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Christie Keeps Pushing to Siphon Cash from Horizon to Fund Drug Treatments

State’s largest health insurer claims $15 million DHS sanction is ‘retaliation’ for refusing to go along with governor’s demand for $300 million from its reserves

christie
Credit: Governor's Office/Tim Larsen
Gov. Chris Christie

Gov. Chris Christie has not abandoned his controversial quest to secure hundreds of millions of dollars from Horizon Blue Cross Blue Shield, New Jersey’s largest health insurer, to fund drug addiction programs and other healthcare needs.

And negotiations with Democratic lawmakers — who have failed to embrace his plans for Horizon — over the proposed budget for fiscal year 2018 could be the path Christie is now pursuing to reach this goal. Legislative leaders met with Christie earlier this week in an effort to secure his support on a revised spending proposal, which includes $125 million in new school aid, among other things.

The Republican governor held a hastily arranged news conference Wednesday, as legislators continued to negotiate details of the budget proposal, which must be adopted in nine days. But instead of focusing on state spending, Christie used the opportunity to disclose select details of a trio of regulatory actions state agencies have taken against Horizon in recent years and to reiterate his call for legislative action on his proposal to reform the insurance giant.

$15 million sanction

The governor pointed to a $15 million sanction issued against Horizon Monday for alleged violations of its Medicaid contract that involved errors with claims processing, provider payments, and member complaints, among other concerns. (Christie declined to provide a copy of the letter, but the Department of Human Services, which issued the sanction, confirmed its existence.) He also noted two violation notices for similar concerns issued by the Department of Banking and Insurance, in September 2016 and in March of this year, which involved penalties totaling $550,000.

Christie urged the state Legislature to move on a concept outlined earlier this year that would overhaul Horizon’s governance and enable state officials to tap into what he called “surplus reserves” that the company has left in its coffers. The measure would improve oversight and operations, he said, while helping the Garden State fund critical healthcare programs.

The nonprofit insurance company, which insures some 3.8 million residents, reported nearly $2.4 billion in reserves at the end of 2016, a level it insists is appropriate for its risk and in line with industry standards.

A question of timing

The governor would not confirm or deny that his support for the Democratic budget changes was tied to legislative movement on Horizon reforms, but the timing of his announcement raised questions about a connection. Christie first worked in private to convince the company to provide some $300 million as a one-time contribution to help the state battle its epidemic of opiate addiction. When those discussions failed, he made a public pitch in his February budget speech for them to kick in annual funding, and in April he shared with lawmakers an outline of possible legislation.

“Horizon needs to be held answerable to this. The only way to do that, in my view, is through the legislation that we provided to the Legislature that would insure greater transparency and greater independent governance,” Christie said, reiterating complaints he has raised before about the high salaries of some Horizon leaders. (Horizon CEO Robert Marino received nearly $4.5 million and other compensation in 2016, according to state records; other top executives collected between $1.3 million and $2.3 million.)

“We should not permit a nonprofit insurer to profit from ignoring the poor and those who give them the life-enhancing and life-sustaining healthcare that they need, at taxpayer expense,” Christie said, noting that the company made $163 million in 2016 from its Medicaid contracts with the state. “They should not be able to operate in the dark.”

Horizon officials shot back before the governor’s press conference ended, defending their efforts to right operational wrongs and suggesting state officials used incorrect data to calculate the latest penalty, which they plan to formally challenge. The company said it is not aware of any impacts to the care of its members, who have given it high marks for quality of service, and suggested the sanction is payback for not agreeing to Christie’s demands for cash.

‘Blindsided’

“Given the substantial progress and success we achieved in working with the state, we were blindsided by both the timing and severity of this action,” said Horizon public affairs manager Kevin McArdle. “It makes us question the motivation behind levying a large, and unreasonable, penalty without permitting the opportunity for the customary appeal and review.”

“For seven years, the Governor had nothing to say about Horizon,” McArdle continued. “His comments strongly suggest that this is further retaliation for Horizon’s unwillingness to submit to his demand for $300 million from the reserves we hold to protect our members and an abuse of power.”

But Christie insisted the timing of any sanctions “has nothing to do with me.” He added, “These are facts. Horizon doesn’t like the facts.”

The governor is not the first state official to eye Horizon’s coffers, or seek changes to the governance structure. In recent decades there have been several legislative attempts to reform the powerful insurer and tap into its reserves to support state healthcare needs. Horizon leadership has also explored converting to a for-profit company, a shift that would involve setting up a foundation to expand access to affordable care.

Details in short supply

Under Christie’s concept for reform — which has yet to be made public as a draft bill — Horizon’s board would be expanded to 19 members with the addition of four more public appointments, chosen by the Legislature and governor to better represent the public. It would also give DOBI officials the right to review the company’s budget and executive compensation, determine what level of reserves is appropriate, and siphon off any “extra” to fuel a new fund, the New Jersey Quality Health and Wellness Fund, which would be overseen by state health officials.

The governor insisted Wednesday that legislators have committed to sponsor the proposal, but he declined to name them. A number of Democrats — including Assembly Speaker Vincent Prieto (D-Hudson) and Sen. Richard Codey (D-Essex), among others — have been forceful in their opposition. Sen. Joseph Vitale (D-Middlesex), who sponsored a 2006 effort to reform Horizon’s governance, is one of the few members who has suggested he is willing to consider the measure.

But Christie devoted much of the press conference to details of Horizon’s claims-processing operations, which was brought inhouse in 2016 — with DHS approval — to save money over time. According to an agreement Horizon made with the DOBI in September 2016, problems with claims denials, notifications, settlements, and billing errors by a subcontractor led to 4,500 claims being improperly denied, for a total of $1.8 million in payments. All errors were corrected and the providers have since been repaid, according to the sanction, which involved a $400,000 penalty.

In March, the DOBI resolved another investigation that found the claims system failed to flag a total of $8 million of improper payments to more than 1,000 providers. These issues were also resolved, the agreement notes, and Horizon paid a $150,000 fine.

Officials at the DHS said the agency just issued a letter assessing Horizon $15 million in sanctions for infractions related to Medicaid claims, including untimely and inaccurate processing, inadequate handling of complaints from members and providers, and inaccurate reporting of financial information. Horizon will be required to submit an updated plan to address these problems to settle the dispute. Additional details were not available Wednesday, and state officials declined to release the letter without a formal Open Public Records Act request.

But McArdle, with Horizon, said these concerns have since been resolved. “The problems have since been remediated and our current claims payment timeliness complies with both the contract and all state regulations,” he said. “We are not aware of a single member whose care was impacted in any way.”

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