Senate Bill S7081

                                BILL NUMBER:S7081

TITLE OF BILL:  An act to amend the public health law, in relation to
covered lives assessments in the Rochester region

PURPOSE: This bill would facilitate health improvement in the
Rochester region by funding regional health improvement projects and
by providing a stable source of graduate medical education funding to
ensure and maintain the adequate supply of physicians to provide care
in the 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.