Health insurers in New Jersey are complaining of a cost crisis arising from regulations meant to protect patients receiving emergency healthcare and involuntary out-of-network treatment.
Among other payers, Horizon Blue Cross Blue Shield of New Jersey is hoping to reform the Garden State's "hold-harmless" regulations, dating back to 2000, that require health plans to reimburse emergency care and certain other providers at their full charges, regardless of whether they are in a contracted network
The 2000 regulation was designed to protect patients from excessive costs for emergency care and involuntary out-of-network utilization by requiring health plans to cover the charges; an update in 2009 effectively prevented providers from "balance billing" patients and let them get paid up to their charges by plans.
The New Jersey Association of Health Plans maintains that the regulations--in the absence of controls on out-of-network charges--has led to "price gouging" that "has a direct impact on premium costs."
Under the rules, fully-insured HMOs, network-based plans and many self-insured plans are required to apply in-network benefit levels and cost-sharing when members receive emergency services at out-of-network (OON) providers, treatment by OON specialists at in-network facilities, or have limited geographic access to a certain speciality in their plan network.
Horizon BCBSNJ, Jersey's largest insurer with a 48 percent market share, argues that the regulations are contributing to New Jersey's high healthcare cost.
New Jersey's employer health plan premiums are the fourth highest in the country, an average of $17,396 for family coverage in 2013, and still growing despite the post-recession slowdown in much of the country, according to the Commonwealth Fund. A study commissioned by Horizon also notes that New Jersey's acute care hospitals are some of the most expensive in the country, charging an average 630 percent of Medicare, compared tothe 390 percent national average.
Horizon BCBSNJ, insurer for 3.8 million, paid out more than $1 billion in out-of-network reimbursement last year--around 8 percent of its revenue. Aetna, insurer for 1.1 million New Jerseyans, has also blamed certain for-profit hospitals using OON schemes for driving up its costs by $15 million over three years.
Some providers "have made a business out of setting prices that have no correlation to the actual cost of care," Horizon BCBSNJ argues. Among the most extreme examples, according to the nonprofit insurer, are an OON cardiologist performing a pulmonary stress test and billing $12,500, and a pain management specialist billing $650 for a simple blood test.
"Unfortunately, a small group of hospitals and doctors are abusing the regulations to increase their own bottom lines, particularly in emergency care situations when people typically have less control over who their doctor is," said Robert Marino, chairman and CEO of Horizon BCBSNJ. "We are asking New Jersey's lawmakers to enact meaningful reform of these regulations to control rising out-of-network health care costs for all New Jersey residents and businesses."
The New Jersey Hospital Association helped spearhead the 2009 "assignment of benefits" amendment that aimed to "remedy a common practice of insurance companies remitting their share of the payments directly to the patient and requiring the provider to seek the full payment from the patient." Now, the hospital trade group concedes that "as the debate continues to grow over controlling rising out-of-network costs within our healthcare system, it is apparent that reform is needed."
For Horizon BCBSNJ, the problem is so bad that it launched a public education campaign and information site, What Health Care Costs NJ, explaining the issues and ideas for reforming it. The insurer also sponsored a report by Avalere Health forecasting the ramifications of different scenarios that lawmakers are considering..
While 12 other states limit charges to HMO members for involuntary out-of-network utilization and 8 others limit charges for PPO members, New Jersey is the only state requiring HMOs and non-HMOs to pay full out-of-network charges for emergency services, according to the report.
Avalere researchers studied five ways that the OON regulations could be reformed. In one kind of approach, the state could set payment benchmarks. The simplest variety of this, Avalere noted, would be pegging out-of-network rates to a certain percentage of Medicare. The state could also develop its own fee schedule or set the out-of-network rate at or above a health plan's or provider's average in-network rate. (New Jersey's Hospital Association has in past years thwarted legislative proposals to introduce a "fee schedule, or any onerous disclosure requirements.")
Another approach outlined by Avalere would let insurers and providers negotiate over the charges in independent arbitration--using traditional arbitration or "baseball style," where an arbiter selects of the proposals. Arbitration, though, would be less predictable and efficient than a benchmark, Avalere said.
Whatever the approach, New Jersey insurers are pushing the legislature to make changes soon. "Other states have addressed this major cost driver, it's New Jersey's turn to address this and get it right for our residents," said Marino. "Horizon will be sharing information about how the current out-of-network regulations are impacting all of us. And we will work closely with legislators as they look for ways to protect New Jersey residents from unreasonable and unnecessary healthcare costs."