What Is Senate Bill 1
Senate Bill 1 was introduced on March 5th, 2026, immediately drawing intense criticism from the state’s large hospital systems. This is important but very complicated legislation, so this document attempts to break it down as simply as possible and give the necessary background and context.
Important Concepts
Primary Care - Regular doctor visits that tend to focus on preventative care. Generally there is a shortage of primary care within Delaware due to lower investment and insurance reimbursement rates.
Value-Based Health Care Delivery - Rather than the most common form of pricing, where health care providers are reimbursed based on the total number of services they provide, value-based care is more focused on measurable outcomes, intending to reduce overall costs.
Reference-Based Pricing - Rather than the standard form of pricing, where insurance companies negotiate with health care providers on a case-by-case basis, reference-based pricing sets hard caps on how much insurance companies can pay for certain services and procedures, usually based on something like Medicare rates.
Spending Benchmarks - These are goals, set by the state, that are meant to limit how much spending should increase in a given year on something like health care.
Primary Care Collaborative
For many years, there has been a shortage of primary care providers in Delaware — generalized doctors who do regular check-ups and help provide preventative care which stops bigger problems down the line.
In 2018, Bryan Townsend introduced and passed SB 227, which created the Primary Care Reform Collaborative and began making some changes to insurance in Delaware, most notably requiring insurance companies in Delaware to reimburse primary care providers at least at Medicare rates, which they had not been doing up to this point. This legislation also required more data reporting from insurance companies to the state and set the table for spending benchmarks that insurance companies would have to hit on primary care.
This initial legislation was designed in response to a shortage of primary care providers in the state of Delaware by essentially increasing the amount of money that insurance companies had to provide to those providers. It also created some longer-term infrastructure for the state to have more information about and control over health care spending.=
In 2019, this initial legislation was expanded with SB 116, which created an Office of Value-Based Health Care Delivery (OVBHCD), which sought to “reduce health care costs by increasing the availability of high quality, cost-efficient health insurance products that have stable, predictable, and affordable rates.” This worked in concert with the Primary Care Reform Collaborative, which was also expanded in this legislation, to research and make recommendations on how to reduce health care costs, primarily by encouraging value-based health care.
Moving Towards Capping Costs
Across 2021-22, two other major pieces of legislation were introduced to further the process of health care reform in Delaware:
SB 120 - Based on OVBHCD’s first report, this legislation continued the process of requiring a higher percentage of insurance spending on primary care, but also set harder limits on how much rates for “nonprofessional services” could go up per year, one of the first major attempts to limit rising health care costs.
HB 442 - This required the state to set more explicit benchmarks on how much it would spend on growing health care costs, building on a 2018 executive order by Carney which attempted to set limits on the state’s health care spending.
While earlier bills were mostly focused specifically on increasing investment in primary care, these pieces of legislation began the process of capping the costs of certain types of health care. The basic idea was that:
The money for increased investment in primary care had to come somewhere
There would be no incentive to invest in primary care unless you were less able to use more expensive and less necessary forms of care.
SB 120 essentially served as a way to shift any given dollar invested in health care from expensive hospital services to less expensive, preventative primary care. HB 442 also attempted to limit the state’s costs specifically, trying to set clearer limits on how much state-run and state-regulated plans were spending. This would become a key fight in following years.
Hospital Pricing and State Workers
In the years after the pandemic, Delaware health care spending skyrocketed, which raised overall costs but also began to put more financial strain on the state, which pays for Medicaid, state employee health plans, and some private plans. Beyond adding state costs, the cost of these state health care plans has become an issue for rating agencies, potentially threatening Delaware’s AAA bond rating. In 2022, the Carney administration attempted to address this by introducing Medicare Advantage to state retirees, but that attempt was quickly shut down by the legislature.
The other major attempt to start clamping down on the state’s health care costs — now some of the highest in the country per capita — came with HB 350. This legislation created the Diamond State Hospital Review Board, intending to address health care costs specifically by targeting the hospitals, the largest drivers of increased costs. The Review Board would have strict control over hospital costs, requiring them to submit their budgets and financial audits. If those hospitals exceeded the costs set by the state benchmarks, the Board had wide authority to approve or deny future budgets and offer changes. It also added temporary cost-cutting measures before the board was in place: requiring insurance plans to pay no more than 250% of Medicare’s reimbursement rate for hospital services.
HB 350 led to massive pushback from the states’ hospital systems, and ChristianaCare organized a lawsuit that was successfully able to reach an agreement to overturn large parts of the bill. This was formalized in SB 213 in early 2026, which took away the Board’s extensive powers to veto hospital budgets that it did not find in compliance. Instead, it could only give them recommended budgets that match with the state’s benchmarks. While it maintained increased transparency and oversight of hospital budgets, it took away the ability to force hospitals to cut costs.
The Current Moment
SB 1 essentially combines the two streams of health care reform — increasing investment in primary care, and reducing hospital costs — into one bill. Across eleven different sections, this legislation touches on a variety of different insurance, care, and cost-cutting measures that touch all different parts of the Delaware code.
It continues many of the parts of SB 120 which were set to sunset, and attempts to reassert some of the cost-control measures of HB 350. This attempts to both increase overall investment in primary care while also cutting overall state health care costs.
Why Do the Hospitals Oppose It?
On the macro level, this legislation will reduce costs for the state and private health insurance customers by reducing the amount of money that these plans give to the hospital systems. Compared to primary care, which is often reimbursed at very low rates, many hospital services are reimbursed at very high rates, so cost-limiting measures hit them harder than anywhere else.
Over the years, health care has become one of Delaware’s largest employers, and much of this has been due to the amount of public money that has flowed into the hospital systems. ChristianaCare is Delaware’s largest private employer. Given that most of these savings will come out of the pockets of hospitals, the Delaware Healthcare Association argues that a loss of funding will result in massive job losses. According to the DHA, labor is 60% of the total expenses for the hospitals, so they claim they would not be able to take the losses without firing people in parts of their systems that don’t bring in as much money.
Specifically, given that the majority of primary care providers are now within larger hospital systems rather than independent providers, they claim that cutting hospital spending would actually lead to a decrease in the availability of primary care — though this ignores the increases in. They also claim that Delaware has such expensive health care because it also has one of the best health care systems in the country.
However, it is unclear if we can trust the hospital numbers. They have many incentives to inflate the economic impact of these changes, and though the cut in reimbursements could technically be used to fire workers, it could also be made up in many other ways, as recommended by the Diamond State Hospital Review Board.
Helpful Numbers
Existing Spending
In 2022, the State Group Health Plan paid $22 million above 250% of Medicare rates. That means that if the cap had been in place, this money would have been saved.
Some insurance systems charged as high as 383% of Medicare for inpatient services and up to 444% of Medicare for outpatient services.
Future Savings
The Department of Insurance estimates that this legislation will save $282 million to the state over this 5-year period, between public employee plans, Medicaid, and other state-regulated plans.
Brown University estimates up to $442.7 million in cumulative commercial market savings annually.
Hospital Numbers
$413 million per year in cuts to reimbursements from state and private plans would also be losses in hospital systems
They claim that this would require them to lay off up to 4000 employees