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Task Force Takes Aim at Public Health Benefit-Plan Managers

Group appointed by governor recommends ways state can save money while delivering better care for some 800,000 public employees

Gov. Phil Murphy
Credit: Edwin J. Torres/Governor's Office
Gov. Phil Murphy addressed a news conference in Trenton yesterday.

New Jersey should revise how it contracts with health-benefit managers to expand public workers’ access to care, improve quality and clinical outcomes, and better identify opportunities for cost containment and innovation, according to a report from Gov. Phil Murphy’s office.

A task force appointed last spring by Murphy has issued an interim report about New Jersey’s public-health benefits, with specific recommendations on what the state can do to get more out of the multiyear deals it signs with companies that manage these programs. Those outfits coordinate provider networks, arrange healthcare plans, and administer medical claims for New Jersey’s more than 800,000 state, local, and school employees, both active and retired — nearly one in 10 state residents. A final report with long-term recommendations is due later this year.

Murphy’s Health Benefits Quality and Value Task Force — consisting of state officials, policy experts, and labor leaders — criticized the current contracts signed nearly six years ago and in the process of being re-bid. It concluded they are inflexible and hinder innovation when it comes to new treatment models or payment methods; they don’t ensure robust provider networks, especially when it comes to mental health and substance-abuse care; and they fail to prioritize, or even effectively measure, clinical quality.

Ensuring insurance companies are accountable

In addition, the group said the current agreements fail to ensure the state has sufficient accountability over the insurance companies operating as so-called Third-Party Administrators — roles currently played by Aetna and Horizon Blue Cross Blue Shield. Those companies are now paid a monthly fee to administer claims and also organize the network and operation of more than a dozen plans open to public employees. They also monitor and pay claims, for which they are reimbursed.

The report calls for separating the way the state contracts for this service, so that claims administration and network management would be bid separately; while the governor’s report does not state it explicitly, some critics are concerned the current situation could create a conflict of interest. It also calls for employing real-time (or “near real-time”) auditing of claims data to ensure taxpayers are getting the best deal, similar to technology the state has used to drive down its pharmacy benefit costs for public workers.

“This is an excellent starting point in our ongoing pursuit of innovative solutions to improve the way we provide health benefits to public employees,” Murphy said. “This is a goliath of a task, but the blueprint laid out today provides sound, actionable items that are achievable in the immediate future, while we work towards long-term solutions,” he added. The recommendations are designed to be incorporated into the current contracting process.

The report — part of a wider Murphy initiative to identify potential savings in public healthcare and pension benefits — received praise from legislative leaders, who are also pushing to rein in workforce-related costs and address other major policy challenges facing the Garden State. Despite ongoing disputes with the Democratic governor over plans to legalize marijuana and raise the minimum wage, both Senate President Steve Sweeney (D-Gloucester) and Sen. Paul Sarlo (D-Bergen), budget committee chair, were quick to praise the task force’s findings, especially when it came to its comments on TPAs.

“These recommendations will provide significant healthcare savings and are an important first step as we begin to address the multi-billion-dollar fiscal crisis laid out in our Economic and Fiscal Policy Workgroup report in August,” Sweeney said of a report he helped produce that also called for changes to TPA contracts, tweaks to plan benefits, and other changes.

New Jersey’s public workforce makes for a massive book of business when it comes to insurance plans, experts note, with nearly 500,000 active employees and more than 300,000 retirees. The state, which is self-insured and must cover the full cost of its medical care, has budgeted $3.4 billion in the current fiscal year to cover these costs — more than 9 percent of the total state spending plan. Local governments are expected to kick in roughly $3.6 billion more for their share.

Hundreds of millions in potential savings?

While the existing contracts have certain mechanisms to prevent overpayment, and the state hires an auditor who reviews these processes every five years, some suggest more could be done to protect taxpayer interests in this process. Sarlo introduced legislation in October to reform how the state contracts for healthcare benefits — requiring an independent entity provide oversight — and he believes there could be significant savings, perhaps hundreds of millions of dollars, available through tighter control of these deals. (One example he cites is how the state used new technology to award a contract for Pharmacy Benefit Management services that is predicted to save some $1.6 billion over three years.)

“Unbundling the Third-Party Administrator contract for claims adjudication from the health insurance provider network contract — as the task force also recommended — is essential to ensure that we don’t have ‘the fox guarding the henhouse,’” Sarlo said, adding that he was eager to work with the administration to put a new system in place, with “independent, real-time auditing” of claims payments.

(Ironically, Murphy vetoed two of the leaders’ related reform priorities just before the holiday break, including legislation designed to expedite a court-ordered re-bid process now underway with the state’s PBM contract, and a separate measure sponsors said would reduce benefit costs for community colleges.)

To reach its conclusions, Murphy’s 16-member task force — the result of an executive order he signed in May in an effort to improve the system’s quality and value — held monthly meetings starting in July, solicited input online, and held a series of regional public forums. The governor said the goal is to include these reforms in the request for proposals now being crafted to help officials identify the best TPA deal.

“These recommendations can bring about savings while also improving how the state delivers benefits to public workers,” said the group’s chair, Human Services Commissioner Carole Johnson. “Using innovation and accountability will make the system more efficient while also improving quality and ensuring access to care.”

Shorter contracts with specific goals

Among other things, the report calls for shorter TPA contracts — three years, instead of five, with options for a one-year extension — with specific clinical goals and metrics for measuring progress when it comes to healthcare outcomes. In addition, the agreements should identify clear steps to expand the use of case management and disease management, two low-cost protocols that can reduce the need for more costly interventions over time.

In addition, these deals must also allow for data sharing, something the task force said has been missing; without detailed information on treatment use and spending, committees working to tweak the plans don’t have effective guidance on what to change, it said. This lack of transparency has also hampered the state’s effort to promote and build a primary-care pilot program, an initiative championed by Sweeney and union leaders, to improve care and reduce costs.

The task force also recommended the state be allowed to contract directly with additional providers, as it did in the primary-care pilot, in an effort to expand care, especially in underserved areas like behavioral health. And it said any deal must include specifics on what constitutes “network adequacy” when it comes to provider access, especially for those offering mental health and substance-abuse treatment and services.

“Although plan members may choose to go out-of-network for services in plans that provide out-of-network coverage, plan members should never feel compelled to go out-of-network because the network manager failed to meet access requirements,” the report said.

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