NJ Lawmakers Move to Contral the Ravages of Managed Care

New Jersey Friday, May 23, 1997

N.J. Senate approves HMO limits Firms would have to let patients see any doctor. The Assembly will weigh in. Gov. Whitman backs the bill.

By Thomas Ginsberg INQUIRER TRENTON BUREAU TRENTON --

Managed health care firms in New Jersey would have to let patients choose any doctor they want -- in or out of their plan -- under sweeping new consumer and doctor protections approved unanimously by the state Senate yesterday.

The package of protections, if approved by the Assembly and signed as expected by Gov. Whitman, would make New Jersey's managed-care laws among the most stringent and comprehensive in the country, according to Senators and consumer advocates.

Drafted in reaction mostly to individual tales of abuse in the burgeoning managed health-care system, the laws were passed amid furious lobbying by consumer advocates, the medical community and insurance companies. In just a few years, managed health care firms have come to dominate health care and now provide coverage for approximately 60 percent of New Jersey's 8 million people, including almost all of its Medicaid recipients.

Among the measures approved yesterday is one that would require managed health care firms to offer so-called point of service options to their patients. It would allow patients the right to use out-of-network physicians and still have their plans pay the costs.

Exempted from the requirement is the so-called staff model of managed care, which lets patients choose any doctor. The HIP Health Plan of New Jersey is the only one that uses that model, according to lawmakers. No other state has mandated the point of service option, although some firms have been offering it voluntarily to entice customers, according to Cathy Hurwit, deputy director of Citizen Action, a Washington-based consumer advocacy group that is monitoring managed-care regulations nationwide.

``We're having a race to the top,'' Hurwit said about the states passing or considering laws on managed health care. ``New Jersey's bill has some real victories for consumers. ''

Another provision prohibits managed care firms from offering physicians financial incentives for withholding care or information about care they deem medically necessary. It includes a ``Gag Clause'' to protect physicians who talk to patients about treatments or recommend an uncovered treatment. That's in response to complaints from doctors who said they were fired or disciplined for suggesting expensive care.

The bill approved by the Senate establishes an independent appeal process and creates a state-appointed appeal board for patients who believe their managed care provider denied them treatment. It also creates an independent appeal process for physicians who contend they were fired without cause.

The legislation would require insurers to use only physicians in deciding whether to deny or reduce coverage. And it would require full disclosure of coverage options and rules to patients.

The bill permits the state to levy penalties anywhere from $250 to $10,000 per violation, depending on the infraction. Bills in Connecticut and New York would impose similar restrictions, Hurwit said. Texas has a bill pending that would let patients hold a managed care firm liable for damages resulting from denied coverage, she said. Many other states are drafting departmental regulations, rather than laws, to address alleged abuses, she said. Pennsylvania has begun considering regulations but its effort has not progressed as far as New Jersey's, she said.

``Nobody's saying that we want to return to the old system,'' Hurwit said. ``But that doesn't mean you should countenance a system that provides incentives to deny treatment. ''

Managed care firms argued that imposing the point of service option and the other rules, rather than letting companies offer them voluntarily in response to consumer demand, will drive up health care costs and ultimately hurt consumers.

``People certainly cannot think that you can mandatorily add on procedures like the length of stay . . . and think that will not raise costs,'' said Paul Langevin, president of the HMO Association, which represents major managed-care firms in New Jersey. ``You're going to see premium increases this year, unquestionably. ''

The sponsor of the bill, Sen. Jack Sinagra (R. , Middlesex), agreed that health-care costs would go up within two or three years. But he contended the rise would result from costlier treatments and slower growth in the business, not from consumer protection legislation like his.

``They've gotten about all the savings they can out of the system,'' Sinagra said. ``When they go looking for more savings, this bill will keep them from getting it from patients. '' New Jersey lawmakers last year led the nation in imposing minimum mandatory hospital stays for child births and adopted a similar law on mastectomies earlier this year, despite complaints from managed-care firms that the rules were unnecessary and could add cost.

Health care premiums nationwide, on average, changed very little if at all from 1995 to 1996, according to Langevin and Gary Frazier, a managed care analyst at Bear Stearns brokerage house in New York. But premiums next year are expected to rise 3 percent to 5 percent, Frazier said.

``In isolation, these [ bills ] will not cause significant pain to the industry. But collectively across the country, they do take away control from managed care executives . . . and as a result it has an impact in terms of medical loss ratios and profit margins,'' Frazier said. Sinagra said he hoped the new comprehensive legislation would be the last, and dismissed what he called ``Disease of the Week'' bills in New Jersey and elsewhere that only confuse consumers and tangle up the industry.

``With this bill, we've done everything we need to do to manage managed care,'' Sinagra said. ``I know it's politically correct to bash HMO's. To say that all of them are abusing the patient is not true. But unfortunately, it's true that some do not have the patient's interest first,'' Sinagra said.

Philadelphia Online -- The Philadelphia Inquirer, New Jersey -- Copyright Friday, May 23, 1997