Senate Commerce Committee Statement to Senate, No. 2875 — State of New Jersey (May 13, 2024)

Summary

A Senate Commerce Committee statement to the Senate on Senate Bill No. 2875, State of New Jersey, dated May 13, 2024, reporting the bill favorably with committee amendments. The bill changes the minimum loss ratio requirements for the individual and small employer health insurance markets, requiring the 80 percent minimum loss ratio for the previous year to be calculated on a three-year rolling average. It directs the Department of Banking and Insurance to issue regulations on how carriers aggregate data, what counts in the numerator, and the exclusion of new or increased State and federal taxes or assessments from premiums. The amendments say a quality-improvement activity must lead to measurable improvements in patient outcomes or safety, prevent hospital readmissions, promote wellness, or enhance health information technology.

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SENATE COMMERCE COMMITTEE

STATEMENT TO

SENATE, No.
2875

with
committee amendments

STATE
OF NEW JERSEY

DATED: MAY 13,
2024

The Senate Commerce Committee reports favorably and
with committee amendments Senate Bill No. 2875.

As amended, this bill makes certain changes to the
minimum loss ratio requirements for the individual and small employer health
insurance markets. Generally, a minimum loss ratio requires health insurers to
spend a certain portion of each premium dollar on claims payment and on quality
improvement. The remaining portion of each premium dollar may be spent on
administrative expenses.

Under the bill, the 80 percent minimum loss ratio for
the previous year is required to be calculated based on a three-year rolling
average. In addition, the bill requires the Department of Banking and
Insurance to issue regulations for both the individual and small employer
markets:

(1) requiring a health insurance carrier’s minimum
loss ratio to be calculated by aggregating the data for a three-year period
which includes the data for the previous calendar year whose minimum loss ratio
is being calculated, including three months of runout through the first quarter
of the subsequent year and the data for the two years immediately preceding the
year for which the minimum loss ratio is being calculated;

(2) requiring that the numerator of a carrier’s
minimum loss ratio for a minimum loss ratio reporting year to be the carrier’s
claims paid plus the carrier’s expenditures for activities that improve health
care quality;

(3) requiring adjustments to be either included in or
deducted from incurred claims receipts related to the transitional reinsurance
program and net payments or receipts related to the risk adjustment; and

(4) requiring that any new or increased State and
federal taxes or assessments be excluded from premiums for purposes of the
minimum loss ratio calculation.

COMMITTEE AMENDMENTS :

The committee amended the bill to provide that, to be
included as an activity that improves health care quality, the activity is to
lead to measurable improvements in patient outcomes or patient safety, prevent
hospital readmissions, promote wellness, or enhance health information
technology in a way that improves quality, transparency, or outcomes.

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