The appellate ruling flatly rejected the request to overturn regulators' approval of Horizon's tiered network. But this is not the end of litigation over the controversial plan.
An appellate court today flatly rejected a request from a group of hospitals to overturn last fall’s approval of a controversial tiered network plan from Horizon Blue Cross Blue Shield of New Jersey, saying state officials fulfilled requirements for network adequacy and were under no obligation to assess the plan’s impact on the broader healthcare landscape.
Horizon’s OMNIA plan, rolled out in September 2015, has created a stir from the beginning by creating 2 tiers of hospitals—including a preferred tier where enrollees can enjoy much lower out-of-pocket expenses. Critics say the preferred tier favors large hospitals at the expense of smaller ones, and note that all but one of the state’s Catholic hospitals were left out. Lawsuits and legislative hearings followed, but thus far OMNIA has remained intact. Horizon announced in March it had enrolled 234,000 consumers.
The appellate judges agreed with the timeline laid out by the hospitals—that regulators initially thought OMNIA was identical to an older tiered network called Advance. In late August 2015, upon realizing this discrepancy, regulators pressed to get information from the insurer and were still making demands about how Horizon would provide obstetric services in one large county, when Horizon unveiled a massive marketing blitz on the eve of open enrollment of state employees. The NJ Department of Banking and Insurance (DOBI) did not officially approve the network until September 18, 2015, several days after OMNIA was announced.
Despite the political fallout, the appellate panel had no issue with how DOBI interpreted the law. “There is no provision in any of the governing statutes that requires the Department to make a specific finding that a tiered benefit network is ‘in the public interest’ before it can be approved,” wrote Judge Michael Haas, for the panel.
In fact, the judges stated, the point of tiered networks is to give insurers bargaining power to extract savings. Continuity of care issues apply to individual patients for set periods of time, not to provider networks, they found.
“We’re pleased the court unanimously affirmed that the Department’s approval of OMNIA was ‘accomplished in strict accordance with the current statutes and regulations’ and rejected entirely any claim that it was ‘arbitrary,’ ‘capricious,’ or ‘unreasonable,’” said Horizon spokesman Kevin McArdle. “This decision is another win for consumers seeking relief from skyrocketing medical bills.”
The ruling comes the day after the NJ Senate passed a stripped-down version of legislation that would have created some of the most restrictive rules in the country for setting up tiered networks—right down to requiring the inclusion of a major teaching hospital in Newark, the state’s largest city. Senate President Steven Sweeney, a likely candidate for governor in 2017, has blocked 2 of the 3 proposed bills but said he supports measures that promote transparency and consumer education.
While the decision on DOBI’s action was sweeping, other court battles remain. Horizon is still being sued directly by hospitals trying to shake loose answers on how it selected the members of the Tier 1 network and a related population health alliance.
Horizon, the state’s largest insurer with 3.8 million enrollees, has said OMNIA is a response to premiums that are the second-highest in the country. The product was aimed particularly at the individual and small employer markets, where it seems to have attracted most of its business. Urban and Catholic hospitals, which care for large numbers of patients enrolled in plans subsidized by government, fear that over time OMNIA’s prices—premiums are 15% cheaper than comparable rates outside the plan—will draw away consumers with commercial coverage and force them to merge or close.
The OMNIA saga in New Jersey highlights broader trends in healthcare: (1) price sensitive consumers are willing to trade access for savings, (2) urban hospitals are being left out networks, and (3) concerns about transparency are growing as the trend toward limited or narrow networks increases.
Part of a Broader Picture
In a February report, Katherine Hempstead, PhD, MA, of the Robert Wood Johnson Foundation, discussed the trade-offs that the most price-sensitive healthcare consumers are willing to make. “Consumers have repeatedly indicated that they are willing to trade access to providers in exchange for lower health insurance prices,” she said at the time.
This is especially true in the individual market, where OMNIA is most popular—this group accounted for 188,995 of the total enrollees announced in March. Totals included 41,258 consumers who were previously uninsured, ahead of projections. Individuals, small employers, and the uninsured were groups that Horizon said at legislative hearings felt priced out in New Jersey.
This is another key finding of Hempstead’s report, one that speaks to a chief complaint about OMNIA: urban and safety net hospitals are being left out of networks nationwide. Hempstead notes some rural hospitals may be the only provider in the area, which gives them bargaining power with health plans their urban counterparts do not enjoy. “Data on individual hospitals in specific metro areas show where the overall reduction in network participation was higher, as nearly two-thirds of hospitals reduced the number of networks in which they participated in 2016,” she wrote.
One thing likely to change in New Jersey is increased transparency. A chief complaint about OMNIA is the way it happened—catching key stakeholders, including legislators, off guard. Horizon has since overhauled its regulatory and public affairs infrastructure, and in May it supported transparency provisions before legislative commission.
More Than One Lawsuit
Today’s ruling comes in 1 of 2 main legal tracts—an attempt to overturn the initial approval of the OMNIA tiered network by DOBI. A second, more complex wave of litigation involves the contractual relationships between Horizon and individual hospitals relegated to the non-preferred tier, known as Tier 2.
This second area has been the subject of intense squabbling in court over discovery of criteria used to select the hospitals in the preferred tier, known as Tier 1; in recent days NJ Advance Media reported that documents freed up through this process confirmed what hospitals suspected: that the most overwhelming criterion for inclusion in Tier 1 was the size of the hospital system.
Sources familiar with the OMNIA cases have told The American Journal of Managed Care that overturning DOBI’s approval was always more daunting than the direct litigation against Horizon, but it was still worth pursuing. Horizon, for its part, has dismissed all the claims in the litigation as “baseless.”
Steven M. Goldman, a former DOBI commissioner representing a group of Tier 2 hospitals, seemed to be referencing the dispute over how OMNIA was created when he reacted today:
"While we are deeply disappointed in the outcome, our clients continue to believe that the department’s decision to approve the plan was arbitrary, capricious and unreasonable, and will have serious consequences for New Jersey patients and providers. We will weigh our legal options in the coming days to determine our course of action.
“The legal issues surrounding Horizon’s controversial OMNIA plan are far from resolved, as the company continues to hide critical information from consumers about how the plan was formulated,” Goldman said. Today, the same appellate division judges will hear arguments regarding court orders that instruct the insurer to disclose a key report on how OMNIA was formed.