Questions About NJ’s Surprise-Billing Law, And One Call for Changes

Although out-of-state transfers are rare, one doctor insists patients fully understand out-of-pocket costs, before they go anywhere

Credit: Twenty20
Helicopter air rescue
Some New Jersey officials believe last year’s surprise-billing law is largely working as intended — protecting Garden State patients who once faced hundreds of millions of dollars each year in unexpected charges from doctors and hospitals that are not part of their insurance network. And they urged stakeholders to be patient as it ramps up to full speed.

But some doctors said the controversial law — nearly a decade in the making — has already cost them significantly, forcing them to take lower payments from insurance carriers and threatening the financial sustainability of their practices. Hospitals said it has reduced their leverage in contract negotiations with insurers over in-network payment rates, according to testimony before a legislative hearing two weeks ago.

In addition, one lawmaker is concerned that the statute, as adopted, does not adequately protect patients who are transferred across state lines for medical care, a relatively rare, but potentially costly, situation. To address that gap, Assemblyman Nicholas Chiaravalloti (D-Hudson) proposed a bill that would require providers to explain why an out-of-state facility was necessary and how the move would impact insurance coverage.

“A well-informed patient is in a better position to make better decisions and be better protected from unexpected costs and inconveniences — especially as it pertains to hospital transfers,” Chiaravalloti said. “But a patient can’t make a sound medical decision when they don’t have this information before the transfer takes place.”

$1 billion in insurance costs

In June, Gov. Phil Murphy signed what was considered one of the nation’s strongest laws to curb the impact of surprise medical bills for emergency or unintentional care, capping a lengthy and hotly contested legislative process. Patient advocates said some 168,000 New Jersey patients faced these charges annually. The costs added nearly $800 million to taxpayers’ tab for public-employee healthcare and drove up insurance costs by $1 billion annually.

New Jersey’s statute required greater disclosure from both insurance companies and providers — so patients are clear on what their plan covers — and ensured patients aren’t responsible for excess costs. It also established an arbitration process to resolve payment disputes between providers and insurers, based on final offers from both parties, a mechanism intended to better control costs. The law took effect in September, under temporary guidance issued by several state agencies; final regulations are still pending.

“One thing we have learned is that we’ve saved average healthcare consumers hundreds of millions of dollars in bills they should not be obligated to pay,” said Sen. Joseph Vitale (D-Middlesex), the health committee chair and lead sponsor of the bill. “That doesn’t mean that the process to pay providers and to reasonably offer payment by carriers isn’t important, because it is.”

Giving insurance carriers upper hand

But some physicians — particularly specialists like emergency surgeons and neurosurgeons — warned for years that the plan would give insurance companies the upper hand, allowing them to pay less to cover lifesaving medical care. And according to testimony several doctors gave to the Senate Commerce Committee on March 30, these fears are now becoming reality.

“I’m in the trenches taking grenades … and I’m going down,” said Dr. David Dupree, a Monmouth County abdominal surgeon who said he has struggled to settle claims under the new system, and has lost four of the six cases he has brought to arbitration under the law. The lower reimbursements have forced him to resign from several hospitals, he said, and he is concerned that he won’t be able to take patients with Medicaid, which also pays a reduced rate. “I can’t sustain a practice like this,” he said.

Hospital officials — who eventually supported the plan — told the committee that while the law may protect patients, it is also hurting their ability to negotiate in-network rates with insurance companies, who they said were emboldened under the new law. (For Inspira Health Network, in South Jersey, this has led to a 44 percent reduction in reimbursements, according to a spokesman.)

“The pain should be shared equally,” said Jennifer Mancuso, executive director of Fair Share Hospitals Collaborative, which represents a number of suburban health systems. But that’s not how it seems to her members, she said. “We’re concerned that this new system basically makes providers lose considerably more than insurers.”

New Jersey Department of Banking and Insurance Commissioner Marlene Caride, who oversees the arbitration process, said the company that handles this process for the state has decided 357 appeal cases to date — 150 in favor of the providers and 207 for the insurance carrier. But the providers were also awarded more than $2 million in payments through the process, while carriers received just over $400,000.

No balance billing

“While it is too early to evaluate the long-term impacts of this law, we do know it is having a positive impact on our residents as the law prohibits balance billing for inadvertent or emergency out-of-network services,” Caride said.

“This law is in its early stages, and as with the development of any program as complex as this one, we can expect some obstacles along the way. In order to ensure that we can quickly address any potential issues that arise, we need to hear from stakeholders,” she added, urging providers and carriers to contact her with any concerns.

One of the obstacles has been the ability of the state’s vendor, a company called Maximus, to process the more than 1,000 claims that have ended up in arbitration since the law took effect; nearly 250 were dismissed or withdrawn and more than 300 were pending, Caride said at the March 30 hearing. It also took months for Maximus — who did not testify — to set up the website required for providers to file these appeals, she noted.

Ward Sanders, president and CEO of the New Jersey Association of Health Plans, which represents the state’s health plans, said the law has worked as intended to protect patients. But he urged stakeholders to take time to carefully evaluate its overall impact and not base any response on anecdotal accounts.

“We would argue for a longer look at the success or failure of the legislation,” Sanders said, noting it may have been an overly ambitious timeline to roll it out. In addition, he noted that many factors are influencing the economics of healthcare in New Jersey, beyond the new law.

While members of the commerce committee appeared willing to hold off on legislative changes to the out-of-network law, Chiaravalloti has called for a new plan to address billing and other concerns related to out-of-state transfers. The proposal (A-5369), which has yet to be posted publicly, outlines half a dozen requirements for providers and healthcare facilities to ensure patients are better informed.

Specifically, the bill codifies a patient’s right to receive care at any facility they want, and insists providers must explain to a potential transfer patient the clinical rationale for the move, among other things. They would also need to discuss the availability of appropriate services in New Jersey and reveal any professional relationship they might have with the out-of-state provider.

Larry Downs, president and CEO of the Medical Society of New Jersey, said that while out-of-state transfers are fairly rare, they are often driven by patient choice, not provider decisions. He said MSNJ favors patients having more information, but has concerns about the way the bill requires providers to explain aspects of the insurance coverage to their patients, a job he said should fall to the insurance companies themselves.

But Chiaravalloti said more information is essential to help patients navigate these complicated decisions. “This type of communication is necessary to help the patient understand whether specific services are covered under their health-benefits plan and the estimated out-of-pocket costs to be incurred because of the out-of-state transfer,” he said.