In New Jersey, Horizon's OMNIA Survives Court Test, While Proposed Law Aims to Block New Tiered Networks for a Year

Note: Updated 4:30 pm ET December 8, 2015, with comments from AHIP spokesman.

Two New Jersey senators today introduced legislation to block the implementation of a controversial tiered network plan, even though it’s been signing up customers since early October. Some public employees are scheduled to start using the plan’s benefits in less than 3 weeks.

Chances of stopping Horizon Blue Cross Blue Shield of New Jersey from moving forward with its tiered network, called OMNIA, looked increasingly slim late today, after the New Jersey appellate division denied a request by 17 hospitals to stay the approval. This was the more serious of 2 legal challenges to the tiered network plan, which has created a firestorm because it focused on larger health systems and failed to include many safety net hospitals and Catholic institutions.

Mayors and lawmakers whose local hospitals were not included in the preferred tier say OMNIA’s structure will financially harm them over time by steering away well-insured patients.

While other states have moved to protect consumers from fallout of narrow networks–especially tenets that result in large, unanticipated hospital bills–a 4-bill package that was scheduled to be introduced today appears to be the most far reaching effort by any legislature in the country to spell out how health plans can respond to market forces set loose by the Affordable Care Act (ACA). Horizon has said throughout that OMNIA responds to New Jersey’s high insurance costs while also addressing federal healthcare reform issues, such as the Cadillac tax. A spokesman for America's Health Insurance Plans (AHIP), a Washington-based group that represents health insurers, said the organization was unaware of legislation elsewhere that would do as much to limit managed care plans in creating tiered networks.

The first lawsuit against OMNIA came from St. Peter’s University Hospital in New Brunswick, which seeks to force Horizon to add the facility to the preferred tier; the second, from a group of hospitals left out of the preferred tier, sought to reverse its approval from the NJ Department of Banking and Insurance (DOBI). The state’s top regulator rejected the request last week, and today’s appellate division ruling leaves little time for opponents to stop patients from starting to use the plan. However, the hospitals will pursue appeals at the next level.

“While we are disappointed a stay was not granted, we recognize that it is difficult to obtain a stay at this stage of the litigation," said Steven M. Goldman, lead attorney for the hospital group. "We are encouraged, however, by the court’s grant of the hospital group’s motion for expedited review, and we look forward to having the case decided on its merits in an accelerated fashion."

Critics of OMNIA say it puts hospitals that serve the poor at a financial disadvantage. “The tiered plans were established in a way that leaves patients without adequate access to care and healthcare providers in our most challenged areas vulnerable to closure,” said Senator Joseph Vitale, a Democrat who chairs the health committee.

At an Assembly hearing last week, opponents said that OMNIA’s configuration creates a scenario in which many urban employees are likely to sign up to save money, only to find out that they cannot use their local hospital without incurring high out-of-pocket costs. OMNIA charges premiums that are 15% less on average, but patients must use preferred tier providers to avoid higher cost-sharing amounts.

Tiered networks have become common as health plans seek to contain costs and develop population health strategies, which call for the use of metrics to track preventive steps to keep patients healthy. The use of metrics among the poor has been controversial; only in recent weeks has CMS acknowledged that it may need to adjust its Medicare Advantage quality ratings to account for socioeconomic status.

Meanwhile, many states, and now the Department of Health and Human Services, have started to take aim at network adequacy requirements and demand greater transparency. The National Association of Insurance Commissioners has just adopted model legislation to update network adequacy standards. 

“The process undertaken to create and approve Horizon plans demonstrated a critical need to establish clear standards for tiered plans, which the Department of Banking and Insurance has unfortunately chosen not to appropriately regulate,” said Senator Nia Gill, a fellow Democrat who chairs the committee the regulates insurance and oversees DOBI.

Vitale and Gill’s moratorium bill would halt any new tiered health networks offered in the calendar year 2015 until January 1, 2017. While aimed at OMNIA, the bill would conceivably affect any other New Jersey tiered network that received regulatory approval in 2015 for the upcoming calendar year. It was not immediately clear if other plans would be affected. It also calls for a special 30-day enrollment period to let consumers select alternate coverage.

The moratorium bill would require Governor Chris Christie’s signature, which seems unlikely since his acting DOBI commissioner just upheld the original OMNIA approval. Override of a veto in New Jersey requires a two-third vote of both houses of the legislature, which is in a lame duck session. Democrats picked up 4 seats in the lower house on Election Day, so the Republicans they are replacing will vote and then leave office..

While lawmakers in both parties are unhappy with Horizon over the failure to include certain hospitals in OMNIA’s top tier, whether the moratorium bill could get enough votes to override a veto is a different question. Already, thousands of enrollees, including many public employees, have no doubt signed up for the plan, which was the centerpiece of the State Health Benefits Program (SHBP) offerings for 2016. Benefits for the plan take effect as early as December 26, 2015, for certain SHBP members and January 1, 2016, for most enrollees.

Goldman, himself a former regulator, praised Vitale and Gill for their efforts. But AHIP's Jay Courtney, deputy director of media relations, said the package was consistent with New Jersey's reputation of "strict market control of health insurance."

"That approach is one of the reasons health insurance costs so much in the state," Courtney said. "This approach will have the harmful effect of stifling innovation and options for consumers--limiting choice, flexibility, and preventing health plans from finding additional ways to make health insurance more affordable for consumers."

Other bills in the package would change the regulatory process for tiered networks going forward, in some highly specific ways. According to a statement from Vitale and Gill, the 3 remaining bills would:

·         Require that selection standards of tiered networks be transparent, with an oversight monitor appointed to ensure compliance. The bill purportedly mirrors standards created by New York Governor Andrew Cuomo when he was Attorney General. Critics say Horizon should not be allowed to keep private its scoring process for deciding which hospitals would be included in the preferred tier, but right now there is nothing to force the insurer to release this information.

 

·         Prevent the DOBI commissioner from granting conditional approvals that allow health insurers to flesh out relationships with additional providers after the fact. DOBI has been criticized for allowing Horizon to find obstetric services for one large county after the September 18, 2015, approval date. Horizon had already launched a high-profile marketing and media campaign to promote the product starting September 10, 2015.

 

·         Require health insurers to publicly report on their websites or in plan documents the actuarial value of a tiered plan. Cost-sharing amounts associated with the least-preferred tier would have to be equivalent to the cost-sharing associated with a silver plan on federal health insurance marketplace. (In other words, those who use the preferred tier cannot be unfairly subsidized by those who do not.) This bill would also require the preferred tier of any plan to include University Hospital in Newark, or “any other hospital that is designated an instrumentality of the state.” Horizon has been criticized for failing to include this facility, which is the level 1 trauma center for northern New Jersey, in the preferred tier.

Even if the moratorium bill does not advance, it is likely that the OMNIA episode will cause New Jersey to revisit its network adequacy and transparency provisions. Regulators may do so voluntarily. The current regulations, adopted in 1999, had some of the strictest “time and distance” provisions in the country when they were adopted, but the ACA has rendered them obsolete. Current rules look at each insurer and network individually and do not give DOBI enough power to force changes based on the overall effect on healthcare access, or the future condition of the market.

Horizon did not address the legislation in its statement and focused on its success in court.

“We are pleased today that the New Jersey Appellate Division denied yet another attack on Horizon’s efforts to offer a high quality, low-cost health plan for New Jersey consumers who are getting crushed by health care costs,” the statement said. “Any effort to deny thousands of uninsured New Jersey families their ability to purchase insurance for the first time in their lives during the Holiday season is reckless and wrong.  

“Opponents of change continue to ignore a very basic reality:  the status quo in New Jersey is not sustainable for our state’s small businesses, consumers and taxpayers.  Horizon will continue to move forward — not backward — on addressing the sky-high cost of health care in New Jersey.”

DOBI did not immediately return a request for comment.