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Murphy Backs Specific Fix for Problem in Out-of-Network Health Insurance Billing

Governor gives surprise endorsement of two lawmakers’ effort to close major loophole, says it could save state tens of millions of dollars

Craig Coughlin
Assembly Speaker Craig Coughlin

Among the surprises in Gov. Phil Murphy’s budget presentation Tuesday was the mention of reforms to address out-of-network health insurance benefits, which the governor said could save the state tens of millions of dollars and improve care for all New Jersey residents.

Murphy, a Democrat who took office in January, suggested in budget documents that changes to the laws governing bills for unplanned medical care by physicians outside a patient’s health insurance network could help the state trim nearly $119 million from the cost of insuring state workers next year. Former Gov. Chris Christie also highlighted this issue in his budget speech last year and budgeted $125 million in health-benefit savings tied to reform.

But while Christie declined to specify a legislative solution, Murphy made clear his preference for one of several out-of-network reform bills. He praised the lead sponsors by name, a comment that took at least one of the two lawmakers by surprise.

“And, I look forward to partnering with you to make health care work for all residents. I know (Assembly) Speaker (Craig) Coughlin is at the forefront of the effort, along with Senator (Joseph) Vitale, to close the out-of-network loophole, and I commit to getting this done,” Murphy said in presenting his $37.4 billion budget for fiscal year 2019, which begins in July, and still requires legislative approval.

(That said, Coughlin and other Democratic leaders had little direct praise for Murphy’s budget, however, suggesting they would keep an open mind as they worked through the process. The Democrats have differed over how best to raise new revenue, among other things.)

Makes things transparent

The out-of-network reform proposal championed by Coughlin and Vitale, (both D-Middlesex), seeks to expand transparency around billing and hold down the provider charges in question — an element that has raised significant concerns for some physicians. Other legislation focuses primarily on forcing insurance companies and providers to make it easier for patients to understand network benefits and the billing process.

Lawmakers have debated how best to address out-of-network benefits for nearly a decade, and the issue has become one of the most intensely lobbied topics in the State House. Patient advocates estimate that some 168,000 residents are hit with these “surprise” bills each year and end up owing an average of $2,500 each, for a total of $420 million. These charges also impact state workers, adding as much as $800 million a year to taxpayers’ tab for their healthcare costs.

The proposal led by Coughlin and Vitale, which passed an Assembly committee earlier this month but has yet to be posted for a vote in the Senate, has the backing of a wide variety of stakeholders: patient advocates, labor groups, business interests and — if key amendments are adopted — the New Jersey Hospital Association. But the Medical Society of New Jersey, which declined to respond to Murphy’s comments, has said this approach will force some physicians out of business.

Better Choices, Better Care NJ, an advocacy group that includes business interests and is funded in part by Horizon Blue Cross Blue Shield, the state’s largest insurance provider, praised Murphy for including out-of-network reform in his budget speech and said his comments — and the Coughlin/Vitale bill — “offer great promise for finally fixing this long-standing problem and saving consumers countless dollars.”

Unresolved ‘for far too long’

“This has gone unresolved for far too long and we appreciate the governor highlighting the problem and calling for action,” added Better Choices spokesman Chris Donnelly. “Failure to act, and act quickly, leaves open the possibility that one more person will fall victim to this practice.”

New Jersey law currently prohibits patients from paying extra for out-of-network treatment following an emergency, but providers often end up in disputes with insurance companies over these charges — which are not regulated by government.

In budget documents released Tuesday, Murphy said the legislative solution must include a mechanism for settling these disagreements. The Coughlin/Vitale plan would do this through an arbitration process led by a neutral party, but many providers are concerned this approach would short-change physicians.

“This broader approach to OON reform is not anticipated as a savings to the State budget for fiscal 2019 but the Murphy Administration strongly supports any efforts that promote fairness and equity for providers and patients alike,” the Murphy administration wrote in the Budget in Brief document.

Other savings

But Murphy’s budget, which allocates $3.4 billion for medical care for current and former public workers, does count on savings from other aspects of legislative reform — in particular, transparency provisions that he said would make it easier for employees to obtain accurate information about costs and coverage. A change in the law will also enable other regulatory adjustments that can further cut costs, he said.

“This includes reforms such as prescription drug formulary management and mandatory generic utilization to achieve lower prescription drug costs for employers and for patients,” the budget document states. State officials were unable to provide additional information on the specific reforms or the potential savings yesterday.

The potential savings would come on top of existing reductions to health-benefit costs, one of the government’s largest expenses and a budget item that has been rising as much as 9 percent annually in recent years. Some of these savings are based on similar reforms already underway.

In October, the Christie administration announced the state expected to save $1.6 billion on healthcare expenses over the next three years and that premium costs would not rise for certain public employees; others, including teachers, did see out-of-pocket costs rise. The state attributed the savings to policy and operational changes that enabled employee insurance plans to save on prescription drug costs, out-of-network costs and other expenses.

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