The Delaware General Assembly is considering a wide-ranging update to state health care law that would reshape how primary care services are covered, paid for, and regulated across the state.
The legislation, known as Senate Substitute No. 2 for Senate Bill No. 1, makes changes to four separate sections of the Delaware Code — Titles 16, 18, 29, and 31 — as well as an earlier chapter of Delaware law dealing with primary care insurance.
Under the bill, the Health Care Commission would work alongside the Primary Care Reform Collaborative to monitor whether primary care providers are following value-based care delivery models set up through the Office of Value-Based Health Care Delivery. The Commission would also have ongoing authority to request written progress reports from health insurers on how they are adopting and implementing value-based payment approaches — removing a previous deadline on that authority.
The bill establishes that financial penalties for certain insurance law violations could be equal to the amount of the violation itself, and that money collected from those penalties would go into a dedicated Primary Care Fund. That fund would be used by the Statewide Benefits Office and the Division of Medicaid and Medical Assistance.
Starting in 2026, insurance carriers offering individual and group health plans would be required to spend at least 11.5% of their total cost of medical care on primary care services. At least 5% of that spending must come through prospective primary care management payments. Carriers would also be required to offer value-based care programs and could not prevent contracted providers from participating in those programs.
The bill extends existing cost containment calculations through rate filing year 2027. Delaware’s two smallest hospitals and its only free-standing children’s hospital would be exempt from that extension due to their size and the patient populations they serve within Delaware’s health care market.
Beginning in rate filing year 2028, the legislation sets limits on what health benefit plans may pay per service, tying those limits to Medicare Reference-Based Pricing Targets. Those targets are based on the full Medicare rate, the free-standing children’s hospital Medicare outpatient payment rate, or the TEFRA Rate — a target amount under the federal Tax Equity and Fiscal Responsibility Act Waiver Program that applies to free-standing children’s hospitals.
Exemptions from those pricing limits would apply to Delaware’s two smallest hospitals and, under certain conditions, to a Delaware hospital located in a high-growth, high-Medicare population region that is making progress on value-based care.
Insurance carriers that have been issuing plans in the commercial market for at least two consecutive years and cover more than 5,000 members would be required to meet minimum percentages of alternative payment model contracting.
The bill also applies similar primary care spending requirements to health coverage for state public officers and employees. Plans covering public workers would need to report data on primary care spending as a percentage of total medical costs for plan years 2027 and 2028, and then increase primary care spending by 1% per year until it reaches 11.5% of total medical costs.
The same incremental spending increase requirement would apply to entities providing health insurance under the state’s public assistance programs.
A sunset clause that would have eliminated several key provisions of existing law on January 1, 2027 is removed under this bill, allowing those provisions to remain in effect going forward.
The Department of Insurance would be required to issue regulations implementing the law within 18 months of enactment. Regulations establishing a method for calculating annual inflation and other adjustments to a hospital’s full Medicare rate must be in place by January 1, 2027.
This version of the bill differs from an earlier substitute in that it adds additional exemptions from aggregate unit price growth limits for free-standing children’s hospitals, hospitals that qualify as Medicare-Dependent Rural Hospitals based on federal criteria for at least three of the five years before the applicable rate filing year, and Urban Medicaid DSH Hospitals. It also directs the Department of Insurance and the State Employee Benefits Office to lead a process — in consultation with Delaware hospitals — to recommend how inflation and other adjustments to a hospital’s full Medicare rate should be determined and applied by January 1, 2027.
