LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington St., Suite 301
Indianapolis, IN 46204
(317) 233-0696
iga.in.gov
FISCAL IMPACT STATEMENT
LS 6847 NOTE PREPARED: Jan 9, 2024
BILL NUMBER: HB 1393 BILL AMENDED:
SUBJECT: Managed Care and Hospital Assessment Fee.
FIRST AUTHOR: Rep. Barrett BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
DEDICATED
XFEDERAL
Summary of Legislation: Managed Care Assessment Fee (MCAF): The bill authorizes the Managed Care
Assessment Fee (MCAF) to be assessed against specified insurers and administered by the Office of the
Secretary of Family and Social Services (FSSA). The bill also establishes the Managed Care Assessment
Fee Committee, and it sets forth requirements of the MCAF. It expires the MCAF on June 30, 2025.
High Risk Pool Fund: The bill establishes the High Risk Pool Fund.
Contractual Reimbursement Rates: It allows certain providers to contractually agree to a different
reimbursement rate with a managed care organization as part of a value based services contract. It also
excludes hospitals and private psychiatric hospitals.
Phase Out Trust Fund: The bill provides for payments to hospitals out of the Phase Out Trust Fund and
expires the fund.
Hospital Assessment Fee (HAF): The bill exempts: (1) physician owned hospitals; and (2) hospitals that only
provide respite care to certain individuals; from the Hospital Assessment Fee (HAF). It makes assessment
of the HAF subject to federal approval of changes made by this Act. It also requires the HAF committee to:
(1) review and approve the quality program; and (2) be guided to ensure hospitals are reimbursed at a rate
that meets specified requirements. The bill reduces the HAF by the MCAF and the payment from the Phase
Out Trust Fund.
State Directed Payment Program: It specifies components of a state directed payment program. It specifies
uses of the HAF and that the HAF will not be used for disproportionate share payments (DSH) if the state
HB 1393 1 directed payment program is implemented.
Department of Insurance: The bill requires the Commissioner of the Department of Insurance to revoke or
suspend the authority of a managed care organization to do business in Indiana if the managed care
organization fails to pay the MCAF.
Repeals: It repeals language concerning the Hospital Care for the Indigent Program, and it repeals language
specifying the distribution of the HAF.
Effective Date: Upon passage.
Explanation of State Expenditures: The Office of the Secretary of Family and Social Services (FSSA) will
have increased workload and costs outside of their routine operations to develop a methodology for assessing
the Manage Care Assessment Fee (MCAF), submit the plans to the MCAF and Hospital Assessment Fee
(HAF) committees and the federal government for approval, and support the newly established MCAF
committee. The FSSA will track collections of the MCAF and report to the Department of Insurance (DOI),
just as it currently collects the information from the HAF and reports to the Budget Committee. The FSSA
may adopt provisional and final rules to implement the MCAF program.
The bill establishes a state direct payments program to implement value-based payments. Value-based
payments use incentive payments to achieve quality goals. The FSSA will have to develop the program and
receive approvals from the federal program. While improved quality can reduce overall health care costs to
Medicaid, the program may provide higher levels of reimbursement to hospitals that meet quality goals than
the current supplemental payments under the HAF.
The bill increases the workload for the DOI to administer the nonreverting High Risk Pool Fund. The fund
will receive 10% of the MCAF for high-cost medical conditions. The use of the fund is not specified.
For all of the these programs and assessment fees, the FSSA or the DOI may need outside consultants, similar
to rate-setting consultant contracted to implement the HAF and the actuarial services supporting a previous
high-risk insurance pool. [However, no high-risk insurance program is required by the bill.] It is estimated
that consultant costs will be at least $250,000 to implement the programs.
The bill establishes the Managed Care Assessment Fee Committee with eight members, who serve without
compensation.
Additional Information - The FSSA contracted with Myers and Stauffer as a consultant to initialize the HAF.
The contract covering the period 2016 to 2019 incorporated many rate setting projects. For hospital related
task the FSSA paid about $250,000 a year during the five-year period.
The Indiana Comprehensive Health Insurance Association (ICHIA) dissolved in 2014 with the enactment
of the Affordable Care Act. Up to that point, ICHIA provided a high-risk insurance pool for individuals who
could not get insurance and for those with high-cost conditions. The coverage premium was funded 50% by
the insured, 12.5% by insurance companies, and 37.5% from state General Fund. In 2012, with 1,200 of the
7,400 participants in the high-risk category, the total program cost was $145 M. The health status of the
insureds raised health care and premium costs significantly for this population.
Kentucky’s state directed payments program to implement value-based payments commenced in 2020.
HB 1393 2 Twenty percent of provider payment is withheld through the end of the performance period. Performance
must improve 2% over the current year performance on six metrics that are chosen by each provider from
a menu of options. Metrics with already high achievement by the provider are removed from the menu. The
total state and federal spending for inpatient, outpatient, and certain provider services that participate in the
program is $1.75 B for plan year 2024.
Explanation of State Revenues: Revenue from the new MCAF will be deposited in the state General Fund
and dedicated funds to provide the state’s share of Medicaid programs, in some cases replacing the existing
HAF funded state share. The MCAF will equal 6% of premium revenue generated by managed care
organizations (MCO) beginning in FY 2025. The bill provides conditions that could affect the rate imposed.
[This fiscal note will be updated if premium revenue information becomes available from the Department
of Insurance.] Additionally, the FSSA may impose an interest penalty on assessments that are more than 11
days delinquent. The FSSA will determine the assessment method in consultation with the MCAF and HAF
committees.
The revenue from the HAF will decrease when the $23 M balance in the Phase Out Trust Fund is applied
to the incremental HAF assessment, thereby distributing it prorata to the HAF-paying hospitals currently
participating. The Phase Out Trust Fund will expire on July 1, 2025. The HAF revenue will also decrease
when certain uses are funded by the MCAF, or repealed.
The bill’s exemption of physician-owned and respite hospitals will redistribute the HAF and the incremental
HAF among the remaining hospitals, possibly increasing cost for those remaining hospitals. Medicaid is
administered by the state with policies set within a federal framework. Federal requirements on assessment
fees, including being broad based, uniform, and no guarantee of repayment, may affect the requirements of
the bill. Additionally, without federal approval of the HAF changes, the MCAF would not be implemented.
Additional Information - The MCAF revenue will be used to replace some state cost currently paid by the
HAF. The following table shows the apportionment of the MCAF revenue in the bill. (The distribution does
not total 100% of the revenue.)
Use Percentage
FSSA Medicaid Expenses 28.5%
Inpatient and Outpatient reimbursement at Medicare levels 20%
Funding the state share of the Medicaid expansion population 20%
High Risk Pool to lower premium costs for high cost medical
conditions
10%
Explanation of Local Expenditures: Locally owned hospitals that pay HAF will have some reduction in
cost contingent on the amount of increase from limiting the contributing hospitals.
Explanation of Local Revenues:
State Agencies Affected:
HB 1393 3 Local Agencies Affected:
Information Sources: Paul Bowling, FSSA; Douglas Stratton, Letter to State Budget Director re: Budget
Committee Presentation, December 12, 2013; IDOA Contract Database, 86152-000;
https://www.macpac.gov/wp-content/uploads/2020/01/Health-Care-Related-Taxes-in-Medicaid.pdf;
https://www.cms.gov/medicare/quality/value-based-programs;
https://www.medicaid.gov/sites/default/files/2023-07/ky-fee.vbp-iph.oph_.amc-renewal-20240101-20241
231.pdf
Fiscal Analyst: Karen Rossen, 317-234-2106.
HB 1393 4