HB 37 - SB 428
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
February 28, 2025
Fiscal Analyst: Chris Higgins | Email: chris.higgins@capitol.tn.gov | Phone: 615-741-2564
HB 37 - SB 428
SUMMARY OF BILL: Authorizes an insurer offering a group insurance plan that covers
state employees to adopt or amend a state preferred drug list (PDL). Requires the insurer, when
establishing a PDL, to ensure that a non-opioid drug approved by the federal Food and Drug
Administration (FDA) for the treatment or management of pain is not disadvantaged or discouraged
with respect to coverage relative to an opioid or narcotic drug for the treatment or management of
pain on the PDL. Applies to a non-opioid drug immediately upon its approval by the FDA for the
treatment or management of pain, regardless of whether the drug has been reviewed by the insurer
for inclusion on the PDL. Includes non-opioid drugs being provided under a contract between the
insurer and a pharmacy benefits manager (PBM) for purposes of a group insurance plan.
Requires an insurer, for purposes of offering a group insurance plan, to ensure that reimbursement
is provided to a healthcare prescriber who provides a non-opioid treatment to a covered employee
under the group insurance plan. Requires the insurer to ensure that a hospital that provides either
inpatient or outpatient services to a recipient is reimbursed separately under the group insurance
plan for any non-opioid treatment provided as a part of those services.
FISCAL IMPACT:
STATE GOVERNMENT
EXPENDITURES General Fund
FY25-26 & Subsequent Years $1,220,800
FEDERAL GOVERNMENT
EXPENDITURES
FY25-26 & Subsequent Years $133,500
LOCAL GOVERNMENT
EXPENDITURES Mandatory
FY25-26 & Subsequent Years $826,600
Article II, Section 24 of the Tennessee Constitution provides that: no law of general application shall impose increased expenditure
requirements on cities or counties unless the General Assembly shall provide that the state share in the cost.
Assumptions:
HB 37 - SB 428 2
• The State Group Insurance Program (SGIP) under the Division of Benefits Administration
(Division) offers health plans to state employees, higher education employees, and
employees in participating local education and local government agencies.
• The SGIP contracts with a pharmacy benefits manager (PBM) who utilizes the same
formulary for all three plans offered by the SGIP. Therefore, it is assumed any impact to
changes for state employees will impact higher education and local employees as well.
• Non-opioid drugs can be added to the SGIP's formulary utilizing existing resources;
however, the PBM will be unable to add such drugs immediately upon FDA approval due
to the administrative procedures that are required to do so.
• The proposed legislation will require the SGIP to reimburse inpatient or outpatient services
involving non-opioid treatment separately from any other services, which will require
significant changes to current reimbursement processes.
• Non-opioid medication reimbursement at inpatient settings is currently handled as part of
bundled payment arrangements that are negotiated between carriers and hospitals.
• The legislation requires non-opioid medications to be removed from the bundled payments
and paid for under a separate methodology, which will increase the cost.
• Based on information provided by the Division, requiring separate reimbursement for non-
opioid treatment will result in an increase in expenditures to the SGIP of approximately
$2,412,490 in FY25-26 and subsequent years.
• It is estimated that 48 percent of members are on the State Employee Plan, 43 percent are
on the Local Education Plan and 9 percent are on the Local Government Plan.
• The state contributes 80 percent of member premiums resulting in a recurring increase in
state expenditures of $926,396 ($2,412,490 x 48% x 80%).
• Some state plan members' insurance premiums are funded through federal dollars. It is
estimated 14.41 percent of the state share of the state plan is funded with federal dollars,
resulting in an increase in federal expenditures of $133,494 ($926,396 x 14.41%).
• The state contributes 45 percent of instructional member premiums (75 percent of Local
Education Plan members) and 30 percent of support staff member premiums (25 percent
of Local Education Plan members) resulting in state expenditures of $427,915 [($2,412,490
x 43% x 75% x 45%) + ($2,412,490 x 43% x 25% x 30%)].
• The mandatory increase in expenditures for the local government share of the Local
Education Plan is estimated to be $609,456 [($2,412,490 x 43%) - $427,915)].
• The state does not contribute to the Local Government Plan. It is estimated the Local
Government Plan would be responsible for a mandatory increase in local expenditures
estimated to be $217,124 ($2,412,490 x 9%).
• The total increase in state expenditures is estimated to be $1,220,818 ($926,396 - $133,494
+ $427,915) in FY25-26 and subsequent years.
• The total increase in federal expenditures is estimated to be $133,494 in FY25-26 and
subsequent years.
• The total mandatory increase in local expenditures is estimated to be $826,580 ($609,456 +
$217,124) in FY25-26 and subsequent years.
HB 37 - SB 428 3
IMPACT TO COMMERCE:
BUSINESS IMPACT
FISCAL YEAR REVENUE
FY25-26 & Subsequent Years $2,412,500
Assumptions:
• Healthcare providers and pharmaceutical companies will experience an increase in business
revenue of $2,412,490 in FY25-26 and subsequent years from increased reimbursement for
non-opioid medications.
• There will be no impact to jobs in Tennessee as a result of the proposed legislation.
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director