With 17 days until the new tiered insurance plans offered by Horizon Blue Cross Blue Shield of New Jersey go on sale, two state senators are racing from the state to the federal level, asking regulators to delay the launch.
The stakes are high.
Sen. Nia H. Gill (D-Essex and Passaic) and Sen. Joseph F. Vitale (D-Middlesex), as well as executives of hospitals relegated to the higher-cost tier of Horizon’s OMNIA Health Alliance plans, are concerned that the result could be hospital closures.
They also contend that Horizon assembled the plans without being transparent.
The senators have asked the state attorney general and the Federal Trade Commission to step in to block the plans’ launch — without success so far.
Executives with Horizon and its OMNIA partners say the plans are designed to meet a demand for lower-cost health insurance options. They also assert that they’ve taken unprecedented steps to describe the factors that went into designing the alliance’s top tier, which will cost patients less in out-of-pocket payments.
Health-law experts say that while the FTC has pursued actions to block the consolidation of hospital systems, it would be unusual for the agency – charged with protecting consumers and ensuring competition – to step in to block a tiered health plan.
They add that OMNIA could actually foster competition among insurers, since Horizon’s rivals will have an incentive to include the hospitals left out of OMNIA’s Tier 1 in their own top tiers.
But at least one expert asserted that the entire OMNIA controversy reveals a potential gap in how the state protects the interests of urban patients who rely on local hospitals that aren’t as financially strong as larger hospital systems.
Shortly after a marathon legislative hearing concluded last week, Gill and Vitale said they’d ask acting Attorney General John J. Hoffman to step in to delay the OMNIA plans (although one OMNIA plan is already available to public workers, since the enrollment period for the State Health Benefits Program starts a month before the enrollment period for individuals and small employers).
Hoffman immediately recused himself, handing off the issue to a deputy, since his father, John Hoffman, is chairman of the parent organization for the Robert Wood Johnson Health System, which is part of the OMNIA alliance.
The attorney general’s office asked the senators yesterday to hand over testimony and documents related to OMNIA, to “facilitate our consideration of whether any action within the statutory or constitutional authority of the Attorney General may be warranted.”
First Assistant Attorney General Robert Lougy is overseeing the matter.
Senate Democratic spokeswoman Trish Graber said the nonpartisan Office of Legislative Services is compiling all of the testimony and documents received by the the joint committee led by Gill and Vitale. The Senate Majority Office will provide all of the information it received to the attorney general’s office and the FTC tomorrow, Graber said.
Vitale added that he and Gill have additional “avenues of interest that we believe the attorney general will be interested in,” adding that he isn’t in position to disclose this information.
Vitale said Horizon has presented a potentially major obstacle to competition by requiring that hospitals that join the Omnia Health Alliance can’t sign identical deals with other insurers, which limits their ability to compete with Horizon.
Vitale said he and Gill would be concerned about any insurer that took the same approach as Horizon to negotiating tiered plans with hospitals..
“I would like either (the attorney general or FTC) to launch a formal investigation into the entire process and the product,” Vitale said.
The two senators have raised specific legal concerns: that Horizon advertised some organizations as OMNIA members after they had signed letters of intent but before they finalized agreements, and that the state Department of Banking and Insurance approved the “adequacy” of the plans before Horizon specified how it would provide Tier 1 maternity services in Burlington County.
Seton Hall University health law professor John V. Jacobi said the OMNIA plans could spark competition among insurers. But he also said that the FTC takes seriously the implications of concentrated market power in healthcare.
Jacobi said that under the Tier 1 selection process described by Horizon executives,
a number of factors might protect the company from an antitrust case.
One is that the OMNIA agreements with hospitals don’t require the hospitals to limit themselves to Horizon’s network. Another is that the hospitals themselves didn’t participate in Horizon’s selection of which would be invited into Tier 1, according to Horizon executives.
Even if the OMNIA plans don’t lead to federal antitrust action, Jacobi said they appear to reveal a gap in the state’s regulatory structure.
[related]They showed that certain areas are served by hospitals that may not be able to survive without more state support, he said. For example, executives at St. Francis Medical Center – the last full-service acute-care hospital in Trenton – have said that the hospital could be financially destabilized by losing Horizon customers.
“What this kerfuffle suggests is, maybe it’s time for New Jersey to look at what it pays for charity care, look at what it pays for Medicaid,” in order to strengthen hospitals serving low-income patients, Jacobi said.
Horizon executives say they expect their rivals to develop their own tiered plans to compete with OMNIA. That’s already occurred with Aetna, which was required to offer tiered options for the State Health Benefits Program. Aetna’s Tier 1 incudes such hospitals as the Virtua system and St. Francis, which OMNIA left out.
“Horizon is committed to complying with all regulations and laws applying to our business,” company executives said in a statement, adding that they complied with laws and regulations in structuring the alliance. “We will be offering new lower-cost health plan options for consumers who are paying some of the highest healthcare costs in the nation.”
Top insurance industry lobbyist Wardell Sanders, president of the New Jersey Association of Health Plans, said he expects OMNIA to increase insurance competition in the state.
“Tiered products, which are found throughout the country, present a lower-cost option for insured and uninsured consumers while still offering broad networks to a larger number of providers,” he said in a statement. “Hospitals and physicians with strong records, brand loyalty and/or proximity to consumers not in one carrier’s preferred list of providers may make them more attractive to other carriers. Market forces and existing regulatory requirements will ultimately ensure access, competition and choice.”
OMNIA critics have noted that not all New Jerseyans have that choice, particularly those whose employers choose their health plans for them.