Insurance Mandate Worries Small Business
18 02 08 - 11:37
Governor also concerned about required coverage of orthotic and prosthetic costs
By Thomas Gaudio
2/18/2008
TRENTON-While the state's latest health care mandate has the orthotic and prosthetic industry smiling, that is hardly the case with small businesses and insurers.
The legislation signed last month requires private health care insurers in New Jersey, together with the State Health Benefits Program, to cover the cost of any orthotic or prosthetic device when a doctor deems it medically necessary. The State Health Benefits Program provides medical, dental and prescription drug coverage for New Jersey state workers and retirees.
The mandate doesn't allow the insurers themselves to review whether the devices are medically necessary. Decisions are left solely up to the doctors who refer patients to orthotists and prosthetists—caregivers who custom build and fit devices such as leg braces and artificial limbs for patients. The legislation does not apply to self-funded insurance coverage, typically provided by large employers.
The legislation does call for reimbursement rates to be tied to Medicare rates.
Gov. Jon Corzine signed the bill, but voiced several concerns about it. In a statement that accompanied the governor’s signing on Jan. 13, Corzine said he was concerned that the measure prevented "utilization review, which is designed to ensure the medical necessity for such appliances and thereby prevent unnecessary costs." The governor also worried that tying insurers' rates to Medicare's will 'limit insurers’ ability to negotiate price reductions."
Two Trenton-based trade groups—the New Jersey Business and Industry Association (NJBIA) and the New Jersey Association of Health Plans (NJAHP)-have joined Corzine in raising concerns about the cost increases that often follow mandated insurance coverage.
Christine Stearns, vice president of NJBIA, says that although the new law probably won’t greatly increase costs for small businesses, she's worried about the "cumulative cost of all mandates. There are a fair number of health insurance mandates out there."
Wardell Sanders, president of NJAHP, whose members include Aetna Inc., Horizon Blue Cross Blue Shield of New Jersey and UnitedHealthcare, says that "for the first time that I'm aware of, the government is involved in price-setting for commercial health care insurance. And [the new law] doesn't allow for appropriate review."
Sanders says New Jersey insurers cover relatively few orthotic and prosthetic patients. He says some prosthetic devices that use the latest technology can be extremely expensive but may not be the right fight for a patient.
Tom Fise, executive director of the American Orthotic & Prosthetic Association (AOPA), an Alexandria, Va.-based industry trade group, says the mandate increases insurance rates by "10 to 20 cents per month, per insured person. The cost is negligible."
Fise says licensed orthotists and prosthetists, and companies in New Jersey that make and supply the devices and their parts, will probably see an increase in revenue as patients take advantage of the change.
Local practitioners include C.G. Medical Inc. of North Brunswick, Delta Orthopedic Lab Inc. of Jersey City and Manfredi O&P Affiliates of Long Branch. Hanger Orthopedic Group Inc. of Bethesda, Md., has 10 locations in New Jersey.
As of 2005, the last year for which data is available, the orthotic and prosthetic devices most often approved by Medicare were a custom-made, jointed ankle brace, and a basic, lower limb prosthesis, according to AOPA.
That year, Medicare approved payment for nearly 4.5 million orthotic and prosthetic services in the United States for a total of more than $968 million, the AOPA says.
Fise says the most important part of the New Jersey mandate is that it eliminates the reimbursement caps that insurers had in place for expensive prosthetic limbs and their related-care services.
He says that "private insurers frequently put a cap of about $1,200 on orthotic and prosthetic services per year and only allow for one limb for the life of a patient," a limit he calls severely inadequate for many patients. As a patient grows older or experiences fluctuations in weight, an artificial limb needs to be adjusted accordingly, something insurers don't usually account for, says Fise.
Makers and suppliers of orthotic devices should benefit as well. Carol Hiemstra-Paez, director of customer satisfaction at Allard USA Inc., a Rockaway-based supplier of orthotic devices, says mandated coverage is a "positive thing" for the company.