill allows the executive director to enter into contractual
agreements necessary to prepare the annual health care expenditure and
quality benchmark reports, including contracts with actuarial,
economic, and other experts and consultants.
§§ 5 & 6 — FAILURE TO MEET HEALTH CARE BENCHMARKS AND
SPENDING TARGETS
Payers and Provider Entities
Beginning January 1, 2023, the bill requires the OHS executive 2022HB-05042-R000056-BA.DOCX
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director to identify each payer or provider entity that exceeded the
health care cost growth benchmark or failed to meet the primary care
spending target for the performance year (i.e., the most recent year for
which certain data is available). She must do so by annually by May 1.
Starting January 1, 2024, she must also identify, annually by May 1,
each payer or provider entity that failed to meet the health care quality
benchmarks for the performance year.
Within 30 days of making the identification, the bill requires the
executive director to notify the payer or provider entity, in a form and
manner she prescribes, that (1) she identified its failure to meet a health
care benchmark or spending target and (2) the factual basis for her
identification.
Other Contributing Entities
Starting January 1, 2023, if the executive director determines that the
annual percentage change in total health care expenditures for the
performance year exceeded the health care cost growth benchmark, then
the bill requires her to identify any entity that significantly contributed
to exceeding the benchmark. Under the bill, an “other entity” is a
pharmacy benefit manager (PBM), provider that is not a provider entity,
or a drug manufacturer. She must do this for each calendar year by May
1, based on:
1. the OHS total health care expenditure annual report required
under the bill (see § 4);
2. annual reports that existing law requires PBMs to submit to the
insurance commissioner on prescription drug rebates;
3. OHS’s annual list of up to 10 outpatient prescription drugs that
are either provided at substantial cost to the state or critical to
public health, required under existing law;
4. information from the state’s all-payer claims database; and
5. any other information the executive director, in her discretion, 2022HB-05042-R000056-BA.DOCX
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deems relevant.
The bill requires the executive director to also account for costs, net
of rebates and discounts, when identifying these entities.
Annual Informational Public Hearings
The bill requires the executive director to annually hold
informational public hearings as follows:
1. starting by June 30, 2023, a hearing to compare the growth in total
health care expenditures in the performance year to the
associated health care cost growth benchmark and
2. starting by June 30, 2024, a hearing to compare the performance
of payers and provider entities in the performance year to the
associated health care quality benchmark.
Hearings on Total Health Care Expenditures
The bill requires annual informational public hearings on health care
expenditures to examine the following:
1. OHS’s most recent annual total health care expenditure report
required under the bill, if any;
2. payer and provider entity expenditures, including health care
cost trends, primary care spending as a percentage of total
medical expenses, and the factors contributing to them; and
3. any other matters the executive director deems relevant.
The bill allows the executive director to require hearing participation
from any payer or provider entity that she determines is a significant
contributor the state’s health care cost growth or has failed to meet the
primary care spending target for that year. These entities must testify on
the issues the executive director identifies and provide additional
information on actions they have taken to (1) reduce their contribution
to future state health care costs and expenditures and (2) increase their
primary care spending as a percentage of total medical expenses. 2022HB-05042-R000056-BA.DOCX
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Similarly, the executive director may also require participation in the
hearing by any other entity she determines is a significant contributor
to the state’s health care cost growth during the performance year. These
entities must also provide testimony and additional information in the
same manner as payers and provider entities described above. If the
other entity is a drug manufacturer whose participation is required with
respect to a specific drug or drug class, then the bill permits the hearing,
to the extent possible, to include representatives from at least one brand-
name manufacturer; one generic manufacturer; and one innovator
company that is less than 10 years old.
Hearings on Quality Performance Benchmarks
The bill requires the annual informational public hearing on provider
entity quality performance to examine the most recent OHS annual
report on health care quality benchmarks (see § 4) and any other matters
that the executive director deems relevant.
Under the bill, the executive director may require hearing
participation from any payer or provider entity that she determines
failed to meet the health care quality benchmarks during the
performance year. Payers or provider entities required to participate
must provide testimony on issues the executive director identifies and
additional information on actions they have taken to improve their
quality benchmark performance.
Annual Legislative Reports on Public Hearing Information
The bill requires OHS, starting by October 15, 2023, to report annually
to the Insurance and Public Health committees on her analysis of the
information submitted during the most recent informational public
hearing on total health care expenditures. The report must accomplish
the following:
1. describe health care spending trends in the state, including
trends in primary care spending as a percentage of total medical
expenses, and the factors underlying these trends and
2. disclose the office’s recommendations, if any, on strategies to 2022HB-05042-R000056-BA.DOCX
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increase the efficiency of the state’s health care system, including
any recommended legislative changes.
Additionally, the bill requires the executive director, starting by
October 15, 2024, to report annually to the Insurance and Public Health
committees on her analysis of the information submitted during the
most recent informational public hearing on health care quality
benchmarks. In the report, the executive director must do the following:
1. describe health care quality trends in the state and their
underlying factors and
2. disclose the office’s recommendations, if any, on strategies to
improve the quality of the state’s health care system, including
any recommended legislative changes.
COMMITTEE ACTION
Insurance and Real Estate Committee
Joint Favorable
Yea 17 Nay 0 (03/10/2022)