Legislation revising the arbitration provisions of New Jersey’s Out-of-Network Consumer Protection, Transparency, Cost Containment, and Accountability Act was signed into law by Governor Phil Murphy on July 29, 2022.  New Jersey’s law was a predecessor to, and in some ways supplements, the federal “No Surprises Act.

As we noted in an earlier Client Alert, while the federal No Surprises Act has its own arbitration provisions, it defers to state laws to the extent they apply to payment amounts. New Jersey’s state law arbitration provisions are therefore still very relevant to arrangements within the reach of the state law.

S1177 extends the amount of time that the insurance carrier and healthcare provider have to negotiate a settlement in the event of an inadvertent use of out-of-network services from 30 to 60 days. It also extends the deadline for the carrier, provider, or covered person to initiate binding arbitration in the event of a failure to reach a settlement from within 30 days of the final offer to within 90 days of the final offer. The legislation provides that, in order for binding arbitration to be initiated, the difference between a carrier’s and provider’s final offers must be $1,000 or higher for a billed amount of $2,500 or more, or $500 or higher for a billed amount of less than $2,500.

The bill also changes the certification requirement for arbitrators from a certification from the American Arbitration Association to a certification from the Department of Banking and Insurance.

Finally, the bill requires an arbitrator to include detailed written findings with each decision. The detailed written findings are to be an analysis of the decision including information concerning any databases, previous awards, or other documentation or arguments that contributed to the arbitrator’s decision.

This last provision may be a nod to litigation filed against the federal arbitration provision as promulgated by CMS. A CMS rule that the dispute resolution entity must select the offer closest to “the qualifying payment amount,” typically the median rate the insurer would have paid for the service if provided by an in-network provider or facility, drew widespread criticism and litigation.

In Texas Medical Association et al. v. United States Department of Health and Human Services et al., the Court found that the rule deviated from the federal law, stating that: “…the Act plainly requires arbitrators to consider all the specified information in determining which offer to select.”  While the arbitration provisions of the New Jersey law would not be preempted by the federal rules, the new law clearly calls for greater accountability for the factors used by the arbitrator in making its decision.

The new law becomes effective on the 90th day following the July 29, 2022 date of enactment.

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Photo of Neil M. Sullivan Neil M. Sullivan

Counsel, Corporate and Healthcare Departments

Mr. Sullivan concentrates his practice in healthcare and insurance law, with a particular emphasis on the intersection of healthcare finance and delivery. He regularly represents and counsels health plans and healthcare providers in regulatory compliance and filings, and…

Counsel, Corporate and Healthcare Departments

Mr. Sullivan concentrates his practice in healthcare and insurance law, with a particular emphasis on the intersection of healthcare finance and delivery. He regularly represents and counsels health plans and healthcare providers in regulatory compliance and filings, and alternative financial models for healthcare delivery, including Organized Delivery Systems (ODS), Accountable Care Organizations (ACO), Multiple Employer Welfare Arrangements (MEWA), and health system equity ownership or participation in insurance organizations.

As Assistant Commissioner of the New Jersey Department of Banking and Insurance (DOBI) from 2010-2014, Mr. Sullivan oversaw the Office of Life and Health during a period of fundamental change in both the healthcare and insurance sectors. This encompassed the implementation of the Affordable Care Act (ACA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act; the emergence of alternative financial models for health care delivery, including CO-OPs, ACOs, and health system equity ownership or participation in insurance organizations; and the transition to electronic health records and implementation of the ICD-10 mandate.

In his role at DOBI, Mr. Sullivan had overall responsibility for the implementation of insurance reforms under the ACA, including the establishment of a high-risk pool and feasibility study of health insurance exchanges, and rationalizing conflicting points of state and federal law. He served as the DOBI Commissioner’s designee on the NJ Individual Health Coverage (IHC) and Small Employer Health (SEH) program boards, the Mandated Health Benefits Advisory Commission, and the NAIC Regulatory Framework Task Force and Senior Issues Committee, and acted as liaison with the Centers for Medicare & Medicaid Services (CMS) over ACA implementation.

Contact information:

nsullivan@greenbaumlaw.com | 973.577.1804 | vCard  | LinkedIn

For more information visit the Greenbaum, Rowe, Smith & Davis LLP website.