11 hospital systems sue state over OMNIA approval

Eleven New Jersey hospital systems are going to court to challenge the state’s approval of Horizon Blue Cross Blue Shield of New Jersey’s controversial new OMNIA insurance plan.

The lawsuit aims to challenge the lack of adequate coverage, as well as the danger to safety-net hospitals if the OMNIA plan succeeds in driving market share away from urban hospitals.

The lawsuit was filed on behalf of Capital Health Regional Medical Center, CentraState Medical Center, Holy Name Medical Center, JFK Medical Center, Kennedy Health, Our Lady of Lourdes, St. Francis Medical Center, St. Luke’s Warren Hospital, Trinitas Regional Medical Center, Valley Health System and Virtua Health.

The tiered OMNIA network, which was announced in September, gives members greater savings at partner hospitals (mostly suburban systems)  known as Tier 1, compared with regular, in-network hospitals (including urban systems), which were labeled Tier 2.

Tier 2 hospitals feel spurned by the state’s largest insurer and believe the state’s Department of Banking and Insurance should not have approved the new plan.

The lawsuit is being led by Steven Goldman, a former commissioner of the state DOBI — the same department being sued.

“The problem is not with tiered networks. (The problem is) execution of the idea and methodology of implementation (of the tiered network),” Goldman said in a conference call with media Thursday morning.

DOBI has approved a plan that doesn’t meet geographic requirements and does not meet the needs of having access to a Level 1 and 2 trauma center, Goldman said.

He echoed earlier comments by state Sen. Nia Gill stating that DOBI violated its own regulations.

A joint Senate committee hearing in October, led by commerce and health committee chairs Gill (D-Montclair) and Sen. Joseph Vitale (D-Woodbridge) revealed that DOBI did indeed find minor issues with the plan before approval Sept. 18.

Gill and Vitale said, in a joint statement after the hearing, that DOBI “may have violated state law and its own regulations by approving the tiered plans even though they did not meet established requirements.”

The Department of Banking and Insurance, tasked with regulatory oversight of fully funded insurance plans such as OMNIA, allowed Horizon to obtain approval despite not meeting adequacy rules for Burlington County — the largest area county in the state and the only one without a Tier 1 or OMNIA partner hospital.

Acting DOBI Commissioner Peter Hartt said that, prior to approval of the tiered product, officials were aware Horizon’s Tier 1 presence in Burlington County was just shy of the required 90 percent, at 88 percent.

Hartt explained that Horizon committed to take action that would rectify the problem, which was treating obstetric services as Tier 1 within Burlington County.

“DOBI allowed Horizon to dictate to it how it would meet adequacy rules. That’s a very dangerous way, in terms of regulatory power, even for the narrow jurisdiction they (DOBI) have. So there is a failure of the regulatory agency to follow the very rules that are in place,” Gill said after the hearing on Oct. 5.

DOBI approved a plan that doesn’t meet the minimum requirement for geographic adequacy, as well as puts patients who travel to hospitals by foot in danger of not having those hospitals in urban areas, Goldman said.

Even though the plan is a commercial one, the potential to drive market share to suburban hospitals will lower the volume of paying customers and, as a result, Medicaid and Medicare members in urban areas could lose their nearest hospital, Goldman said.

“New Jersey has some of the highest health care costs in the nation and consumers are demanding relief,” Thomas Rubino, director of public affairs for Horizon BCBSNJ, said in a statement. “It is unfortunate that these lawsuits aim to preserve the high-cost status quo in New Jersey, which is neither sustainable nor acceptable.”

Goldman said earlier Thursday that he was not against the idea of a tiered network and commended the concept of lowering the cost of health insurance and increasing quality. But, he said, the execution of this particular plan was concerning, especially because Horizon is the largest state insurer.

“Since Horizon first announced its OMNIA plan in September, Catholic hospitals in New Jersey have raised important questions about the network’s secretive criteria and the state’s inadequate oversight,” Sister Patricia Codey, president of Catholic HealthCare Partnership of New Jersey, said in a prepared statement. “We have serious concerns that OMNIA is designed to inflict economic harm on Tier 2 hospitals in order to incentivize expensive Tier 1 hospitals to accept lower payments. If the OMNIA plan is allowed to continue, the financial impact will be devastating to Catholic hospitals and the patients they serve.”

The lawsuit asks for a reply from DOBI by Nov. 30 to stall the plan’s rollout, and, if not, the hospital systems will file through the appellate court for a stay.

Appellants Brief