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In New Jersey, Failure to Keep Pace With ACA Leaves a Vacuum, and a Political Mess

Mary K. Caffrey
Another hearing on Horizon BCBS of New Jersey's OMNIA plan reveals how the Christie Administration's failure to keep pace with a changing healthcare market left regulators ill-equipped to address a far-reaching plan that has upset urban mayors, legislators, and safety net hospitals.
The hospitals left out of OMNIA’s Tier 1 fit the profile of the smaller, community facilities that healthcare experts predict will be left behind as the nation moves to financing structures that ask providers to bear more risk. New Jersey has seen its own wave of mergers and acquisitions, the biggest being the pending merger of the Barnabas Health and Robert Wood Johnson systems.

But Horizon’s critics say that state policymakers, not an insurance company, should decide the fate of hospitals based on factors other than size and profit. One of the lawsuits, filed by former NJ Banking and Insurance Commissioner Steven M. Goldman, notes that many of the Tier 2 hospitals have been financed by $3 billion in tax-exempt bonds, so Horizon’s move could ultimately harm taxpayers.

“Horizon should not be dictating healthcare decisions this way,” Jackson said.

Looking at the Big Picture

Linda Schwimmer, president and CEO of the NJ Health Care Quality Institute, asked Assembly members to look at the big picture: tiered health plans are happening across the country—and they’ve been in New Jersey for a while, too, just not with the profile and scope of OMNIA.

“You’re going to continue to see these types of products,” Schwimmer said, because they offer the best vehicle to rein in costs for middle-class consumers, especially those at small businesses or the self-employed. Rather than resist tiered networks, she encouraged lawmakers to be more proactive in setting policies that govern them, asking, “What do we want for our state?”

Both Schwimmer and Goldman agreed the regulations for managed care networks were not designed to handle something like OMNIA. Last updated in 1999, Schwimmer called them “antiquated.” Regulators themselves have said as much, and did so in a 40-page order Monday when they turned back Goldman’s petition to reverse their approval of the OMNIA network.

Citing the law granting DOBI’s authority, the order states, “Neither this statute, nor any other statute, grants the Department the authority to review managed care networks with regard to other parameters, such as the criteria a carrier uses when deciding to contract with a particular provider and on what terms.” There are also no specific standards for determining whether a network is “adequate.”

Schwimmer told the Assembly members there are solutions beyond updated regulations: New Jersey Medicaid reimbursements are far too low for a high-cost market; this means that providers have no choice but to charge more for commercial customers and patients in the State Health Benefits Program (SHBP). It’s a short-sighted strategy, she said, because the federal government will match Medicaid payments, but not others. “We’re just making it more expensive to live in New Jersey.”

That’s why Tier 2 hospitals fear the loss of patients—any disruption of the payer “mix” would upset their financial balance.

Losing commercial customers is something that concerns Horizon, too—that’s what drove OMNIA in the first place. One statistic that jumps from its 2014 annual report is the loss of 268,000 small group members in a single year, while Medicaid enrollment climbed due to expansion under the ACA. Company officials have said that having the second-highest premiums in the nation drives away business and crushes the middle-class and self-employed, 2 groups that Schwimmer agreed are being hard hit in the current climate.

Schwimmer also warned that New Jersey needs to prepare for the Cadillac tax—a charge of 40% that will have to be paid on any individual plan that cost $10,200 or more after 2018. One aim of OMNIA is that it will help employers and the SHBP avoid this penalty.

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