NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1211-15T3
CAPITAL HEALTH SYSTEM, INC., CENTRASTATE MEDICAL CENTER, APPROVED FOR PUBLICATION HOLY NAME MEDICAL CENTER, INC., THE COMMUNITY HOSPITAL GROUP, June 7, 2016 INC., t/a JFK MEDICAL CENTER, KENNEDY HEALTH, OUR LADY OF APPELLATE DIVISION LOURDES HEALTH CARE SERVICES, INC., ST. FRANCIS MEDICAL CENTER, INC., ST. LUKE'S WARREN HOSPITAL, INC., TRINITAS REGIONAL MEDICAL CENTER, VALLEY HEALTH SYSTEM, and VIRTUA HEALTH, INC.,
Plaintiffs-Appellants,
v.
NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE,
Defendant-Respondent.
Argued May 25, 2016 – Decided June 7, 2016
Before Judges Alvarez, Accurso and Haas.
On appeal from the New Jersey Department of Banking and Insurance.
Kerri Ann Law (Kramer Levin Naftalis & Frankel, LLP) of the New York bar, admitted pro hac vice, argued the cause for appellants (Greenberg Dauber Epstein & Tucker; Steven M. Goldman; Daniel Goldman (Kramer Levin Naftalis & Frankel, LLP) of the New York bar, admitted pro hac vice; and Ms. Law, attorneys; Michael H. Freeman, Steven Goldman, Daniel Goldman and Ms. Law, of counsel; Linda G. Harvey, of counsel and on the briefs).
Richard E. Wegryn, Jr., Deputy Attorney General, argued the cause for respondent Department of Banking and Insurance (Robert Lougy, Acting Attorney General, attorney; Melissa Dutton Schaffer, Assistant Attorney General, of counsel; Mr. Wegryn, on the briefs).
Jeffrey S. Chiesa argued the cause for respondent Horizon Blue Cross Blue Shield of New Jersey (Chiesa Shahinian & Giantomasi, PC, attorneys; Mr. Chiesa, on the briefs).
Melinda Martinson, General Counsel, Medical Society of New Jersey and Edith M. Kallas, Joe R. Whatley, Jr., Ilze C. Thielmann (Whatley Kallas, LLP) attorneys for amicus curiae Medical Society of New Jersey (Ms. Martinson, of counsel and on the brief; Ms. Kallas, Mr. Whatley and Mr. Thielmann, on the brief).
Howard R. Rubin, Robert T. Smith and Eric T. Werlinger (Katten Muchin Rosenman, LLP) of the District of Columbia bar, admitted pro hac vice, and Scott A. Resnik (Katten Muchin Rosenman, LLP) attorneys for amicus curiae New Jersey Patient Care and Access Coalition (Mr. Rubin, Mr. Smith and Mr. Werlinger, of counsel; Mr. Resnik, of counsel and on the brief).
The opinion of the court was delivered by
HAAS, J.A.D.
2 A-1211-15T3 Appellants, a group of ten New Jersey hospitals,1 appeal
from the September 18, 2015 final decision of the New Jersey
Department of Banking and Insurance (the Department), approving
Horizon Blue Cross Blue Shield of New Jersey's (Horizon's)
application to establish the OMNIA Health Alliance (OMNIA)
network. OMNIA is a health benefits plan that contains a two-
tiered network of hospitals and physicians under which a
member's cost-share (deductibles, co-insurance, and co-payments)
are lower if the member elects to use a Tier 1 provider.
Horizon designated appellants as Tier 2 hospitals under the
OMNIA tiered plan.
Appellants argue that the Department acted arbitrarily,
capriciously and unreasonably in approving the OMNIA network
because: the hospital network did not comply with the statutory
and regulatory geographic access and availability standards
(time and distance standards) for network adequacy; the hospital
network is contrary to the public interest; the Department
1 The ten hospitals are Capital Health System, Inc., Centrastate Medical Center, Holy Name Medical Center, Inc., The Community Hospital Group, Inc., t/a JFK Medical Center, Kennedy Health, Our Lady of Lourdes Health Care Services, Inc., St. Francis Medical Center, Inc., Trinitas Regional Medical Center, Valley Health System, and Virtua Health, Inc. An eleventh hospital, St. Luke's Warren Hospital, Inc., withdrew its appeal on May 24, 2016.
3 A-1211-15T3 failed to conduct a meaningful analysis of the hospital network;
and the approval was not supported by substantial evidence.
After evaluating these contentions in light of the record
and the applicable law, we affirm the Department's decision in
all respects.
I.
The Department is vested with the authority to administer
and enforce the insurance laws of this State. N.J.S.A. 17:1-1.
It has "a statutory obligation to protect the interests of New
Jersey's insurance consumers and to regulate and oversee the
operations of the insurance industry." N.J.S.A. 17:1C-19(a)(1);
see Richardson v. Standard Guar. Ins. Co., 371 N.J. Super. 449,
464 (App. Div. 2004) (citing N.J.S.A. 17:1C-19(a)(1)); In re
Markel Ins. Cos., 319 N.J. Super. 23, 29 (App. Div. 1999)
(insurance companies subject to strict regulatory control of the
Department).
Among other things, the Legislature has granted the
Department the authority to regulate fully insured health
benefit plans sold in commercial markets, including the OMNIA
plan offered by Horizon, a health service corporation. N.J.S.A.
17:48E-44. In accord with its statutory authority, the
Department issues licenses to carriers seeking to transact
health insurance business in the State, N.J.S.A. 17:48E-4;
4 A-1211-15T3 reviews insurance products and rates for compliance with
existing regulations, N.J.S.A. 17:48E-13, -13.1; monitors the
financial solvency of licensees to ensure product availability
in the marketplace, N.J.S.A. 17:48E-37; responds to consumer
complaints and inquiries; and educates consumers about insurance
products and issues. See, e.g., N.J.S.A. 26:2S-4 (carrier shall
disclose to subscriber terms and conditions of health benefits
plan).
Under the Health Care Quality Act (the HCQA), N.J.S.A.
26:2S-1 to -28, the Department is also charged with reviewing
"managed care plans." N.J.S.A. 26:2S-2 defines a "managed care
plan" to mean
a health benefits plan that integrates the financing and delivery of appropriate health care services to covered persons by arrangements with participating providers, who are selected to participate on the basis of explicit standards, to furnish a comprehensive set of health care services and financial incentives for covered persons to use the participating providers and procedures provided for in the plan.
Tiered benefit plans, like the OMNIA plan that is the
subject of this appeal, fall within this broad statutory
definition, and have been offered over the past several years by
a number of New Jersey carriers, including Horizon. Under a
two-tiered benefit plan, the carrier provides a network of
providers in both the preferred tier, (Tier 1), where consumers
5 A-1211-15T3 pay less than the standard level of cost-sharing, and the non-
preferred (Tier 2), standard cost-sharing tier. If the consumer
elects to use a Tier 1 provider, the cost-share is lower than
the standard cost-share for a Tier 2 provider.
As defined in N.J.S.A. 26:2S-2, the term "carrier" includes
a "health service corporation" like Horizon. In setting up a
tiered benefit network, the carrier "may establish criteria and
standards for providers of health care services with which it
desires to contract, and may establish its own contracting
criteria for the providers as it shall determine[.]" N.J.S.A.
17:48E-10(d). Once the carrier determines its proposed network,
it submits an application to the Department seeking its
approval.
N.J.S.A. 26:2S-18 grants the Department the authority to
promulgate regulations to carry out the purposes of the HCQA.
In this regard, N.J.A.C. 11:24A-4.10(a) states:
A carrier shall maintain an adequate network . . . of [primary care providers (PCPs)], specialists and other ancillary providers to assure that covered persons are able to access services in-network and take full advantage of the in-network benefits levels when the policy or contract specifies that there is a differential between the in- network and out-of-network benefits levels for one or more covered services . . . .
As applied to an application for approval of a tiered network,
the Department has interpreted this regulation to require the
6 A-1211-15T3 Department to review each tier to determine the "adequacy of the
provider network with respect to the scope and type of health
care benefits provided by the carrier, the geographic service
area covered by the provider network and access to medical
specialists[.]" N.J.S.A. 26:2S-18.
Under the Department's regulations, the carrier must meet
specific time and distance standards for the various types of
providers as to each plan offered. N.J.A.C. 11:24A-4.10(b).
With respect to hospitals or "institutional providers," N.J.A.C.
11:24A-4.10(b)(3) provides that:
For institutional providers, the carrier shall maintain contracts or other arrangements acceptable to the Department sufficient to meet the medical needs of covered persons, and maintain geographic accessibility of the services provided through institutional providers, subject to no less than the following:
i. The carrier shall have a contract or arrangement with at least one licensed acute care hospital with licensed medical- surgical, pediatric, obstetrical and critical care services in any county or service area that is no greater than [twenty] miles or [thirty] minutes driving time, whichever is less, from [90%] of covered persons within the county or service area.
ii. The carrier shall have a contract or arrangement with surgical facilities, including acute care hospitals, licensed ambulatory surgical facilities, and/or Medicare-certified physician surgical practices available in each county or
7 A-1211-15T3 service area that are no greater than [twenty] miles or [thirty] minutes driving time, whichever is less, from [90%] of covered persons within the county or service area.
iii. The carrier shall have a contract or otherwise agree to cover medically necessary trauma services at a reasonable cost with all Level I or II trauma centers designated by the Department of Health and Senior Services, with the provision of benefits at the in-network level.
iv. The carrier shall have contracts or arrangements for the provision of the following specialized services at in-network benefit levels (if covered by one or more of the carrier's health benefits plans in network, and determined to be medically necessary), so that services will be available within [forty-five] miles or [sixty] minutes average driving time, whichever is less, of [90%] of covered persons within each county or service area:
(1) At least one hospital providing regional perinatal services;
(2) A hospital offering tertiary pediatric services;
(3) In-patient psychiatric services for adults, adolescents and children;
(4) Residential substance abuse treatment centers;
(5) Diagnostic cardiac catheterization services in a hospital;
(6) Specialty out-patient centers for HIV/AIDS, sickle cell disease, hemophilia, and cranio-facial and congenital anomalies; and
8 A-1211-15T3 (7) Comprehensive rehabilitation services.
According to the Department, its analysis of network
adequacy is an "iterative and continual process," because it is
"rare that a network submission is complete or adequate upon the
initial filing." Thus, the Department frequently asks carriers
for additional information necessary to complete the network
adequacy review. If the carrier successfully demonstrates that
its proposed tiered benefit network is "adequate" under N.J.A.C.
11:24A-4.10(b)(3), the Department will approve the carrier's
plan. Once a network is approved, the Department continues to
monitor the adequacy of the network and if a network deficiency
is detected, it takes corrective action. See N.J.S.A. 26:2S-16;
N.J.A.C. 11:24A-2.7.
II.
Beginning in January 2014, Horizon offered its subscribers
a tiered benefit plan known as the Advance Tiered Network ("the
Advance plan"). The network had 87,211 subscribers and was
comprised of thirty-one hospitals in Tier 1, and thirty-seven
hospitals in Tier 2. There was one Tier 1 hospital located in
every county in New Jersey under the Advance plan, except
Somerset and Cumberland counties. Appellants were participating
providers in the Advance plan network: four hospitals were
designated as Tier 1 (Kennedy, Lourdes, St. Francis, and
9 A-1211-15T3 Trinitas), and the other six hospitals were designated as Tier 2
(Capital, Centrastate, Holy Name, JFK Medical Center, Valley
Health, and Virtua).
On June 25, 2015, Horizon submitted its application to the
Department for network adequacy approval of the OMNIA two-tiered
provider network.2 OMNIA's hospital network was comprised of
thirty-five hospitals in Tier 1 and thirty-two hospitals in Tier
2 (including all ten appellants). There is one Tier 1 hospital
located in each county in New Jersey, except Warren and
Burlington counties. At the time of the application, Horizon
projected that 250,000 consumers would enroll in the OMNIA plan,
which would represent approximately 6.6% of its total statewide
market-share.3
Over the course of the next three months, the Department
reviewed the adequacy of Horizon's OMNIA network pursuant to
N.J.S.A. 26:2S-18 and N.J.A.C. 11:24A-4.10. The application
ultimately comprised thousands of pages of documents, including:
spreadsheets of PCPs, specialists, and hospitals; enrollment
projections by geographic area; and geo-access reports detailing
time and distance requirements to designated Tier 1 providers
2 The OMNIA plan was intended to replace the Advance plan. 3 Horizon provides health benefits to more than 3.8 million members.
10 A-1211-15T3 for the projected enrollment in the geographic service areas of
concern.
Initially, Horizon only submitted its proposed physician
network to the Department for review, not its proposed hospital
network. As a result, by letter dated August 25, 2015, the
Department asked Horizon to provide the completed General Acute
Care Hospital tables ("hospital tables"), in addition to other
information regarding physicians and specialists.
On September 3, 2015, the Department again asked Horizon to
submit a completed copy of the hospital tables for the OMNIA
plan. The Department stated that it assumed that the OMNIA and
Advance hospital networks were identical, but if they were not,
Horizon should provide a comparison of the networks under the
plans. Horizon provided the Department with the completed
hospital tables for both plans on that same date and, on
September 11, 2015, Horizon submitted information regarding the
proposed networks compliance with the adequacy standards.
Horizon explained that the OMNIA and Advance networks were
similar in that they each included a Tier 1 hospital in all but
two counties and met geographic access requirements, but
differed in that the Tier 1 hospitals in the Advance plan were
"mostly small systems," while the Tier 1 hospitals in the OMNIA
network were "the largest systems in the State."
11 A-1211-15T3 Based on its review, the Department found a substantive
deficiency in the OMNIA Tier 1 hospital network; obstetrical
services in the Burlington County area only reached 88% of the
projected membership, not the 90% required under N.J.A.C.
11:24A-4.10(b)(3)(i). By email dated September 15, 2015,
Horizon committed to curing this deficiency, and indicated that
it wanted the "latitude" to proceed under one of two options,
including the option it ultimately implemented, that is,
applying Tier 1 benefits for Tier 2 obstetrical services in
Burlington County. Based on this commitment, the Department
concluded "that the OMNIA Network met the time and distance
requirements of N.J.A.C. 11:24A-4.10 and qualified for statewide
approval." The Department further found that
[w]ith regard to the acute care hospital requirements at N.J.A.C. 11:24A- 4.10(b)[(3)(1)], the OMNIA Network satisfied the adequacy standard with [thirty-five] hospitals in Tier 1 and [thirty-two] additional in-network hospitals in Tier 2. This means that the OMNIA Network has at least one acute care hospital with medical- surgical, pediatric, obstetrical, and critical care services, within [twenty] miles or [thirty] minutes driving time for 90[%] or more of the OMNIA plans' projected enrollment in each county or service area.
In a final decision issued on September 18, 2015, the
Department's Chief of the Office of Managed Care, wrote that the
Department had completed its review of Horizon's
12 A-1211-15T3 application to establish the OMNIA Network. This network is approved [statewide] as of September 15, 2015. On that date, the Department advised the Centers for Medicaid and Medicare Services that it was revising the QHP [qualified health plan] certification to indicate that the OMNIA network was approved.
Overall, any change in operations from those descriptions filed with this application are subject to prior review and approval by the Department. Horizon shall be subject to all provisions of N.J.S.A. 26:2S-1 et seq. and N.J.A.C. 11:24A-1 et seq. . . . .4
On November 19, 2015, appellants filed their notice of
appeal from the Department's September 18, 2015 final decision.
Appellants also filed a motion for a stay of that decision with
the Department. On November 30, 2015, the Department denied
appellants' motion, and issued a comprehensive forty-page
written decision that thoroughly explained its decision
approving Horizon's application and determining that the OMNIA
plan met all applicable network adequacy requirements.5
4 On September 30, 2015, Horizon provided the Department with additional information about the OMNIA plan, including updated hospital tables adding two new Tier 1 hospitals, and responses to the Department's August 25, 2015 request for more information about physicians and specialists. 5 Pursuant to Rule 2:5-1(b), we have treated the Department's November 30, 2015 decision as its findings of fact and conclusions of law concerning the Horizon application.
13 A-1211-15T3 On December 7, 2015, we denied appellants' emergent motion
for a stay of Horizon's implementation of the OMNIA tiered
network plan, but granted appellants' motion for acceleration.
III.
Established precedents guide our task on appeal. Our scope
of review of an administrative agency's final determination is
limited. In re Stallworth, 208 N.J. 182, 194 (2011). "An
appellate court affords a 'strong presumption of reasonableness'
to an administrative agency's exercise of its statutorily
delegated responsibilities." Lavezzi v. State, 219 N.J. 163,
171 (2014) (quoting City of Newark v. Nat. Res. Council, Dep't
of Envtl. Prot., 82 N.J. 530, 539, cert. denied, 449 U.S. 983,
101 S. Ct. 400, 66 L. Ed. 2d 245 (1980)). "Particularly in the
insurance field, the expertise and judgment of the [Department]
may be allowed great weight." In re Comm'r's Failure to Adopt
861 CPT Codes, 358 N.J. Super. 135, 149 (App. Div. 2003). "The
party challenging agency action bears the burden of overcoming
these presumptions." Ibid.
Moreover, "[a]n agency's interpretation of its own rule is
owed considerable deference because the agency that drafted and
promulgated the rule should know the meaning of that rule."
N.J. Healthcare Coal. v. N.J. Dep't of Banking & Ins., 440 N.J.
Super. 129, 135 (App. Div.) (quoting In re Freshwater Wetlands
14 A-1211-15T3 Gen. Permit No. 16, 379 N.J. Super. 331, 341-42 (App. Div.
2005)), certif. denied, 222 N.J. 17 (2015). A reviewing court
"may not second-guess those judgments of an administrative
agency which fall squarely within the agency's expertise." In
re Stream Encroachment Permit, Permit No. 0200-04-0002.1 FHA,
402 N.J. Super. 587, 597 (App. Div. 2008).
"An agency's determination on the merits 'will be sustained
unless there is a clear showing that it is arbitrary,
capricious, or unreasonable, or that it lacks fair support in
the record.'" Saccone v. Bd. of Trs. of Police & Firemen's Ret.
Sys., 219 N.J. 369, 380 (2014) (quoting Russo v. Bd. of Trs.,
Police & Firemen's Ret. Sys., 206 N.J. 14, 27 (2011)). In
determining whether agency action is arbitrary, capricious, or
unreasonable, an appellate court must examine:
(1) whether the agency's action violates express or implied legislative policies, that is, did the agency follow the law; (2) whether the record contains substantial evidence to support the findings on which the agency based its action; and (3) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.
[Stallworth, supra, 208 N.J. at 194 (quoting In re Carter, 191 N.J. 474, 482-83 (2007)).]
We are not, however, in any way "bound by the agency's
interpretation of a statute or its determination of a strictly
15 A-1211-15T3 legal issue." Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85,
93 (1973).
Applying these principles, and for the reasons that follow,
we discern no reason to disturb the Department's decision
approving the OMNIA plan.
A.
Appellants argue that the OMNIA network did not meet the
network adequacy requirements set forth in N.J.A.C. 11:24A-
10(b)(3), because at the time of approval Horizon did not have
"signed agreements" with all of the Tier 1 hospitals, thereby
making it impossible for the Department to determine if the
hospital network complied with the regulatory standards. We
disagree.
N.J.A.C. 11:24A-10(b)(3) provides that "[f]or institutional
providers, the carrier shall maintain contracts or other
arrangements acceptable to the Department sufficient to meet the
medical needs of covered persons, and maintain geographic
accessibility of the services[.]" (emphasis added). The
carrier shall have a "contract or other arrangement" with
certain specific providers, including acute care hospitals,
trauma centers, and specialists within a certain time and
distance from 90% of the covered subscribers. N.J.A.C. 11:24A-
10(b)(3)(i)-(iv).
16 A-1211-15T3 Horizon was statutorily authorized to enter into contracts
with the hospitals or "participating" providers. N.J.S.A.
17:48E-10; N.J.A.C. 11:24A-4.15. The contracts required the
hospitals "to accept agreed-upon payments for specified services
as payment in full, thus relieving the subscriber of any further
financial burden and, in turn, require[d] Horizon to pay each
participating provider directly, this doubtlessly to encourage
greater participation in the network." Somerset Orthopedic
Assocs., P.A. v. Horizon Blue Cross & Blue Shield of N.J., 345
N.J. Super. 410, 413-14 (App. Div. 2001).
It is undisputed that at the time of the Department's
approval, Horizon had automatically renewable contracts
("Network Hospital Agreements") in place with all of the
hospitals participating in the OMNIA network, including all the
Tier 1 hospitals, as well as appellants and the other hospitals
in Tier 2. As the Department explained in its November 30, 2015
decision, it was "important to note that . . . all of the Tier 1
and Tier 2 hospitals participating in the OMNIA Network were
already contracted with Horizon and considered in-network.
Establishment of the OMNIA Network did not require re-
contracting with these hospitals."
Thus, contrary to appellants' assertions, Horizon fully
complied with N.J.A.C. 11:24A-10(b)(3). At the time of the
17 A-1211-15T3 Department's approval of the OMNIA plan, Horizon had standard
contracts in place with all of the provider hospitals in the
network, under which the hospitals agreed to participate in
Horizon's health services plan and to receive payment directly
from Horizon on a set-fee basis. The existence of these
contracts was sufficient to enable the Department to ensure
adequate consumer access to necessary medical care and providers
so that the benefits provided under the OMNIA plan were not
illusory.
Further, the Department properly found that "N.J.A.C.
11:24A-4.10 does not require carriers to have contracts with
network providers that specif[y] a particular cost-sharing tier
for consumers in order to meet network adequacy. The rules
merely provide that the carrier have a contract or other
arrangement acceptable to the Department." The Department
explained that a carrier could, for example, satisfy this
requirement by: contracting with a provider for inclusion in a
network at a specific cost-sharing tier; entering into a general
contract that is not network or plan-specific and does not
specify the cost-sharing for consumers, thereby requiring a
hospital to participate in all of its networks without regard to
tier assignments; and applying Tier 1 cost-sharing for consumers
at certain facilities and/or providers to expand access or meet
18 A-1211-15T3 network adequacy standards. Thus, the Department found that the
general contracts between Horizon and the in-network OMNIA
providers met the regulatory requirement. The Department's
interpretation of its own rule is owed considerable deference.
N.J. Healthcare Coal., supra, 440 N.J. Super. at 135.
Therefore, we reject appellants' contention on this point.
B.
Appellants next argue that at the time of the approval the
OMNIA Tier 1 hospital network did not meet the adequacy
standards, set forth in N.J.A.C. 11:24A-4.10(b)(3)(i), for
hospital obstetrical services in Burlington County. This
contention lacks merit.
As noted above, N.J.A.C. 11:24A-4.10(b)(3)(i) requires
carriers to have "a contract or arrangement" with at least one
licensed acute care hospital with obstetrical services "in any
county or service area that is no greater than [twenty] miles or
[thirty] minutes driving time, whichever is less, from [90%] of
covered persons within the county or service area." During its
review, the Department initially determined that the OMNIA Tier
1 hospital network was deficient in that obstetrical services in
Burlington County reached only 88% of the projected membership,
not 90% as required by the rule.
19 A-1211-15T3 Although the OMNIA hospital network did not initially meet
the adequacy requirements, Horizon responded to the Department's
determination by committing to apply Tier 1 cost-sharing for
obstetrical services at Virtua, a Tier 2 hospital located in
Burlington County. Thus, contrary to appellants' contention,
there was no longer a deficiency in the OMNIA network because at
the time of the Department's approval, Horizon had an agreement
with Virtua -- a licensed Tier 2 hospital located within twenty
miles or thirty minutes driving time of 90% of the persons
covered -- to provide obstetrical services to Burlington County
subscribers. N.J.A.C. 11:24A-4.10(b)(3)(i). That arrangement
clearly met the regulatory requirements for network adequacy,
curing the previous inadequacy prior to the Department's
approval. Ibid.
C.
Appellants next contend that the OMNIA Tier 1 hospital
network failed to meet the network adequacy standards
established by the Department for trauma centers. Again, we
The Department of Health has designated three hospitals in
New Jersey as Level I trauma centers (UMDNJ-University Hospital,
Robert Wood Johnson University Hospital, and Cooper
Hospital/University Medical Center), and seven hospitals as
20 A-1211-15T3 Level II trauma centers (Hackensack University Medical Center,
St. Joseph's Hospital and Medical Center, Jersey City Medical
Center, Morristown Memorial Hospital, Capital Health, Jersey
Shore Medical Center, and AtlantiCare Regional Medical Center).
N.J.A.C. 11:24A-4.10(b)(3)(iii) provides that "[t]he carrier
shall have a contract or otherwise agree to cover medically
necessary trauma services at a reasonable cost with all Level I
or II trauma centers designated by the Department of Health and
Senior Services, with the provision of benefits at the in-
network level."
Horizon fully satisfied this requirement. Horizon
contracted with the ten trauma centers to place them in-network;
eight trauma centers were designated as Tier 1 providers (RWJ,
Cooper, Jersey City Medical Center, Hackensack, Jersey Shore
Medical Center, Morristown Memorial, St. Joseph's Hospital, and
AtlantiCare); and two trauma centers were designated as Tier 2
providers (Capital Health and UMDNJ).
Contrary to appellants' contention, and as the Department
expressly found, "[n]othing in the regulation requires that all
trauma centers be placed in the most preferred tier, only that
they be in-network." It is undisputed that Horizon has a
contract with the ten trauma centers to provide benefits at the
"in-network level" as required by N.J.A.C. 11:24A-
21 A-1211-15T3 4.10(b)(3)(iii). Therefore, the Department properly found that
the OMNIA network was adequate for trauma services.6
D.
Appellants assert that before determining whether the OMNIA
network was adequate, the Department was required to consider
and make a specific finding that the public interest would be
served by approving Horizon's proposal. Appellants contend that
OMNIA's two-tiered hospital network "endangers" them and the
other hospitals that Horizon selected for Tier 2, and interferes
with the "continuity of patient care." Appellants also complain
that Horizon was not "transparent" with regard "to the OMNIA
plan's tiering decisions," which "makes informed health care
choices impossible." These contentions lack merit.
The Department's role in approving a health service
corporation's proposed tiered benefit network is limited by the
HCQA to the establishment of standards for the "adequacy of the
provider network with respect to the scope and type of health
care benefits provided by the carrier, the geographic service
area covered by the provider network[,] and access to medical
6 It is also important to note that N.J.A.C. 11:4-37.3(b)(2) specifically requires a health benefits plan, like the OMNIA network, to "provide that the cost sharing applied to the covered person for emergency care shall be the same regardless of whether the services were rendered by network or out-of- network providers."
22 A-1211-15T3 specialists, when appropriate[.]" N.J.S.A. 26:2S-18. The
Department established these required network adequacy standards
when it promulgated N.J.A.C. 11:24A-4.10. As discussed in
detail above, the Department carefully applied these standards
and determined that the OMNIA network was adequate.
It is well established that an administrative agency, like
the Department, may "only act reasonably within the scope of its
delegated authority." Jersey Cent. Power & Light Co. v. Melcar
Util. Co., 212 N.J. 576, 600 (2013). Thus, "an agency may not
issue a regulation that is outside 'the fair contemplation of
the delegation of the enabling statute,' or that is otherwise
'inconsistent with [its] legislative mandate.'" N.J. Healthcare
Coal., supra, 440 N.J. Super. at 136 (citation omitted) (quoting
N.J. State League of Municipalities v. Dep't of Cmty. Affairs,
158 N.J. 211, 222-23 (1999)).
Turning to the arguments raised by appellants in this
portion of their brief, there is no provision in any of the
governing statutes that requires the Department to make a
specific finding that a tiered benefit network is "in the public
interest" before it can be approved. Indeed, none of the
statutory provisions cited by appellants that mention the
"public interest" relate to network adequacy. For example,
appellants cite N.J.S.A. 17:1C-19, which provides that
23 A-1211-15T3 "establishing a dedicated funding mechanism for the operations
of the New Jersey Real Estate Commission," to enable the
Department to "maintain an adequate level of financial
oversight" is "in the public's interest." Other laws cited by
appellants require the Department to issue a certificate of
authority, N.J.S.A. 17:48E-4(a), and a certificate of
incorporation, N.J.S.A. 17:48-5, to a health service corporation
if the Department is satisfied that the issuance "would not be
contrary to the public interest." See Radiological Soc. of N.J.
v. Sheeran, 175 N.J. Super. 367, 384 (App. Div. 1980)
("Commissioner has been given broad powers" under N.J.S.A.
17:48A-3 "to 'supervise' a medical service corporation so that
its 'condition or methods of operation are not such as would
render its operations hazardous to the public or its
subscribers'"), certif. denied, 87 N.J. 311 (1981).
However, the HCQA contains no similar requirement. Thus,
the Department is not currently statutorily authorized to review
Horizon's selection of network providers under the amorphous
"public policy" standard asserted by appellants.
That having been said, we recognize that "the public
interest is an added dimension in every administrative
proceeding . . . , and, in a sense, the public is an omnipresent
party in all administrative actions." City of Hackensack v.
24 A-1211-15T3 Winner, 82 N.J. 1, 30 (1980). However, the public interest is
plainly served when an administrative agency follows the
governing statutes and regulations, conducts a prompt and timely
review of an applicant's proposal, and renders a fully
supported, thoughtful final decision that withstands appellate
review. That is the case here.
Appellants' other arguments on this point also lack merit.
The Legislature has not authorized the Department to review a
carrier's hospital selection criteria for a tiered benefit
network, except to ensure that subscribers have sufficient
access to care under the plan because the network is adequate.
See Radiological Soc. of N.J., supra, 175 N.J. Super. at 384
(Commissioner "has not been given the power to become so
involved in Blue Shield's activities that he [or she] controls
the way the plan operates").
There is also no statutory or regulatory procedure for the
Department to determine the financial impact of the tier
designation on a hospital, or to compel carriers to include, for
example, all faith-based or urban hospitals in Tier 1. In fact,
"the Legislature specifically recognized the right of Horizon to
enter into provider contracts wherein it could exercise some
leverage as to price in return for direct payment." Somerset
Orthopedic Assocs., supra, 345 N.J. Super. at 420. Nor, as the
25 A-1211-15T3 Department correctly points out, does it have the authority to
require Horizon to allow appellants to apply for Tier 1 status.
The Legislature only requires carriers to grant pharmacies and
pharmacists "the right to participate as a preferred provider or
as a contracting provider, under the same terms and conditions
currently applicable to all other preferred or contracting
providers[.]" N.J.S.A. 17:48-6j(2). The Legislature has not
extended that right to hospitals.
Contrary to appellants' next contention, the HCQA does not
require the Department to consider possible "continuity of care
issues" when it reviews an application for approval of a tiered
benefit network. However, because provider networks are fluid,
N.J.S.A. 26:2S-9.1 already protects covered persons under
certain situations when their in-network physician or hospital
leaves the network. This statute provides for varying lengths
of covered treatment (post-operative, oncology, psychiatric, and
obstetrical), including services in an acute care hospital, in
the event the in-network physician "is no longer employed by or
under contract with the carrier[.]" Ibid.
Moreover, before purchasing a tiered product like OMNIA,
the consumer has the ability to review the hospitals and health
care providers in each network tier. N.J.S.A. 26:2S-4 and -5.
26 A-1211-15T3 Thus, consumers are fully aware what hospitals and providers
they can use when they select a tiered benefit network.
There is also no requirement in the HCQA that a carrier
publicly disclose the criteria it used to evaluate the hospitals
for inclusion in, or exclusion from, a particular tier.
Instead, N.J.S.A. 26:2S-5 requires carriers to disclose to
subscribers specific information about the provider network,
including a directory of participating providers. OMNIA
complied with this requirement in the present case. Therefore,
we reject appellant's contention on this point.
E.
Finally, appellants assert that the Department conducted a
rushed review of Horizon's application, did not fully explain
its decision, and improperly failed to permit their input. We
The record reflects that the Department's review of
Horizon's application was both extensive and deliberate.
Horizon submitted its application on June 25, 2015 and the
Department did not complete its review and approve the OMNIA
network until September 18, 2015. During this period, the
Department obtained the necessary information to conduct a
meaningful review of the adequacy of the hospital network under
N.J.S.A. 26:2S-18 and N.J.A.C. 11:24A-4.10, including the
27 A-1211-15T3 hospital tables and geo-access reports. It posed questions to
Horizon and reviewed the carrier's responses. While the
Department's September 18, 2015 final decision did not detail
the agency's findings of fact and conclusions of law, it
subsequently rendered a forty-page written decision fully
explaining the factual and legal basis for its approval of the
OMNIA network.
Contrary to appellants' contention, the fact that an entity
may be impacted by an agency decision does not, in and of
itself, give rise to a right to notice and participation in the
administrative process. Elizabeth Fed. Sav. & Loan Ass'n v.
Howell, 24 N.J. 488, 505 (1957). Moreover, an administrative
agency must conduct a "contested case" hearing only when "the
legal rights, duties, obligations, privileges, benefits[,] or
other legal relations of specific parties are required by
constitutional right or by statute to be determined by an agency
by decisions, determinations, or orders, addressed to them or
disposing of their interests, after opportunity for an agency
hearing[.]" N.J.S.A. 52:14B-2. Appellants have not
demonstrated the existence of a constitutional or statutory
right to a contested case-type hearing concerning a carrier's
application for approval of a tiered benefit network.
28 A-1211-15T3 As for the balance of any of appellants' arguments not
expressly discussed above, they are without sufficient merit to
warrant discussion in a written opinion. R. 2:11-3(e)(1)(D) and
(E).
IV.
In sum, we conclude that the Department's decision
approving Horizon's application to establish the OMNIA network
was accomplished in strict accordance with the current statutes
and regulations applicable to its review. Under these
circumstances, appellants' contention that the HCQA should be
amended to reflect their view of how tiered benefit networks
should be implemented can only be addressed by the Legislature.
"We do not pass judgment on the wisdom of a law or render an
opinion on whether it represents sound public policy. That is
the prerogative of our elected representatives." Caviglia v.
Royal Tours of Am., 178 N.J. 460, 476 (2004) (citations
omitted). Stated simply, "courts do not act as a super-
legislature." Trautman ex re. Trautman v. Christie, 211 N.J.
300, 307 (2012) (quoting Newark Superior Officers Ass'n v. City
of Newark, 98 N.J. 212, 222 (1985)).
Having determined that the record fully supports the
Department's decision that the OMNIA network was adequate under
N.J.S.A. 26:2S-18 and N.J.A.C. 11:24A-4.10(b)(3), and that its
29 A-1211-15T3 determination was neither arbitrary, capricious, nor
unreasonable, our task is complete.
Affirmed.
30 A-1211-15T3