New Jersey fines Aetna for fee schedule, orders more pay for doctors

A state regulator says the insurer limited pay to out-of-network physicians. Aetna plans to appeal.

By Carolina Procter — Posted Aug. 13, 2007

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The New Jersey Dept. of Banking and Insurance fined Aetna a record $9.5 million for trying to pay nonparticipating physicians 125% of the existing Medicare fee schedule instead of their billed charges. The department also ordered the health plan to reimburse physicians for those billed charges.

The bulk of the fine -- due immediately and one of the largest ever imposed by the department -- stems from Aetna's attempt to apply the 125% schedule to out-of-network physicians who were providing emergency care to patients, providing care during patient admission to a network hospital, or providing care after referrals or authorizations from Aetna, according to the order.

"Aetna was trying to impermissibly shift the cost of care onto the patient, where it was Aetna's obligation under New Jersey law to cover those services," said Larry Downs, general counsel for the Medical Society of New Jersey.

The July 23 order also tags the health plan for "misrepresenting Aetna's obligation with respect to claims" in a June 1 letter sent to 130 physicians and for "not providing its members the right to be free of balance billing."

It says Aetna must "reprocess all claims under insured contracts" for services rendered by the affected physicians, and that Aetna must pay them "an amount sufficient to insure they do not balance-bill members."

Department spokeswoman Jaimee Gilmartin said, "We're going to let the order speak for itself," and issued no further comment.

Aetna spokeswoman Cynthia Michener said the plan would request an appeal hearing with the department. The order says Aetna has 30 days to submit the request in writing.

"We believe that we are not only in compliance with New Jersey statutes, but that our policy protects our members and customers in the state of New Jersey from excessive billed charges by a small group of physicians who do not participate in insurer networks," she said. "We are concerned that this interpretation of the law may encourage this small subset of physicians to drive up medical costs and insurance premiums."

Downs said the medical society is "thrilled" and has commended the department's decision.

"When patients come into the office under emergency situations, and they've purchased a contract of insurance, the physician expects to work on the patient and not have to chase down bills," he said. "We're not talking about elective procedures; we're talking about necessary and immediate health care. Physicians should be compensated appropriately for that. The fact that Aetna was saying, 'We'll pay this portion and the provider can either not collect or the patient can be balance-billed,' is the wrong approach."

When the out-of-network doctors received Aetna's June 1 letter, which informed them they'd receive a "fair payment" of 125% of the Medicare allowable amount, they complained to the medical society, Downs said.

In mid-June, the department made formal inquiries with Aetna and determined that the plan was trying to violate New Jersey insurance rules that say emergency situations under consumer contracts must be covered in full by a payer, Downs said.

Though the Medical Society of New Jersey agrees with this department decision, it didn't agree with a previous department proposal earlier this year to allow employer group health plans with 51 or more employees to pay no less than 150% of the Medicare amount in physicians' claims for out-of-network, nonhospital services.

"Our position was that the market should determine those kinds of issues in terms of payments of nonparticipating doctors," Downs said.

The state's health plans were against the 150% minimum as well, for similar reasons.

Gilmartin, the department spokeswoman, said the agency would not approve the regulations as originally proposed, but changes are not yet set.

"We're still going through the comments we received, which were voluminous," she said.

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