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Hospitals, insurers spar over transparency, penalties in bill targeting automated insurance reviews
Summary
Hospitals told the Financial Institutions and Insurance Committee that automated utilization-management systems appear to drive denials and shift clinician time to appeals; insurers warned the bill’s 20% penalty trigger and requirement of medical-director review for all claims are unworkable and could duplicate recent reforms.
Chairman Bridal convened the Financial Institutions and Insurance Committee and opened discussion on Assembly Bill 3858, which would require insurers to collect data on claims and decisions made using automated utilization-management systems.
Christine Stearns of the New Jersey Hospital Association told the committee that greater transparency is needed because the growing use of automated systems “seems to correlate to an increase in denials and delays for patients.” She said those systems can prioritize cost containment over patient care and that appeals “require a clinician’s time and attention” that pulls staff away from direct patient care and strains hospital resources.
Ward Sanders of the New Jersey Association of Health Plans urged caution in how the bill is written. He said some recent reforms (referred to on the record as chapter 296) already changed prior-authorization reporting and turnaround rules and that the bill’s current language could unintentionally require a licensed medical director to review every claim, which he said would slow routine approvals. He called the bill’s penalty mechanism — which ties a payment trigger to a 20% threshold of claims deemed unjustified — “unworkable,” noting difficulties in defining who would make a determination of unjustified denials and how a denominator that includes “every claim” could be calculated.
Committee members pressed Sanders on automated claim processing and the potential for penalties to be passed through to ratepayers. Sanders acknowledged that many routine claims are processed quickly by algorithmic systems without human review and that an appeal process and an independent external reviewer already exist to resolve individual disputes. He said the 20% trigger raises measurement and administrative difficulties, and that if a pattern of problems exists the Department of Banking and Insurance could engage.
On the intent behind A3858, the chair said the bill aims to identify “where there’s a pattern of behavior of excessive denials.” Members and witnesses agreed the bill is in discussion-only to gather feedback and refine language, and both hospitals and insurers expressed willingness to continue negotiating specific definitions, measurement approaches and limits on reporting to avoid duplication with recently enacted requirements.
The committee did not take a vote on A3858; the session served to surface technical issues around scope, measurement and penalties and to collect follow-up materials and data from stakeholders.
The committee then proceeded to other bills on the agenda and adjourned after releasing several measures.
