State senators opposed to how Horizon Blue Cross Blue Shield of New Jersey designed its OMNIA Health Alliance are pointing to New York as a model for designing a tiered health network.

During the recent marathon-length hearing on the alliance, Sen. Nia H. Gill (D-Essex and Passaic) repeatedly pointed to a series of agreements forged by New York Gov. Andrew Cuomo when he was the attorney general in 2007. These agreements required insurers to disclose when they name medical specialists to tiers how much of these decisions was based on measurements of the doctors’ quality and how much was based on the doctors’ cost efficiency.

Sen. Joseph F. Vitale (D-Middlesex) joined Gill in asking New Jersey Acting Attorney General John J. Hoffman to delay the launch of the OMNIA tiered plans. In a tiered health network, patients pay less in out-of-pocket costs if they see a doctor or visit a hospital that is in a low-cost tier. The OMNIA Alliance has been controversial since it was announced last month because executives with hospitals that were left out of the low-cost tier believe that they will lose patients and that will hurt them economically.

There is a notable difference between what happened in New York in 2007 and what the OMNIA Alliance has proposed. Namely, the New York agreements covered doctors, while the alliance affects both doctors and hospitals. In addition, it may be unlikely that Hoffman would effectively reverse the approval of OMNIA by officials with the Department Banking and Insurance.

Vitale and Gill sent a letter to Hoffman on Wednesday asking him to “immediately intervene to delay Horizon from offering the OMNIA plans until his office establishes a permanent oversight mechanism for the process for tiering and rating healthcare providers in New Jersey.”

The senators described Cuomo’s actions as a precedent and added: “It is our firm belief that oversight of the OMNIA Alliance and all tiered plans will ensure fairness, transparency and consistency in the healthcare market and for all of New Jersey’s consumers.”

Call for closer monitoring

The senators assert that there hasn’t been adequate state oversight and that the attorney general should provide stricter control. They said that Department of Banking and Insurance officials may have violated state law by approving the OMNIA plans before Horizon had specified exactly how it would provide Tier 1 maternity services in Burlington County. New Jersey approved the plans after Horizon executives told state officials that they would provide these services in one of multiple ways, possibly by specifying that just the maternity services at a Tier 2 hospital would be included in Tier 1.

Gill and Vitale also noted that officials with the Department of Health and the Department of Human Services have said that regulating the OMNIA Health Alliance is outside their jurisdictions.

Much of the criticism of the new alliance focuses on the degree of transparency – or lack thereof – that went into the selection of hospitals. While Horizon has said that they’ve gone further than other insurers in disclosing the factors that went into determining which hospitals to invite into Tier 1 (the low-cost tier), they haven’t disclosed the weight given to each factor that was considered or the final score each hospital received.

The factors include measurements of clinical quality; experience providing a broad range of services, including both inpatient and outpatient care; consumer-preference data; capacity and commitment to provide value-based services; and a hospital system’s size and scale.

Horizon, alliance members, and some business leaders have defended the alliance, saying that it would lower healthcare costs. It’s also aimed at improving healthcare quality by shifting payments from being based on the volume of services providers deliver toward being based on measurements of provider quality and cost efficiency.

NY action followed probe of tiers

The New York agreements followed a several-month investigation by Cuomo into how Aetna, Cigna, and UnitedHealthcare had determined which doctors in different specialties would be in their low-cost tier. As in New Jersey, some of the loudest voices concerning the insurers’ approach were those providers left outside of these tiers -- although in New York, it was doctors and not hospitals.

Gill noted a 2007 statement from Cuomo: “When the sponsor (of a tiered network) is an insurer, the profit motive may affect its program of physician measurement or reporting. This is a potential conflict of interest and therefore requires scrutiny, disclosure and oversight by appropriate authorities.”

In the 2007 agreements struck with six New York insurers -- which included the New York Blue Cross Blue Shield affiliate -- the insurers agreed to have an “oversight monitor” ensure that they disclose how they ranked doctors. This potentially allowed doctors who were left out of the low-cost tiers to make changes that would make them eligible.

It’s not clear how a similar approach would work with hospitals, since inherent in the OMNIA concept is that certain medical centers will be excluded from the low-cost tier. That’s because hospitals generally only agreed to accept the lower payments in return for the promise that they will receive more patients. Since it’s impossible for every hospital to have more patients, the patients must shift from the Tier 2 hospitals to the Tier 1 institutions.

This potential shift of customers is a source of concern for the Tier 2 hospitals, since some operate on low margins and rely on privately insured patients to remain financially viable.

The senators said in their letter to Hoffman that they’re “not opposed to tiered plans that are created fairly and transparently.”

In fact, Vitale and Gill have sponsored a bill that applies to contracts between healthcare providers and insurers. It says, in part, that doctors can’t insert a clause into their contracts that prevents insurers from starting a tiered network and thus pay providers less. This bill, [http://www.njleg.state.nj.us/2014/Bills/S3000/2603_I1.HTM|S-2603]/A-3686, was introduced last year and has not been scheduled for a hearing in either legislative house. Assemblyman Troy Singleton (D-Burlington) is the sponsor in the lower chamber.

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