10/2001: State Legislative Update

Published October 1, 2001


HMOs are leaving rural California, and residents are being forced to pay higher premiums or go without coverage. At least 16 rural counties have lost some or all of their health maintenance organizations. Legislators have been warned by the HMOs, who say there are not enough patients able to afford rising health costs.


Seeking to rein in spiraling prescription drug costs, the state has passed a get-tough measure aimed at collecting millions of dollars lost annually in improper Medicaid pharmacy claims.

In 1999, Georgia paid out some $21 million to cover prescription drug costs for Medicaid patients who should have had part of their bills covered by a third party, typically a private insurance company or the federal government.


Illinois became the 36th state to approve a new insurance producer licensing bill that brings the state into compliance with the federal Gramm-Leach-Bliley Act. H.B. 2994 was signed in September by Governor George Ryan and becomes effective January 1, 2002.

The bill essentially adopts provisions of the National Association of Insurance Commissioners’ model law allowing for reciprocity in the licensing of most nonresident agents.


State pharmacists won a temporary injunction to stop an “emergency” reduction in Medicaid reimbursements for prescriptions.

The lawsuit stems from Governor Frank O’Bannon’s (D) plan to cut nearly $100 million from the state Medicaid program’s $1.15 billion drug budget by cutting the fee pharmacists get to fill a Medicaid prescription from $4 to $3, and by cutting drug markups by as much as one-half.

The two pharmacies involved in the suit, Walgreen’s and CVS, say if the cuts take place, store closings and reduced hours would be necessary–affecting more than 650,000 Medicaid beneficiaries, as well as patrons who shop in stores that fill a lot of Medicaid prescriptions.


The House Ways and Means Committee has approved a measure allocating $42 million of the state’s FY 2001 budget surplus to increased Medicaid reimbursements for hospitals and grants to “financially distressed” hospitals. The measure is part of a larger $494 million surplus spending bill.

According to a statement made by Craig Melin, past chairman of the Massachusetts Hospital Association, to the Springfield Union-News, this “sets the stage” for reducing the annual $200 million gap between hospital Medicaid costs and state reimbursement rates.

“The problem,” Melin stated, “is the gap is large that it is affecting care all over the state.” Passage by the legislature is expected.


Thousands of disabled people will be able to earn more money and still qualify for Medicaid benefits under a new bill signed by Governor Holden. Under the law, an individual can earn 2-1/2 times the federal poverty level–$21,480 a year–and still qualify.

Holden called the legislature back into special session on September 5 in an effort to produce a new prescription drug program for seniors. The current program is breaking the budget. Senator Marv Singleton (R) has offered a bill that utilizes the private sector; it may run into stiff opposition from Democrats.

New York

Although state legislators have focused a great deal of their attention and efforts on providing health insurance for uninsured children, the majority of uninsured New Yorkers are adults, according to a study released last month by the United Hospital Fund.

Approximately 2.4 million of the estimated 3 million uninsured New Yorkers are between the ages of 19 and 64, and 75 percent of those are from families in which at least one member is employed.

The report notes New York has made “considerable progress” in addressing the uninsured children problem, but the uninsured rate for adults has remained high. Overall, 20 percent of the state’s 9 million workers lack health insurance.


Ohio’s largest physicians association will stay on the sidelines, at least for now, in court challenges to far-reaching patient privacy regulations being enacted by the Bush administration.

Lawsuits challenging the constitutionality of privacy rules mandated by the Health Insurance Portability and Accountability Act (HIPAA) have been filed by doctors organizations in the past month in federal courts in Texas and South Carolina.


Patients of county-owned hospitals may sue and recover damages for negligence if the hospital has liability insurance, the Kentucky Supreme Court ruled in August.

In a unanimous ruling that lifted the immunity that previously shielded such hospitals from lawsuits, the Supreme Court found the patients may collect damages from the insurer. The ruling is unclear as to what happens if no liability insurance exists.


State legislators are crafting a plan to use a portion of the state’s $11 billion share of the national tobacco settlement to provide basic health insurance coverage to about 375,000 uninsured adults. About 1.2 million state residents are reportedly uninsured.

The program will be managed by Patricia Stromberg, executive director of the state’s CHIP program, and will be available to adults aged 19 to 64 years old who have been without health insurance for at least 90 days and who have lived in the state for at least 90 days. Eligibility is also means-tested, using 200 percent of the federal poverty level as a base.

The state Insurance Department is seeking proposals from private insurers.

Rhode Island

Rhode Island ranks third in the nation in the percentage of children who have received the recommended vaccinations by age 2, and first in the nation in the percentage of children with health insurance. Legislators suggest it’s a laudable record . . . but not a perfect one. A glance at the raw numbers shows the room for improvement.


The Young Conservatives of Texas (YCT) have drawn a line in the sand. Now they are challenging Bexar County District Attorney Susan Reed to step across it and join their side of a controversial health care issue involving the free, non-emergency treatment of illegal immigrants.

The 21-year-old YCT has filed a complaint with Reed’s office, as well as with the district attorneys’ offices in Dallas and El Paso counties. In those complaints, the group charges the hospital districts with dispensing “illegal socialized medicine.”


The Wyoming health care subcommittee approved a prescription medication plan with a $1,000 deductible for any family earning less than 200 percent of the federal poverty level, or about $35,000 a year. After a three-month phase in, the deductible would drop to $300 with beneficiaries having a $10.00 co-pay. The program would be run by the state Department of Health. The bill now moves to the Labor Committee for further consideration.

Sources: The Council for Affordable Health Insurance (CAHI) and its member companies provided information for this State Legislative Update. Contact CAHI at [email protected], Additional material was provided by The National Association of Health Underwriters (NAHU) http://nahu.org/government, http://bizjournals.com, http://stateline.org, and Nexis/Lexis research.