TRENTON - New Jersey's largest health insurer on Monday defended a new alliance it has struck with some of the state's hospital systems that's intended to lower costs for consumers, even as lawmakers questioned the criteria it used to choose its partners.

Horizon Blue Cross Blue Shield of New Jersey last month announced it had formed the Omnia Health Alliance with six of the state's 20 hospital systems and a physicians group. The only South Jersey hospital system included in the alliance is Inspira.

By choosing from these health systems, as well as an additional eight so-called Tier 1 hospitals designated by Horizon, the insurer says patients will have lower out-of-pocket costs on co-payments, deductibles, and coinsurance.

Starting next year, Horizon intends to sell Omnia plans with monthly premiums that will be 15 percent lower than its standard plans.

Robert Marino, CEO of Horizon Blue Cross Blue Shield of New Jersey, said the alliance wants to find "a new way to pay" for health care.

"Instead of paying for the amount of services provided, our goal is to pay for keeping our members healthy, improving the quality of care, enhancing patient satisfaction, and lowering total cost of care," Marino said during a daylong joint hearing of the Senate Commerce and Health, Human Services, and Senior Citizens Committees.

Lawmakers praised the insurer's effort to reduce health-care costs. But some questioned the criteria Horizon used to select its partners and expressed concern that so-called Tier 2 hospitals will come out as losers, since patients there will have to pay more out-of-pocket.

Tiered networks gained traction with the enactment of President Obama's health-care law. Insurers categorize hospitals into tiers, one where patients can pay less out of pocket, and another where they pay more.

Horizon said the Tier 1 health systems from outside the Omnia alliance, such as Cooper Health System in Camden, were selected based on geography, in accordance with state regulations.

State Sen. Diane Allen (R., Burlington), questioned whether that was true, given that Horizon didn't designate a Tier 1 health system in Burlington County. She and other lawmakers suggested that the Tier 2 designation would stigmatize certain hospitals and discourage patients from seeking care there.

"People absolutely have the opinion based on what you folks have put out there that Tier 1 hospitals are better, not because of what it costs, but because of the quality of the care," she said.

Marino, the CEO, said that wasn't the message Horizon intended to send. The insurer said that for its customers in Burlington County, the average distance to a Tier 1 facility would be 14.7 miles.

Horizon officials also noted that most consumers see their doctor when they get sick; few go to hospitals. The insurer said it would add Tier 1 coverage for obstetrics and gynecology in Burlington County, but it hasn't yet named a facility to provide those services.

Horizon executives told legislators that they analyzed federal Centers for Medicare and Medicaid Services data and hired a consultant to assess criteria that included quality of care, service offerings, consumer preferences, and scale of the organization.

Horizon declined to provide lawmakers with all of the information it used to choose its partners, saying that was proprietary.

In an interview, Virtua Health System CEO Richard P. Miller said his hospital met Horizon's criteria but was never asked by the insurer to join the alliance.

"I'm scratching my head about why we've never been asked, because we have the largest geographic coverage in the tri-county area. We're the only hospital in Burlington County that provides maternity care."

He added, "I hope this isn't done in some back room where the big hospitals in the state and Horizon got together and said, you know, 'These are the providers we want.' "

"They can do that; they can form their own network," he said. "But boy, when you're the largest health-care insurer in the state - you have 50 percent of the market - you have got to provide geographic coverage for the community of patients that you may serve."

Horizon CEO Marino said the company projects 250,000 of its 3.8 million customers will choose the new, lower-cost plans in 2016. He said that in addition 40,000 people who currently lack insurance will be able to afford the Omnia plans.

Lower premiums will help employers, including the state, avert the Affordable Care Act's so-called Cadillac tax on high-cost plans, Marino said.

The 40 percent federal excise tax is set to take effect in 2018 and is expected to cost the state $58 million that year, according to a report completed last year by Gov. Christie's pension and health benefits commission. That cost is projected to rise to more than $280 million by 2022.



Staff writer Harold Brubaker contributed to this article.