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OLR Bill Analysis
sHB 5042 (as amended by House "A")*
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 (§ 7). Finally, it makes minor and conforming 2022HB-05042-R01-BA.DOCX
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changes.
Separately, the bill requires health carriers (e.g., insurers and HMOs)
that deliver, issue, renew, amend, or continue certain individual and
group health insurance policies in the state to develop at least two health
enhancement programs (HEPs) under the policies by January 1, 2024.
Under the bill, an HEP is a health benefit program that ensures access
and removes barriers to essential, high-value clinical services. The bill
authorizes the insurance commissioner to adopt related implementing
regulations.
Additionally, the bill addresses matters concerning the state’s
certificate of need (CON) program, which OHS administers. Under the
CON law, health care institutions (e.g., hospitals, freestanding
emergency departments, outpatient surgical facilities) must generally
receive state approval when establishing new facilities or services,
changing ownership, acquiring certain equipment, or terminating
services. The bill increases the nonrefundable CON application fee from
$500 to a range of $1,000 to $10,000 depending on the proposed project’s
cost. Also, for purposes of applying the CON requirements, the bill
defines “termination of services” to mean ending services for more than
180 days (§ 10).
Lastly, the bill makes technical changes, including to ensure that the
OHS executive director remains a department head as of July 1, 2022 (§
11).
*House Amendment “A” (1) requires, rather than allows, the OHS
executive director to hold certain hearings related to benchmarks and
spending targets; (2) requires she meet with certain entities before
identifying them as missing these benchmarks or exceeding the
spending targets; (3) makes several minor changes to the benchmark
and spending target provisions, including to the type of information
certain annual reports to the legislature must contain; and (4) adds the
HEP and CON provisions.
EFFECTIVE DATE: Upon passage, except the HEP provisions are
effective January 1, 2023, and a technical change is effective July 1, 2022. 2022HB-05042-R01-BA.DOCX
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§ 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 plan, 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-R01-BA.DOCX
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§ 1 — OHS DUTIES
The bill adds the following to OHS’s duties:
1. setting an annual health care cost growth benchmark and
primary care spending target, as described below;
2. developing and adopting health care quality benchmarks, as
described below;
3. developing strategies, in consultation with stakeholders, to meet
these benchmarks and targets;
4. enhancing the transparency of provider entities; and
5. monitoring the (a) development of accountable care
organizations and patient-centered medical homes and (b)
adoption of alternative payment methodologies in Connecticut.
§ 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
calendar years 2021 through 2025, and
2. annual health care quality benchmarks for calendar years 2022
through 2025.
She must also publish on the website each adopted health care cost
growth benchmark and annual primary care spending target.
The director must 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 2022HB-05042-R01-BA.DOCX
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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 requires the executive director to hold at least one
informational public hearing before adopting the health care
benchmarks and spending targets. It also authorizes her to hold
additional informational hearings on (1) health care cost growth
benchmarks and primary care spending targets after they have been set
and (2) the quality measures she proposes as health care quality
benchmarks. The hearings must be held at a time and place she
designates, and a notice must be prominently posted on the OHS 2022HB-05042-R01-BA.DOCX
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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 requires the executive director to annually review the current
and projected inflation rates and post her findings on OHS’s website,
including her reasons for changing or maintaining a benchmark. For
modifications to health care cost growth benchmarks, an additional
hearing is not required if the modifications are due to inflation rates.
The executive director must post a summary of any informational
public hearing she holds on these benchmarks and targets on OHS’s
website, including her decision to modify them if applicable.
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 2022HB-05042-R01-BA.DOCX
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a form and manner the executive director prescribes for the preceding
or prior years, upon her request, based on material changes to data
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;
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; and
4. any other factors the executive director deems relevant to
providing context, which must include the impact of inflation
and medical inflation, the impacts on access to care, and
responses to public health crises or similar emergencies.
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, 2022HB-05042-R01-BA.DOCX
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economic, and other experts and consultants.
§§ 5 & 6 — FAILURE TO MEET HEALTH CARE BENCHMARKS AND
SPENDING TARGETS
Payers and Provider Entities
Beginning in 2023, the bill requires the OHS executive 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
are available). She must do so annually by May 1. However, before
identifying any payer or provider entity, she must meet with it upon its
request to review and validate the total medical expense data collected.
She must review any information the payer or provider entity provides
and, if necessary, amend her findings before identifying it as exceeding
the health care cost growth benchmark or failing to meet the spending
targets.
Beginning in 2024, she must also identify, annually by May 1, each
payer or provider entity that exceeded the health care quality
benchmark for the performance year. She must similarly meet with any
payer or provider entity upon its request to review and validate the
quality data she collected and, if necessary, amend her findings before
making a determination.
Within 30 days of making these identifications, 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
Beginning in 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, 2022HB-05042-R01-BA.DOCX
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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,
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; 2022HB-05042-R01-BA.DOCX
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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 to 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.
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 2022HB-05042-R01-BA.DOCX
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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:
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;
2. include any findings from the total health care expenditure
report;
3. describe how to monitor any unintended adverse consequences
from the cost growth benchmarks and primary care spending
targets, as well as any findings from doing so; and
4. disclose the office’s recommendations, if any, on strategies to
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,
2. include the findings from the health care quality benchmark
report
3. disclose the office’s recommendations, if any, on strategies to
improve the quality of the state’s health care system, including 2022HB-05042-R01-BA.DOCX
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any recommended legislative changes.
§ 8 — HEALTH ENHANCEMENT PROGRAMS
The bill requires health carriers to develop at least two HEPs by
January 1, 2024. Each HEP must (1) be available to each insured under
the health insurance policy and (2) provide incentives to each insured
directly related to providing health insurance coverage for insureds
choosing to complete certain preventive examinations and screenings
the U.S. Preventive Services Task Force recommends with an “A” or “B”
rating.
The bill prohibits an HEP from imposing any penalty or negative
incentive on an insured. It also specifies that an insured cannot be
required to participate in an HEP.
The bill also requires certain individual and group health insurance
policies to cover the HEPs. (However, it is unclear if this means they
must cover HEP administration costs or the examinations and
screenings insureds receive through the HEP.)
The bill’s HEP provisions apply to individual and group health
insurance policies delivered, issued, renewed, amended, or continued
in Connecticut that cover (1) basic hospital expenses; (2) basic medical-
surgical expenses; (3) major medical expenses; or (4) hospital or medical
services, including those provided under an HMO plan.
§ 9 — CON APPLICATION FEE
The bill increases the nonrefundable CON application fee from $500
to a range of $1,000 to $10,000 depending on the proposed project’s cost,
as shown in Table 1 below.
Table 1: CON Application Fees Under the Bill
Application Fee Project Cost
$1,000 Up to $50,000
$2,000 >$50,000 and up to $100,000
$3,000 >$100,000 and up to $500,000
$4,000 >$500,000 and up to $1 million
$5,000 >$1 million and up to $5 million 2022HB-05042-R01-BA.DOCX
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Application Fee Project Cost
$8,000 >$5 million and up to $10 million
$10,000 >$10 million
BACKGROUND
Related Bills
sSB 15 (File 39), reported favorably by the Insurance and Real Estate
Committee, contains similar HEP provisions as this bill.
sHB 5449 (File 343), reported favorably by the Insurance and Real
Estate Committee, increases CON application fees in different amounts
than this bill.
COMMITTEE ACTION
Insurance and Real Estate Committee
Joint Favorable
Yea 17 Nay 0 (03/10/2022)