HSB 641

House File 2488 as amended by Senate amendment H-8252 relates to prior authorizations and exemptions by health benefit plans and utilization review organizations and certain cost controls for health care services.

Division I — Prior Authorizations and Exemptions

Description

Division I relates to prior authorizations and exemptions by health benefit plans and utilization review organizations. The Bill as amended does the following:

• Provides requirements for utilization review organizations in responding to requests for prior authorization from health care providers, in reviewing health care services, and in eliminating prior authorization requirements for health care services that meet conditions described in the Bill as amended.
• Requires all health carriers that deliver, issue for delivery, continue, or renew a health benefit plan on or after January 1, 2025, to implement a pilot program prior to January 16, 2025, that exempts a subset of participating health care providers from certain prior authorization requirements. Includes requirements for health carriers administering the pilot program.
• Requires each health carrier that implements the pilot program described in the Bill as amended to submit a report to the Commissioner of Insurance on or before January 15, 2026, containing the results of the exemption program, including an analysis of the costs and savings, the health benefit plan’s recommendations regarding the program, feedback received regarding the program, and an assessment of the administrative costs incurred by the program.

Background

“Prior authorization” is defined in Iowa Code section 514F.8 as a determination by a utilization review organization that a specific health care service proposed by a health care provider for a covered person is medically necessary or medically appropriate, which determination is made prior to the provision of the health care service to the covered person, and, if applicable, includes a utilization review organization’s requirement that a covered person or a health care provider notify the utilization review organization prior to receiving or providing a specific health care service.

Utilization review is defined in Iowa Code section 514F.4 as a program or process by which an evaluation is made of the necessity, appropriateness, and efficiency of the use of health care services, procedures, or facilities given or proposed to be given to an individual. According to the Board of Regents (BOR), the turnaround time for prior authorization decisions required by the Bill as amended aligns with current practices. Administrative expenses make up a small portion of the State Insurance Plan and BOR Insurance Plans. The estimated total spend for the State of Iowa Insurance Plan is approximately $340.0 million and for the BOR Insurance Plans is approximately $458.1 million.

Assumptions

• Administrative costs to the State of Iowa Insurance Plan and the BOR Insurance Plans may increase as a result of the Bill as amended, but the amount of the increase cannot be determined.
• Claims costs to the State of Iowa Insurance Plan may increase minimally.

Fiscal Impact

Division I may increase costs to the State of Iowa Insurance Plan and the BOR Insurance Plans beginning in CY 2025. Increased costs to the BOR Insurance Plans are estimated to be minimal. The increase in State of Iowa Insurance Plan costs is estimated to be minimal, but has the potential to reach 0.1%, which would reflect a $340,000 increase. The duration of the pilot programs required by the Division is not known; therefore, the duration of potential costs cannot be determined at this time.

Sources

• Iowa Insurance Division, Department of Insurance and Financial Services
• Board of Regents
• Wellmark
• Legislative Services Agency analysis
• Division II — Cost Controls for Health Care Services
• Description
• Division II relates to certain cost controls for health care services and does the following:
• • Adds the improper denial of claims, as described in the Bill as amended, to the list of unfair
• methods of competition and unfair or deceptive acts or practices defined in Iowa Code
• section 507B.4.
• • Provides requirements for health care providers (providers) to establish and disclose
• discounted cash prices the provider will accept for specific health care services (services).
• The Bill as amended prohibits a provider from entering into a contract that prevents the
• provider from offering or disclosing a cash price below the contracted rates the provider has
• with a health carrier.
• • Establishes disclosure requirements regarding deductible credits and for covered persons’
• out-of-pocket pricing for prescription drugs that meet the conditions in the Bill as amended.
• • Establishes disclosure and substitution requirements for health benefit plans regarding the
• average allowed amount for each health care service.
• • Requires credit to be applied towards in-network cost-sharing for covered persons who
• receive service at a discounted cash price other than the average allowed amount at the
• lower of the two amounts if the service is provided by an in-network provider.
• • Prohibits a health benefit plan from discriminating in the form of payment for an in-network
• covered service on the basis of the covered person’s being referred for the service by an
• out-of-network provider.
• • Establishes payment credit requirements for cost-sharing for a covered person who
• purchases generic covered prescription drugs for less than the average allowed amounts for
• the name-brand equivalent.
• • Establishes requirements for health-denying claims pursuant to the Bill as amended,
• including an appeal process and a trigger for an investigation into claim denials by the
• Commissioner of Insurance (Commissioner).
• • Requires health benefit carriers to provide covered persons with a program that rewards the
• covered person with a savings incentive for medically necessary services received from
• providers that offer a cash price below the average allowed amount.
• • Provides requirements for a provider’s initiation or pursuit of a collection action against a
• person for a debt owed for a service.
• • Requires the Department of Administrative Services (DAS) to conduct an analysis of the
• cost-effectiveness of offering a savings incentive program and deductible credit for State
• employees and retirees before August 1, 2025.
• • Requires the DAS to submit a report to the General Assembly on or before September 1,
• 2025, containing an explanation of the implementation decision regarding a savings
• incentive program or deductible credit program.
• • The Bill as amended requires any such program to be implemented for the 2026 State
• employee health insurance open enrollment period.
• Background
• Iowa Code section 507B.4 establishes a list of unfair methods of competition and unfair or
• deceptive acts or practices with respect to the insurance trade, including but not limited to
• misrepresentation and false advertising of insurance policies, unfair discrimination, and unfair
• claim settlement practices.
• Iowa Code section 507B.6 permits the Commissioner to issue and serve a statement of charges
• upon a person who the Commissioner believes has been engaged or is engaging in any unfair
• method of competition or any unfair or deceptive act or practice that would be in the public
• interest. At the hearing, the person has the opportunity to be heard and show cause why an
• order should not be made by the Commissioner to require the person to cease and desist from
• the acts, methods, or practices complained of.
• The 2026 State employee health insurance open enrollment period begins October 2025.
• Assumptions
• • Providers will be required to establish and disclose the discounted cash price for health care
• services available to consumers.
• • Insurers will be required to provide the minimum negotiated charge a provider has
• negotiated with the carrier.
• • Health carriers offering prescription drug coverage will be required to make the out-of-pocket
• pricing for all formulary medications available.
• • The Bill as amended may require operational and administrative changes to the insurance
• plans, which may increase expenses.
• • According to the DAS, in order to conduct the analysis of the savings incentive program
• required by the Bill as amended, the DAS will need to hire an outside consultant with
• expertise in the subject matter. The outside consultant may cost up to $495 per hour. The
• total cost cannot be estimated at this time. The DAS states that any associated fiscal impact
• is not currently included within its operating budget.
• Fiscal Impact
• Division II is estimated to increase operational and administrative expenses for the State of
• Iowa Insurance Plan and the BOR Insurance Plans. The fiscal impact cannot be estimated at
• this time but may be significant.
• The fiscal impact to the DAS to conduct the analysis and complete the report required by the Bill
• as amended cannot be determined.
• Sources
• Iowa Insurance Division, Department of Insurance and Financial Services
• Department of Administrative Services
• Board of Regents
• Wellmark
• Legislative Services Agency analysis