Relates to covered lives assessments in the Rochester region

Summary of provisions

All health insurers and self-insured employers currently pay what are called "covered lives assessments" (CLA). These are monthly payments based on the number of insured persons residing within each region of the State. The existing CLA process funds a number of important health financing objectives. This bill would incorporate two additional program areas in the Rochester region only that have been deemed by healthcare stakeholders in the region to be a priority. The CLA assessments already vary in amount by region and the proposed adjustment would affect only insurers and self-insured plans for their covered persons in the Rochester region. Most of the increased funding for graduate medical education would be offset by decreases in hospital rates to the insurers and plans: the increased costs to insurers would $17 per year for an individual and $58 per year for a family. The bill is supported by a broad coalition of business groups, the two largest health insurers and the hospitals in the region.

Justification

Rochester's health care system has the unique advantage of nearly a century of collaborative community planning. It has long distinguished itself as a community able to develop innovative, cooperative approaches to health care financing and delivery. It has been done so by bringing together the interests of employers, academia, providers, insurers, and consumers. The benefits of this community approach - costs that are 20% below the national average with excellent quality and access - have been highlighted by everyone from President Clinton to the recently issued report by the Institute of Medicine noting Rochester's annual cost-per-Medicare beneficiary was the lowest in the country.

One key factor in Rochester's pre-eminence is a teaching program that has provided a reliable pipeline of medical personnel across the Rochester region. Currently, the three Rochester-based providers train a total of 916 residents. On average, 42% of the graduating residents and fellows who train in Rochester remain there for their first professional position, which has enabled Rochester to avoid the severe physician shortages experienced elsewhere. An equal number of doctors who graduate from the University's School of Medicine and Dentistry affiliate with the local non-University health systems as with the Medical Center. The community's ability to attract and compete for the best students, physicians, and faculty is dependent on the quality and quantity of our academic research. Residents want to train at prestigious institutions with groundbreaking research and have access to the best physician mentors. These interrelated missions allow the next generation of practitioners and academic leaders in education, research, and community health to apply this knowledge to patient care. This translational research, which enables patients early access

through clinical trials to emerging technology, drugs, and procedures, also generates new jobs and companies for the region. Educating and training physicians would not be possible without both public (Medicaid and Medicare) and private health plan support. As a source of medical innovation and discovery, academic medical centers and teaching hospitals are inherently more expensive to operate.

This bill has two components:

* Approximately $100 million in GME support is currently generated from the claims payment rates Rochester region hospitals have negotiated with private payers, which covers additional expenses of operating hospitals with residents and fellows. The CLA adjustment in this bill will instead fund those costs through the CLA payments to assure more stable, long term funding. This bill will replace that existing support on a budget-neutral basis by reducing rates paid by these insurers and health plans, to avoid any premium impact.

* Of the $10 million in new funding provided through the CLA adjustment, $5 million will support associated research and educational costs incurred by Medical Center faculty who teach students and residents in the Rochester area hospitals and the remaining $5 million will fund valuable shared community health infrastructure (e.g. health planning, community-wide safety and quality programs, community measurement, elimination of health disparities, and information technology linkages) that improve quality, affordability, and accessibility through collaborative community efforts. A total of $2 million of the second $5 million would be dedicated to the Finger Lakes Health Systems Agency (FLHSA) and would serve as a local private sector match for recently enacted state funding. The FLHSA would oversee investment in community health initiatives through a transparent, fiscally accountable, multi-stakeholder process.

Currently, the services above are funded by voluntary contributions, with certain local health plans, hospitals and employers bearing a disproportionate share of the expense. A formalized CLA assessment is the only method to assure that all health plans and all employers pay their fair share of community health improvement costs, rather than asking only certain health plans and employers to shoulder this expense for the benefit of the entire community.

In sum, although the region's CLA would be increased by $110 million per year, hospitals and health plans have agreed to reduce the claims payment rates that health plans pay to Rochester region hospitals by an offsetting $100 million per year. A third party will be engaged to assure that offsetting reduction occurs. The net impact of this bill is an increase of only $10 million in health care spending in the Rochester region, which is the equivalent of a 0.5% increase in premiums. There is no impact on regions other than Rochester and no impact on the State's general fund.

History

Similar proposal was in the Assembly one-house budget bill for the March 31, 2014 Executive Budget (A 8558-C).

Fiscal implications

There is no impact on the State Budget. The Medicaid program does not pay the HCRA CLA and the bill has no impact

on Medicaid spending. The HCRA CLA increase will be implemented by the Department of Health as the administrator of the HCRA collections process, but all CLA payments as a result of this bill will be made by private health insurers and self-insured employers in the Rochester region.

Effective date

January 1, 2015.