Last week, the New Jersey Department of Banking and Insurance ("NJ DOBI") entered an order requiring Aetna to pay a fine of $9,457,500 for violating New Jersey's HMO regulations regarding reimbursement for services rendered by non-participating providers.

New Jersey HMO Law

Pursuant to New Jersey law, an HMO must limit its members' liability for services rendered at an in-network hospital to the amount of the co-payment, deductible and/or coinsurance. See N.J.A.C. 11:22-5.6(b). Likewise, an HMO cannot require a member to pay more than his or her co-payment, deductible and/or coinsurance with regard to emergency care rendered at non-participating hospitals. See N.J.A.C. 11:24-5.3(b). Finally, a member cannot be obligated to pay any amount in excess of his or her co-payment, coinsurance and/or deductible obligation for services rendered by a non-participating provider if the HMO referred the member to said provider. See N.J.A.C. 11:24-5.1(a).

Collectively, the above-referenced regulations provide that a member cannot be compelled to pay anything above-and-beyond the member's co-payment, coinsurance and/or deductible relative to care rendered by a participating provider or a non-participating provider if the member was referred to the provider by the HMO or the care constituted emergency services. With regard to such services, a payer must pay the non-participating provider's reasonable and customary fees. Balance billing is not permitted.

Aetna's Alleged Violation of New Jersey Law

According to the NJ DOBI, Aetna forwarded a letter to thousands of non-participating providers stating that it would reimburse the providers at 125% of the Medicare allowable amount and that "additional reimbursement will not be considered." It is not a per se violation of New Jersey law for an HMO to negotiate with a non-participating provider and pay 125% of Medicare's rate (or less), so long as the payment is mutually agreeable and does not result in balance billing. However, it is the NJ DOBI's position that Aetna's letter foreclosing any discussion on the matter of the reasonable fee had the net effect of underpaying physicians and resulted in the balance billing of Aetna's members for medically necessary services in direct violation of N.J.A.C. 11:24-9.1. The NJ DOBI has taken the position that Aetna must pay such non-participating providers the entire amount of the billed charges (minus co-payment, deductible and/or coinsurance) if such payment is the only way to prevent balance billing.

I believe that Aetna will certainly demand an administrative hearing and challenge the order. It will likely argue that 125% of Medicare's allowable amount is a fair reimbursement. Also, it may seize on the qualifying language contained in its June 1st letter (i.e., "State specific exceptions may apply"), which could be viewed as tempering its otherwise definitive statement that "additional reimbursement will not be considered". Moreover, Aetna will likely assert that the NJ DOBI cannot compel it to (as the order requires) pay non-participating physicians whatever they charge; instead the touchstone should be an objective standard focusing on that which is fair, customary and reasonable.

Aetna may further argue that it cannot be held responsible for the actions of nonaffiliated third parties (i.e., non-participating doctors who balance bill), especially not if it has already paid said providers a fair fee. Only time will tell whether these or any other arguments prevail.

Implications for Non-Participating Providers

If it survives the administrative hearing and any resulting appeals, the NJ DOBI's order will require Aetna to pay approximately $9.5 million to the State Treasurer and to cease using 125% of Medicare's allowable amount as the maximum allowable charge for services rendered by nonparticipating providers. The order also requires Aetna to reprocess all affected claims and pay non-participating providers an additional fee equal to the difference between the initial payment and the appropriate payment, together with an interest charge on the underpaid amount equal to 12% per annum, accruing from the date that the claim was initially paid.

If you are a provider and received the June 1, 2007 letter from Aetna that forms the basis of the NJ DOBI's order, you may be entitled to additional reimbursement. If you have not yet received a payment from Aetna, you should insure that Aetna reimburses you for your reasonable and customary fee for service. If you receive solicitations from third-party fee negotiation companies, you should likewise refuse to accept anything less than the fair fee for services rendered. If you have alĂeady received an underpayment from Aetna, you should immediately demand the difference between the reimbursed amount and the fair reimbursement, together with interest.

Labels : Reimbursement, Patient Billing, New Jersey, Medicare/Medicaid

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