New Jersey Department of Banking and Insurance Guidance on Implementing New Out-of-Network Cost Containment and Arbitration Law

Insurance Law Alert

 

On June 1, 2018, Governor Phil Murphy signed the Out-of-Network Consumer Protection, Transparency, Cost Containment, and Accountability Act (P.L. 2018, Ch. 32) (hereafter, the “Act”) into law, with an effective date of August 30, 2018. (See previous alert of August 28, 2018.  https://www.bressler.com/update-on-the-outofnetwork-consumer-protection-transparency-cost-containment-and-accountability-act).  The Act makes two major structural reforms to the healthcare markets in New Jersey.  First, it imposes significant new restrictions on the ability of the healthcare providers to charge consumers for “surprise” out-of-network services by requiring all healthcare providers at an in-network facility to accept in-network compensation.  Second, the Act creates a negotiation and “baseball style” arbitration system to limit the charges of out-of-network healthcare facilities and providers for services rendered to members on an emergency basis. 

Since August, several facets of implementation of the Act have remained unclear.  The Act empowers the New Jersey Department of Banking & Insurance (“DOBI”) to adopt new procedures, and eventually, implement regulations.  On November 20, 2018, DOBI took initial steps toward implementing the Act and issued Bulletin #18-14 (the “Bulletin”), addressing, among other items, the full procedure for negotiating, and if necessary, demanding arbitration of out-of-network emergency medical bills, and the processes to be utilized by carriers, health maintenance organizations and other payers (collectively, “Payers”) for denying payment of “hidden” out-of-network provider bills.

Implementation of Cost Sharing Limitations

The Act strives to significantly reduce, if not eliminate, instances in which consumer members of a health-care network seek treatment at healthcare facilities represented by Payers to be “in-network,” that have certain providers at such facilities who are out-of-network.  Such providers are often referred to as the “hidden” out-of-network providers.  Treatment by such hidden out-of-network providers can significantly increase a member’s financial obligation to pay for medical services under the terms of his or her health benefit plan.  Moreover, the member does not necessarily have the benefit of a negotiated rate that would otherwise be applied to an in-network provider.  Prior to adoption of the Act, these providers were commonplace, particularly in the context of radiologists, pathologists, diagnostic labs and numerous specialist providers who are critical to the staffing of a hospital but who decline to enter network provider agreements with the same Payers and networks with which the hospital contracts.  The Act refers to such situations as a member’s “inadvertent” use of an out-of-network provider because the member likely intended to pursue in-network care by visiting an in-network facility, but “inadvertently” utilized the service of an out-of-network provider by accepting the services of providers staffing the in-network facility.

The Bulletin details the procedures that a Payer shall utilize to process claims received from out-of-network providers, including appeal periods , a brief window for negotiation of a claim, and the “final-offer” arbitration process. 

The Bulletin underscores the need for cost containment and efficiency in healthcare.  Further, members cannot be forced to waive rights to have cost-sharing obligations limited to the in-network level.  Use of forms to permit such waivers are prohibited for use by providers.  The Bulletin further prohibits a healthcare provider from inducing a member to seek care on an out-of-network basis by offering to rebate, waive or otherwise refund out-of-network deductible and cost-sharing obligations in consideration of the member knowingly accepting care out-of-network.  While such rebates could conceivably offer one-time savings to the individual member, inducing members to seek to out-of-network treatment could impose larger, systematic costs on Payers, and ultimately increase premium costs to consumers.

Significantly, the Bulletin clarifies that when a member is accessing services under a “tiered” network, the “inadvertent” provider is to be paid, and the patient’s financial liability limited, to the respective amounts payable as though the provider was in-network in the plan’s lowest cost tier.  On the other hand, the Bulletin does not appear to account for circumstances in which a member seeks treatment from an in-network facility that is in a higher-cost tier, but certain providers at this higher-cost tier hospital are entirely out-of-network.

Final Offer Arbitration and Out-of-Network Emergency Care

DOBI has traditionally interpreted existing law as effectively insulating members from paying exorbitant out-of-network care costs when receiving emergency treatment from out-of-network hospitals.  The policy rationale is clear.  Although consumers knowingly purchase health coverage with preferred or exclusive network arrangements, no person can control if/when he or she might require life-saving emergency medical care from the closest medical facility which may be characterized as out-of-network.  Existing New Jersey law historically has been interpreted by DOBI to prohibit the member from being held personally liable for any such costs of emergency medical care in excess of what the member would be liable for if treatment was sought at an in-network facility.  The ultimate financial responsibility for protecting members from out-of-network bills for emergency care is placed on Payers – who are deemed obligated to pay out-of-network providers amounts sufficient to protect members from balance billing by providers.  Unfortunately, this mandate effectively afforded emergency healthcare providers, pursuing an out-of-network strategy, with the ability to bill carriers and health plans unlimited rates for emergency care – the inflated costs of which were ultimately borne by all health insurance premium Payers in New Jersey.

The Act preserves the insulation of members from increased out-of-pocket liability for emergency and urgent medical care at out-of-network facilities while simultaneously establishing a final-offer, or “baseball style,” arbitration system for resolving disputes between Payers and providers over the reasonableness of providers’ bills.  The Act’s mandated final-offer arbitration system requires, following the establishment of a dispute between Payers and providers that cannot be resolved through negotiation, that both sides submit a best and final offer to an arbitrator.  The arbitrator will select one party’s best and final offer as the sum which the Payer (together with the member pursuant to any in-network applicable cost sharing) must pay to the provider.  While the Act requires that final-offer arbitration be utilized to resolve Payer/provider out-of-network emergency bill disputes, the Bulletin provides only the first glimpse of this dispute resolution process.  DOBI has helpfully included a summary of the overall appeal and arbitration process.

The Bulletin also identifies MAXIMUS, Inc., as the administrator in the final-offer arbitration program for both hidden (i.e., inadvertent) and emergency (i.e., involuntary) out-of-network provider bills.  Arbitrators will have a maximum of 30 days to resolve submitted claims by issuing a written decision.  The amount in dispute must be in excess of $1000, and the out-of-network final offer arbitration system presumes that both sides split the costs of arbitration equally, unless the arbitrator determines one party to have acted in bad faith.  For claims to be eligible for such arbitration, care must have been commenced on or after the effective date of the Act – August 30, 2018.  Moreover, in an attempt to reduce duplicative arbitrations, the Bulletin contemplates that providers will bill all services rendered by an inadvertent or involuntary out-of-network provider on one bill, which bill can be the subject of a single arbitration.  The Bulletin is silent, however, on an enforcement mechanism to ensure consolidated billing practices.

Although participation in the out-of-network final offer arbitration process is not mandatory for self-funded health benefit plans given federal preemption, the Bulletin notes permissive participation in the arbitration program for self-funded plans that meet appropriate qualifications (such as offering a preferred or exclusive network arrangement, and the provider in question having rendered services on an out-of-network basis).  The Bulletin describes this “opt-in” process and attaches an application form for self-funded plan participants.  Notably, the process does require disclosure of the opt-in status on health benefits ID cards distributed to members.

Out-of-Network Treatment Disclosures

Finally, the Bulletin attaches a summary template that Payers can use to appropriately disclose to members benefits and any cost-sharing obligations with regard to both voluntary and involuntary out-of-network services.

While the Bulletin is a substantial step toward implementing procedures required by the Act, questions remain with regard to hidden, out-of-network claims handling and arbitration procedures.  Final clarification hopefully will be provided once regulations are proposed by DOBI, public comments are considered and agency responses are memorialized in the final agency adoption of those regulations.  Whether cost savings can be achieved in the interests of both members and Payers will become clear as the arbitration process unfolds.  Please contact Cynthia Borrelli or Michael Morris with any questions about the Act and its implementation.