As NJ Legislators Try to Fix Out-of-Network Surprise Charges, Doctors Not Happy

Lawmakers try to protect patients from unexpected healthcare charges but the partial fix they propose is opposed by physicians

seniors paying bills
Support from the new governor and Assembly leadership has jumpstarted a decade-old debate on how to reduce the impact of out-of-network medical bills on New Jersey residents, despite the continued objection of some healthcare providers.

The Assembly Financial Institutions and Insurance Committee held the second of three planned hearings Monday, a nearly four-hour discussion of a proposal championed by the new speaker, Assemblyman Craig Coughlin (D-Middlesex). The bill seeks to better protect patients against surprise charges assessed by doctors or hospitals that are not part of their health insurance network.

The proposal — which only applies to bills generated by emergency or inadvertent situations — includes elements to require greater transparency by both doctors and insurance companies, to help patients understand what doctors and services are covered by their policy.

It also contains a more controversial element designed to further regulate the underlying out-of-network charges, which advocates have said impact some 168,000 Garden State residents annually. The latest version calls for arbitration, overseen by a state-appointed third party who would choose between final offers from providers and payers.

But some providers fear the cost-control mechanism, as written, will disadvantage doctors in their contract negotiations with insurance companies, and could drive some physicians out of state, further harming patients most in need of care. Without the threat of high out-of-network charges, providers have limited leverage when it comes to trying to craft in-network agreements with these insurance carriers, opponents said.

Weakens negotiating ability?

“We’re not looking for unreasonable out-of-network rates, but we need to have that negotiating ability to get reasonable (in network) rates to keep our doors open and provide those services for our community,” regardless of their ability to pay, stressed David Dafilou, chief administrative officer of Capital Health, a network with two hospitals, including a safety-net facility in Trenton. Both facilities are in-network with all major providers, he said.

“You’ve got to look at the long-term impact of that situation. With fewer providers, cost begins to rise also,” he added. “In that game of leverage between the payer and the provider, who is winning? Quite candidly, the health plan is winning, by far.”

Resolving the issue, which has been addressed through legislation in at least five other states, is a priority for Gov. Phil Murphy, a Democrat who took office three weeks ago. In its recommendations to the new administration, Murphy’s healthcare transition team claimed that some providers have “taken advantage” of the high out-of-network fees they can charge under the current law, a situation that adds as much as $130 million annually to premium costs, even though a growing number of providers are now in-network with most insurance companies.

While efforts to resolve the issue have attracted significant attention, progress on the issue was derailed by last year’s budget debate and the Legislature did not revisit the question when lawmakers returned to Trenton after November’s election.

Emergency-room protections

Under state law, patients who visit an emergency room are protected against paying anything more than their normal in-network charges — co-pays, co-insurance, or other out-of-pocket costs — for their care, even if they were treated at an out-of-network facility.

But a pair of Yale University researchers showed in a nationwide study that roughly 20 percent of emergency patients are still “balance billed” by physicians for any costs that the insurance company did not pay. Advocates note that, even if they aren’t legally responsible for the charges, the bill alone is stressful and upsetting and not beneficial to a healthy recovery. And unsuspecting patients may just pay it without complaining to the health insurer.

In addition, policy experts note that even when a patient isn’t responsible, higher charges add to the overall cost of care by driving up the cost for insurance companies, an increase that is reflected in higher premium prices. “We have to recognize that all parties in healthcare are economic players. That’s one reason this bill has been so disputed,” said Ward Sanders, president and CEO of the New Jersey Association of Health Plans, which represents insurance providers, and supports the bill.

The current version of the legislation (A-2390) has the backing of several major stakeholder groups, including the insurance industry and consumer advocates, which include patient organizations, business interests and labor unions. These entities insist a proposal that just requires greater disclosure from providers and insurance companies does not get to the heart of the problem.

Medical Society says problem overstated

“It’s not enough just to tell someone that, ‘Hey, you’re about to get a balance bill and it’s really going to stink for you and your family,’” said Linda Schwimmer, president and CEO of the Health Care Quality Institute, and a leader on the governor’s healthcare transition team. “There needs to be a system to resolve the issue.”

But physicians, for the most part, remain opposed to any effort to control out-of-network charges; the Medical Society of New Jersey has insisted the problem with surprise bills is overstated and that other changes in insurance contracting and state oversight are working to control the few egregious cases that remain. While outliers may still exist, the legislation shouldn’t be geared just to these “bad actors,” the group said.

The New Jersey Hospital Association has worked with the sponsors to fine-tune the measure but remains concerned about key elements of the mechanism outlined to resolve disputes between providers and payers.

Coughlin: all will ‘survive and prosper’

Neil Eicher, who heads government relations for the NJHA, said his membership is eager to resolve the issue, but stressed that hospital leaders did not quite know what to expect: the New Jersey legislation is the first in the nation to include hospitals in the payment-negotiation clause. (Unlike some states, New Jersey does not set hospital rates.)

Assemblyman John McKeon (D-Essex), who chairs the financial institutions committee and is a co-sponsor on the bill, urged Eicher to submit suggestions to address the industry’s two primary concerns — a mechanism to ensure some payment upfront when there is a dispute, and different benchmarks for resolving a billing debate, if needed. McKeon said he couldn’t promise any amendments, but he underscored the urgency among leadership to address the issue.

Coughlin, who testified early on, stressed that most of the stakeholders have worked hard to come as close as possible to an agreement. “Each has won and lost something in this,” the speaker said. “If enacted, I’m sure all will be able to survive and prosper.”

One point of consensus was that, regardless of the details, the legislation would only have limited impact. More than two-thirds of those with health insurance are covered under so-called ERISA plans, which are self-insured and regulated by the federal government, not state. (The proposal would allow these plans to opt in to the dispute-resolution mechanism to help resolve out-of-network billing questions, although it’s not clear how many would enroll.)

“This is not a perfect bill,” noted Assemblyman Gary Schaer (D-Bergen), another lead sponsor, who chastised providers and payers for not coming together to resolve the issue on their own, without help from the Legislature. “But it seems to me this is a very significant best effort to find a solution to a problem that everyone seems to agree there is.”

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