Ifservices are either out-of-network “inadvertently” or are“emergent,” the provider is barred from billing the patient inexcess of their deductible, copayment or coinsurance obligation.(Photo: Bigstock)

On June 1, Assembly Bill 2039 became law, ushering in boldpatient protections and blockbuster realignment of claims-handling processes. Effective Aug. 30,extinction of “surprise” out-of-network claims is its goal. Patientprotections now secured, the true “surprise” awaits providers andcarriers scrambling to meet disclosure requirements and theuncertain fiscal impact upon plans who must comply.

A new claims order

Protection under the act hinges upon two classifications ofmedical charges.

The first category addresses out-of-network services that are“knowingly, voluntarily and specifically” selected. In thesecircumstances, aside from brief disclosure obligations of theprovider (discussed later), no further protections apply.

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The second category really shakes things up. Major patientprotection provisions are created. Claims practices betweenproviders and payers are significantly modified. Namely, ifservices are either out-of-network “inadvertently” or are“emergent,” the provider is barred from billing the patient inexcess of their deductible, copayment or coinsurance obligation.This is the hallmark achievement of the act, sparing patients fromso called “surprise medical billing.”

This shifts the fiscal dispute. Now solely between payer andprovider, the act requires plans to provide a “clear andunderstandable description” of their methodology to determine theallowed amount for out-of-network services. Payment is to follow.Assignment of payment to the provider is automatic under the act.If the provider disagrees with the payment, a novel andfast-tracked process awaits with arbitration at the end.

Payment and appeal is abbreviated under the act. Within 20 daysof receipt, the claim is to be paid or notice provided stating thecharges are considered excessive. A 30-day settlement periodfollows. If agreement is not reached, the payor nevertheless is topay their “final offer.” If the provider remains unsatisfied andthe difference between “final offers” is greater than $1000, theprovider holds a 30-day option to initiate binding arbitrationthrough NJDOBI.

Arbitration is upon written submissions including each party's“final offer.” Oddly, the act freezes the payer's position, with noability to submit a modified “final offer.” Decision is swift(within 30 days) and limited to the two amounts submitted. Nodiscretion exists to fashion a different amount (having beendeleted in the final version of the bill). Fees and costs aresplit, unless the arbitrator finds the payor failed to act in goodfaith. No mirror provision exists for providers failing to act ingood faith. Payment (if any), is to be made within 20 days ofdecision. Interest rates apply thereafter.

Arbitration is barred for those not following pre-authorizationor medical necessity review requirements. Similarly, arbitration isunavailable for those who have knowingly and voluntarily selectedout-of-network services.

“Inadvertent” … or by design?

Importance hinges upon whether services were “inadvertently” outof network, defined as “[when] for any reason in-network servicesare unavailable in that facility.” The phrasing is significant.Common hospital practice outsources departments, frequentlyincluding emergency rooms, radiology, lab services andanesthesiology—such services seldom participating with any carrier.It is precisely this mismatch of participation status that leads tothe so-called surprise bills.

But rather than tackle root causes, the act goes in a differentdirection, calling it inadvertent when participating services are“unavailable” “for any reason” (arguably including havingoutsourced the services in the first place). The result deems allsuch services as “inadvertent,” enjoying the protections of fasttrack payment and arbitration. The underlying practice isunaddressed and, by virtue of this act, is now protected.

All is not roses for facilities

It is not all upside. The act requires facilities to advisepatients of their participating status, directing patients to alsoconfirm the participation status of the provider arranging theservice(s). Differences in disclosure depend upon the participationstatus of the facility. A significant twist lies in defining“facility” beyond the traditional concept of a hospital to includebroader categories of satellite emergency departments,hospital-based off-site ambulatory care facilities, andfree-standing ambulatory surgical centers.

The act also requires facility website-based disclosure coveringfour topics: plans in which the facility participates; notice thatphysician services are not included in the facility charges; fullcontact information for all hospital-based groups contracted by thefacility (to include anesthesiology, pathology and radiology); andfinally, the full contact information of every physician employedat the facility and the plans in which they participate. Disclosureforms will be regulated by the Department of Health.

Tougher disclosure for providers

The burden of disclosure (and modified billing practices) fallseven harder upon providers.

Either via website or written notice, providers are to list theplans in which they participate. Where the provider does notparticipate in a plan, the provider is to inform the patient interms “typically understood” of their non-participating status, andtheir charges must be available upon request. If requested, theprovider is to provide the procedure codes anticipated for theservice(s) and their charges. Further, notice is to be given thatthe patient may be responsible for amounts in excess of theperson's deductible, coinsurance and copayment for anyout-of-network services and to contact their carrier for furtherinformation.

Referrals and coordinated treatment bring additionalresponsibilities. Regardless of setting, the originating provideris to disclose the full contact information of any providerscheduled to provide anesthesiology, laboratory, pathology,radiology or assistant surgery services, advising the patient todetermine the plan participation status of referred providers.Disclosure expands when scheduled facility and non-facilityservices are involved to include the full contact information ofany other physician whose services are scheduled at the time ofpre-admission testing, registration or admission. Licensing boardsare delegated oversight of disclosure forms and sufficiency.

Boldly, the act modifies billing practices associated with thewaiving of patient responsibilities. A hotly debated practice, theact now forbids providers from waiving any part of a deductible,copayment or coinsurance “as an inducement” to entice patients toutilize their out-of-network services. If a pattern of such waiveris established, the “inducement” is considered satisfied (and aviolative practice).

Carrier lift

The toughest responsibilities are placed upon carriers. Beyondlisting providers who participate with the carrier, the methodologythat determines the allowed amount for out-of-network services isto be disclosed. Moreover, carriers are to enable a website to notonly calculate reimbursement rates for out-of-network services, buttheir difference from the usual and customary cost. Now obliged tostaff customer service hotlines 16 hours per day, the carrier isresponsible to state the allowed amount the plan will reimburse fora particular medical procedure (CPT code) and the portion of theallowed amount for which the patient will be responsible.

Carriers are to alter their Explanation of Benefits to clearlystate the protections against balance billing for inadvertent andemergent services. NJDOBI is directed to design new medicalidentification cards consistent with the protections under the act.Tabulations of realized savings under the act are to be filedannually with NJDOBI.

Broad brushed, annual independent third-party audits of any“managed care plan” are mandated under the act. While the scope isunclear, apparently audits are to opine upon the adequacy ofproviders “in accordance with applicable federal or state law.”Results will be posted on NJDOBI's website and deficiencies cantrigger NJDOBI enforcement.

Self-funded plans and the illusion of optingin

Recognizing that not all plans are fully insured with a carrier,the act acknowledges that health benefits can be self-funded.Numerous references are made to self-funded plans' ability to optin to the act's new world order of claims resolution. Whether plansdo so is irrelevant, as the act permits providers to initiatearbitration upon all self-funded plans without qualification. Theonly difference for a non-opting-in self-funded plan is thedecision maker's discretion to fashion an award (the concept ofeither/or and “final offers” does not apply). Whether arbitrationis binding is unclear, the act conflictingly stating both.

Further inartful phrasing limits self-funded plans to thoseregulated under ERISA. This leaves the status  unclear fora substantial subset of plans neither fully insured norself-insured under ERISA—e.g. MEWAs (multiple employer welfarearrangements), association plans and church plans—in addition togovernment entities permitted to self fund, which includes the NJState Health Benefit Program, HIFs, counties, municipalities andagencies.

Only the beginning?

Patient protection is always the goal. But it did not have to bethis way. Or so complicated.

Inclusion of the Medicare Allowable Charge upon all billing (acurrent federal proposal) would have benchmarked the relative valuethe act clumsily mishandles. The existing statute regardingexcessive fees could have been modified to declare charges inexcess of “x” times the Medicare Allowable Charge to be de factoexcessive and barred. Alternatively, a requirement could have beenmade that all contracted services to hospitals and all employeephysicians of a hospital mirror its participation status.

Instead, the act is hastily written, contradicting itself attimes, ignoring existing state and federal claims handling andappeal rights. Conflict of laws and federal pre-emption challengeswill plague implementation. The data lift of carriers and providersis substantial. The authority in arbitration to exceed statedout-of-network plan limits is unknown, but doubtful. Thesignificance of “plans” not being synonymous with “carriers” iscompletely missed. Whether estimation of costs will operate as amedical version of a mechanic's pre-estimate is unsettled. Claimsnegotiation services are constrained due to the new processingdeadlines. Because such cost saving mechanisms are curtailed,self-funded plans may be disproportionately affected, particularlythose sponsored by municipalities, counties and unions.

It did not have to be this way. Or so complicated.

Dan Roslokken is general counsel toInsurance Design Administrators in Oakland. He is admitted to theN.J., Pa. and U.S. Supreme Court Bars.