Pa. insurance officials will invoke consumer protection law if IBX and Highmark don’t have new Jefferson contracts by Dec. 31
A 1975 law allows the Pa. Insurance Department to impose a "cooling-off" period if Blue Cross plans and hospitals can't reach a new agreement.
The Pennsylvania Insurance Department will intervene in the high-stakes contract disputes between Jefferson Health and two major insurers, Highmark and Independence Blue Cross, to protect consumers from losing access to their doctors and hospitals if the three parties cannot agree to new contracts by Dec. 31, state officials said this week.
Under a 1975 law, the insurance commissioner can suspend a contract termination for up to six months, hold public hearings on the conflict, and use an arbitrator to help the health system and the insurer reach a deal.
However, regulators can’t force the parties to make a deal.
In Southeastern Pennsylvania, the conflict pits the region’s largest health system against its largest insurer. Jefferson says Independence pays 40% below national averages and wants significant increases. The insurer has countered that the rates it pays Jefferson are competitive locally and that it has offered a significant increase.
» READ MORE: Philly’s biggest health system and biggest insurer trade jabs over a contract
Jefferson owns 33 hospitals from South Jersey to Scranton. Its operations include Lehigh Valley Health Network, which serves areas of Pennsylvania where Highmark has a large market share.
Jefferson said it seeks rates from Highmark “that fairly support the care provided by Jefferson Health physicians and care teams.”
Before the insurance commissioner gets involved, the hospital system or the insurer has to notify regulators they may terminate their contract. That has happened in Jefferson’s negotiations with both Independence and Highmark, as have notifications to insurance brokers and patients.
As relic of the 1970s, the law applies only to Blue Cross Blue Shield companies, not to other insurers like Aetna, Cigna, or UnitedHealthcare.
An insurance department official testified at a 2011 hearing held by the state House of Representatives — during a high-profile dust-up between Highmark and UPMC in Western Pennsylvania — that the law had only been invoked twice, in 1996 and 2008.
In both cases, the insurers and health systems reached a deal before the insurance department held hearings.
The insurance department did not respond to a question Thursday about whether the law had been used on other occasions. The state attorney general brokered an agreement between UPMC and Highmark more than a decade ago, bypassing the full use of the law, known as Act 94.
Dan Tropeano, president of Highmark’s Southeastern Pennsylvania market, said in an interview Friday that it is appropriate for regulators to protect the health and safety of Pennsylvania residents.
Tropeano remains hopeful that Highmark will reach an agreement with Jefferson.
“We’re still negotiating in good faith. We feel like we’re making incremental progress, and I’m still confident, at least from a Highmark perspective, that this will be resolved before it comes to termination,” he said.
» READ MORE: Jefferson Health notified insurance brokers that it could go out of network with Highmark on Jan. 1
Jefferson Health said in a statement that it “would welcome the insurance commissioner bringing all parties together if we don’t come to a fair and sustainable reimbursement for the physicians and caregivers who take care of our communities. We should all want an agreement that protects patient access to the doctors, hospitals and specialized care they rely on.”
Independence said that it had complied with the law by providing 90 days notice to the insurance department of the possible Dec. 31.
Act 94 passed after lawmakers saw the disruption caused by the expiration of a contract between a group of Philadelphia hospitals and Blue Cross of Greater Philadelphia, now known as Independence Blue Cross.
