Reimbursement Caps and Floors.

For urban, non-pediatric hospitals, reimbursement for inpatient and outpatient facility services will be capped at 200 percent of what Medicare would have paid. Pediatric hospitals and critical access hospitals have different reimbursement rules, and some rural hospitals are exempt from the law altogether.

An earlier draft of the bill would have required hospitals to contract with PEBB/SEBB upon a good-faith offer, but this was removed. Instead, the legislature introduced a 185 percent cap for out-of-network hospitals.

The law also introduces reimbursement floors for primary care and behavioral health services. These services must be reimbursed at no less than 150 percent of Medicare.

Potential Swings in Service Line Reimbursement.

The Office of the Insurance Commissioner’s 2024 Affordability Report sheds light on how different service lines may be affected. Emergency department facility services averaged approximately 309 percent of Medicare in 2022 and therefore are likely to see the largest impact. Services already priced below the cap may not see direct changes. The same report shows primary care office visits at 149 percent of Medicare, and behavioral health at about 88 percent, indicating primary care sees only a marginal increase while behavioral health may see a more significant change.

What This Means for Providers.

Providers should begin evaluating how these ceilings and floors may affect 2027 contracting. While the law applies only to PEBB/SEBB plans, hospitals raised concerns during public testimony about indirect effects on commercial contracting. Primary care and behavioral health providers should be prepared to leverage the statutory minimum in future negotiations.

If you would like more guidance on how this law may affect your contracted rates with any payer, please contact an attorney in our health law practice group.