Passage of ‘Out-of-Network’ Bill a Historic Step Forward

The legislature made history today by finally passing legislation (S-485) that will help to address surprise billing and the high cost of health insurance. This is critical as polls show that a primary concern of New Jerseyans is the high cost of health care. While this legislation is extremely important and welcomed, more legislation will be needed in the future to bring down these costs.

Simply put, insurance is becoming unaffordable in New Jersey, especially for middle class families who are not eligible for public coverage or subsidies. While it took many years to finalize this bill, it demonstrates that the legislature can take on powerful interest groups and establish policies that will benefit consumers.

The average cost for a family with employer-based coverage is about $18,000, the 13th highest amount in the nation. This affects the family, but also the employer which shares in the cost and is one of the main reasons why the number of New Jerseyans covered by small employers has dropped by half since 2010 (from 740,000 to 371,000). This problem is even worse for families who do not have employer- based coverage and must pay the entire cost for coverage in the individual market; a four-person family typically pays about $23,000 in premiums, plus cost sharing, which often represent between a quarter to a third of their gross income.

This bill addresses this problem in two major ways. First, it provides new protections and transparency for New Jerseyans to avoid surprise billing, including a prohibition on balanced billing. In a 2016 report on this issue, NJPP estimated that 168,000 New Jerseyans receive surprise bills from their health providers annually. These bills amount to $420 million and average about $2,500 per person. Under this legislation, many of these individuals would no longer receive a bill or, if they did, they would know about it before they agreed to medical treatment. New Jerseyans who obtain their insurance in the individual or small group market, Medicare or Medicaid, and the health system for public employees already have some – but not all – of these protections, however many of the 3.8 million New Jerseyans in self-insured employer-based plans do not.

The second way in which this bill will reduce costs is that it addresses the problem of health providers that submit claims to insurers for exorbitant, inappropriate costs by requiring a fair and expedited method to arbitrate bills when there is no agreement on what should be paid. In effect a small number of health providers can charge significantly higher bills by going out of network.  NJPP estimated that the total claims submitted to insurers for out of network costs amounted to about one billion dollars in New Jersey, much of which are passed along in higher premiums and cost sharing to five million New Jerseyans with commercial insurance. The new arbitration system also benefits many health providers because it provides a quick and fair method to resolve billing disputes.