Critics Take Horizon to Task Over OMNIA Alliance, Citing Lack of Transparency

Andrew Kitchenman | October 6, 2015 | Health Care
State senators to call on attorney general to block controversial tiered insurance plan before planned November launch

State Sen. Joseph F. Vitale (D-Middlesex)and state Sen. Nia H. Gill (D-Essex and Passaic)
The traditional role of New Jersey’s state government in regulating the hospital and insurance industries has been to balance the needs of residents against the realities of the market, to ensure, among other things, equitable access to healthcare.

Then why are two leading senators on insurance issues — Nia H. Gill (D-Essex and Passaic) and Joseph F. Vitale (D-Middlesex) — arguing that the state has abdicated its responsibility in the case of the new OMNIA Health Alliance from Horizon Blue Cross Blue Shield of New Jersey? And they’re not alone in claiming that Horizon’s secretive selection process has left hospitals that were shut out of the alliance facing a bleak future, one that could include going dark.

This situation helps explain why Gill and Vitale are calling for Acting Attorney General John J. Hoffman to step in and put a stop to the OMNIA rollout, at least until his office and legislators have more time to review the plans.

Both Horizon executives and critics of how OMNIA was put together attempted to build their cases during nearly eight hours of testimony before a joint meeting of Senate Commerce and Health, Human Services, and Senior Citizens Committee.

It’s a process that could play out again in legal proceedings, as those left out of the alliance are raising the possibility of going to court to block it.

That said, not everything about OMNIA is raising a red flag. Senators welcome the
possibility of lower costs, as well as the improved care-coordination and value-based approach that the tiered insurance plan is supposed to deliver.

And OMNIA has its defenders. One of them, Dr. Jeffrey Le Benger, CEO of alliance member Summit Medical Group, said that Summit has already reduced the cost of providing care to Horizon members by 13 percent over a two-year period.

Ronald C. Rak, chief executive of New Brunswick-based St. Peter’s Healthcare System, is definitely not among OMNIA’s champions. He found a corollary to the actions of the state’s largest insurer in ancient Rome.

Only the strong survive?

“This seismic shift in our healthcare marketplace was decided not in the public forum but in the Roman Coliseum, where the emperor allows the beast — accustomed to devouring everything in sight — to prevail, and spares a few warriors because they happen to serve his purposes,” Rak said.

Rak also remarked on the widespread concern among hospitals left out of the top tier — which can offer potential patients the deepest discounts — that the state is letting it happen.

To understand more fully what has state legislators and some hospitals so upset, it’s necessary to take a step back.

The state Department of Banking and Insurance (DOBI) is responsible for determining whether proposed health plans meet its requirement that all residents have adequate access to a network of primary-care providers, medical specialists, and hospitals. This is part of a wider web of state responsibility for overseeing the healthcare system, including the state Certificate of Need process, in which the state must approve significant changes to hospital services, such as opening and closing hospital buildings, as well as departments like maternity care.

Rak’s version of what is going on differs radically — and understandably — from the one offered offered by Horizon executives, as well as those hospitals included in OMNIA Tier 1, which they say will allow consumers the option of cutting their monthly insurance premiums and significantly shrinking out-of-pocket expenses. Horizon actually estimates that costs will be so low that it will entice 40,000 currently uninsured residents to buy coverage.

Or as Summit’s Le Benger succinctly put it, “We felt it beneficial for us … to be part of their Tier 1 network.”

The alliance allows Horizon to negotiate lower payments to some of the most well-regarded — and most expensive — hospitals in the state. In return, those Tier 1 hospitals would receive more patients. But these patients will essentially migrate from Tier 2 hospitals, some of which are on a less-secure financial footing. And executives at some facilities say they could become unstable if they lose valuable, higher-paying Horizon members.

Horizon offers new details

During the hearing, Horizon gave its most detailed account yet of what the OMNIA plans will look like.

People who choose OMNIA will pay 15 percent less in monthly premiums than those in non-OMNIA plans, and they would also have significantly lower out-of-pocket costs, including as little as zero dollars in deductibles (amounts that must be paid before coverage begins).

In the individual and small-group markets, the 2016 plans will offer more specialists and expanded benefits in comparison with less extensive tiered plans that were offered this year. In addition to the 36 hospitals in OMNIA Tier 1, the top, lowest-cost tier will include 63 percent of the doctors in the state, ranging from 57 percent of providers in Hudson County to 88 percent in Hunterdon County. Horizon officials said the full details of these plans won’t be available until later this month due to federal regulations.

The premium savings are less than those in the OMNIA plan being offered through the State Health Benefits Program, which are 25 percent lower than non-tiered plans (23 percent lower including prescription benefits).

Horizon Chairman, President and CEO Robert A. Marino noted that New Jersey is a national leader in healthcare costs, including insurance premiums. While he said that the lower-cost plans would entice 40,000 uninsured residents into the individual and family insurance market, he added that Horizon’s competitors would likely develop similar products. The company covers 3.8 million people, 43 percent of the state’s population of 8.9 million, although it projects that only 250,000 would shift to the OMNIA plans in their first year.

One of Vitale’s concerns had to do with Horizon’s size.

“It wouldn’t matter if you were just some insurance company that had a small piece of the market. It matters when Horizon does something,” Vitale said, adding that as the state’s largest nonprofit insurer, Horizon has benefited significantly from tax breaks over the years. Vitale said the company could have done a better job of being transparent in how it designed the alliance.

Much of the focus on the OMNIA rollout has focused on what critics perceive as a lack of transparency in how alliance members were chosen. While Horizon revealed the factors it used to choose its alliance partners — a step that company executives said was unprecedented in the state and nationally — they still haven’t disclosed to either the public or state regulators how those factors were weighed and scored.

“It’s not just about fairness, it’s about survivability, it’s about access,” Vitale said, noting that patients served by Tier 2 hospitals could lose if their hospitals closed.

Vitale added that he doesn’t think the state has the money to bail out hospitals, noting that earlier reports recommending that safety-net hospitals be shored up have been ignored.

“When you boil all of this down, the consequence is going to be that hospitals will suffer because of this — and that’s not your job, it’s not anyone’s job, it’s our job to make them all whole,” Vitale said.

Horizon executive downplays concerns

Horizon Senior Vice President for Healthcare Management Kevin P. Conlin said that the economic consequences of the OMNIA plans to Tier 2 hospitals would not be as large as some fear.

He noted that Horizon members who bought the less-extensive Horizon tiered plans that were offered in the individual marketplace last year still visited Tier 2 hospitals 40 percent of the time. Horizon estimated that the average loss of patients to Tier 2 hospitals would be one patient per day, or $1.1 million per year. And he added that Horizon isn’t acting alone, with its competitors already building or set to build similar tiered plans.

But Vitale wasn’t swayed, noting the individual example of a patient who suffers a stroke and is taken to the regional stroke center at JFK Medical Center in Edison. Once the patient has been stabilized after the initial treatment, he would face thousands of dollars in out-of-pocket costs to be admitted for an inpatient stay at the Tier 2 hospital — unless they asked to be taken to a Tier 1 hospital, a request that a recent stroke victim would be hard-pressed to make.

Vitale also deflected Horizon executives’ assertion that the alliance will put a greater focus on paying providers for the value of the services they provide (based on measurements of quality and cost efficiency), adding that all healthcare providers are moving to such a system. Sen. Ronald L. Rice (D-Essex) later described this is as the “apple pie and motherhood piece” of Horizon’s argument — one that no one, including the senators, opposes.

Sen. Raymond J. Lesniak (D-Union) joined in the more than three-hour grilling of Horizon executives.

“It’s pretty apparent that your definition of value is discriminatory,” Lesniak said, adding that Tier 2 hospitals were concentrated in cities and served larger minority populations.

Lesniak said the OMNIA model won’t succeed unless the smaller, poorer Tier 2 hospitals lose needed Horizon patients. He called on Horizon officials to “scrap what you’re doing and have another value-based system that does not discriminate against low-income communities.”

Rice added that state-owned University Hospital in Newark was left out of Tier 1.

Horizon Chief Strategy Officer Dr. Minalkumar Patel said the company’s concern for urban communities is central to its goals, to a greater degree than its for-profit competitors based outside of the state.

Marino added that the company projected the addition of 40,000 uninsured residents through extensive consumer research. He said that an estimated 65 percent of those residents would be African-American, 25 percent Hispanic, and 85 percent from urban areas.

Disagreement over Tier I selection process

Horizon officials shared the full list of factors that were used to determine which hospitals were included in the OMNIA Health Alliance. They include hospital information tracked by the federal Centers for Medicare & Medicaid Services (CMS), as well as consumer data from U.S. News’ hospital rankings.

But Gill countered that the insurer won’t release key pieces of information, such as how much weight it gave to each factor and the final score for every hospital. She described the outcome of the alliance as a “potential monopoly.”

Gill also raised the question as to whether Horizon committed fraud by advertising that six hospital systems and a medical practice had joined OMNIA when it was still in contract talks with several of them.

In a joint statement, Gill and Vitale said Horizon misrepresented the alliance, and that the state Department of Banking and Insurance may have violated state law and regulations by approving the plans when they didn’t meet established requirements.

For example, Gill focused on the provision of maternity services in Burlington County. The state approved the OMNIA plans after Horizon committed to adding maternity services in the county, without specifying exactly how it would do so.

“The attorney general must immediately intervene and establish a permanent oversight mechanism for the process to ensure fairness, transparency, and consistency in the hospital and physician ratings and a focus on the quality of care,” Gill and Vitale said in the statement. They added that New York Gov. Andrew Cuomo established a precedent for such action when he was that state’s attorney general, intervening in the establishment of tiered health plans.

According to Holy Name Medical Center President and CEO Michael Maron, smaller, standalone Tier 2 hospitals are reimbursed by Horizon as little as one-third the amount it pays larger, wealthier systems that were invited into Tier 1.

And Richard P. Miller, CEO of the South Jersey-based Virtua system, questioned why Virtua wasn’t included in Tier 1, when it already entered into a value-based system with Horizon’s patient-centered medical home program. He also said he couldn’t understand why Horizon chose Cooper University Health Care for Tier 1, when Cooper owns 20 percent of Horizon competitor AmeriHealth New Jersey.

“I don’t get that,” Miller said. “I don’t understand why that was done and frankly there’s a real gap” left in South Jersey.

Pluses and minuses — and risks

In comparison with the hospital executives, Rutgers Center for State Health Policy Director Joel Cantor offered a more complicated view of the alliance. He said that it “addresses long-standing and serious deficiencies” in a state where the relatively high amount spent on healthcare isn’t matched by a high level of performance in various measurements of healthcare quality.

But he added that this situation also presents some unintended consequences and risks, such as potentially leading to Tier 2 hospitals cutting back on their services.

New Jersey Health Care Quality Institute President Linda Schwimmer said the state should take this opportunity to require Horizon and other insurers to design a system that really does demand quality.

She noted that New Jersey has the clout to do just that if it used the market power that it commands through the 1.75 million in its Medicaid program and more than 800,000 in the public-worker insurance programs.

For example, Maine designed the tiered plan for state workers so that they pay less out of pocket if they go to any hospital with an “A” grade in the Leapfrog Group’s Hospital Safety Scores.

Schwimmer is a Leapfrog Group board member.

While Vitale questioned why Horizon didn’t use the Leapfrog scores to design the OMNIA alliance, Patel said that the company chose to rely on CMS-tracked information since the federal government uses the same data in its value-based payment programs. He also said that the Leapfrog Group focuses on factors, such as high surgical infection rates, that no hospital should have.

Schwimmer later noted that the federal government is phasing out most of these measures since they’ve become outdated.