BACKGROUND: The New Jersey Department of Banking & Insurance (DOBI) is responsible for enforcement of the managed care laws and regulations. This is a recent change in enforcement authority and should be an improvement over the past system where enforcement was shared by the Department of Health & Senior Services and DOBI.

Historically, the state has not aggressively prosecuted managed care companies for issues that directly impact physicians, such as insurer payment practices. For example, violations of the prompt payment provision may have only been formally prosecuted in an enforcement action once. [Horizon; $35,000 penalty; 2000] More recently, however, it appears that the state has brought an action where insurer payment practices negatively impact both physicians and premium-paying patients. HealthNet agreed in the spring of 2006 to settle an enforcement action against it by entering into a consent order and paying a fine in the amount of $325,000. While this amount of money is not significant to a major healthcare insurer, MSNJ is heartened that the state has pursued a healthcare insurer for improper business practices. The settled matter involved allegations by the state over.

"HealthNet’s refusal to cover certain out-of-network surgicenter charges and…inaccurate, deceptive and misleading letters to certain …[members] who were planning to undergo surgery at out-of-network surgicenters, which letters created the false impression that certain services were not covered benefits…." [Consolidated Consent Order in the Matter of Proceedings by DOBI against HealthNet of New Jersey, Reference No. 7695351, Docket No. BKI-08326-2004S (Mar. 1, 2006)].

MSNJ POSITION: ;MSNJ believes that the state should engage in more enforcement activities against managed care companies that fail to comply with rules that directly affect physicians and their patients. In addition, MSNJ believes that penalty amounts must be increased so that whenever penalties are leveled against insurers, there is some meaningful financial impact and incentive to change business practices. Finally, MSNJ believes that it should be easier, more expedient, and less costly for individual physicians to seek redress from insurers. In egregious situations or when an insurer's violation is clear physicians should not be required to pay filing fees and bear the costs to air grievances.

MSNJ ACTION: MSNJ spear-headed an initiative to reform how managed care companies process and pay claims based on the collective experience of our members who reported that insurers continued to seek loop-holes to avoid or delay payment. We sought legislation that would make the payment process more transparent and consistent. In response the legislature passed the Health Claims Authorization, Processing and Payment Act (HCAPPA), that became effective on July 11, 2006. While the Department of Banking & Insurance (DOBI) plans to promulgate rules, it believes that many of the obligations imposed should be met, regardless of whether rules have been finalized. DOBI has published two bulletins on its web site to help insurers and providers meet their obligations under the new laws. (Read MSNJ's November 1, 2006 letter to the Commissioner of the Department of Banking & Insurance discussing enforcement and claims processing issues.)

STATUS: The managed care reform legislation passed in January of 2006 and effective in July of 2006 requires more disclosure, transparency, and consistency in claims processing. An explanation of most of the new managed care laws can be found on this web site under the "ISSUES PAGES" that can be accessed from the managed care index page. MSNJ will keep members informed on rule-making activity on the new law's provisions.

Penalties: The reform legislation establishes penalties against payers in the amount of not less than $250 and not more than $10,000 per day for violations if reasonable notice is given by the state of its intent to levy penalties for violations. However, the payers have 30 days, or additional time in the discretion of the DOBI's Commissioner, to remedy any violations.