S4111

An Act concerning downcoding in reimbursement of health insurance claims and supplementing N.J.S.17B:30-1 et seq.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. Notwithstanding the provisions of any law, rule, or regulation to the contrary, no payer shall use downcoding in a manner that prevents a health care provider from submitting a health benefits claim for the actual service performed and collecting reimbursement from the payer for that service.

b. The Department of Banking and Insurance shall adopt regulations, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) to effectuate the purposes of this act.

c. As used in this section:

"Carrier" means an insurance company, health service corporation, hospital service corporation, medical service corporation, or health maintenance organization authorized to issue health benefits plans in this State.

"Covered person" means a person on whose behalf a carrier offering a health benefits plan is obligated to pay benefits or provide services pursuant to the health benefits plan.

“Downcoding” means the adjustment of a health benefits claim submitted to a payer to a less complex or lower cost service in order to reimburse a provider in an amount less than is required pursuant to the provider contract. “Downcoding” includes, but is not limited to, the use of remark codes.

"Health benefits claim" means a claim by a covered person for payment of benefits under a health benefits plan.

"Health benefits plan" means a hospital and medical expense insurance policy; health service corporation contract; hospital service corporation contract; medical service corporation contract; health maintenance organization subscriber contract; or other plan for medical care delivered or issued for delivery in this State.

“Payer" means a carrier or any agent thereof or an organized delivery system or any agent thereof that is doing business in the State and is under a contractual obligation to pay insured claims.

2. This act shall take effect on the 180th day next following the date of enactment.

STATEMENT

This bill prohibits a health insurance claims payer from using downcoding in a manner that prevents a health care provider from submitting a health benefits claim for the actual service performed and collecting reimbursement from the payer for that service. The bill applies to health insurance carriers, organized delivery systems, or any agents of a health insurance carrier or organized delivery system doing business in New Jersey.

Downcoding refers to the practice of adjusting health benefits claims submitted to a payer to a less complex or lower cost service than the service actually performed so the payer can reimburse a lower amount to the health care provider that submitted the claim. Downcoding may occur where a payer disputes a specific service or contends that the diagnosis did not require the specific service code submitted by the health care provider. Excessive or routine downcoding can significantly reduce revenue for health care providers.

Health care providers are already subject to robust State laws concerning fraud relating to health benefits claims. These laws, including the “New Jersey False Claims Act,” the “New Jersey Health Care Claims Fraud Act,” and the “New Jersey Insurance Fraud Prevention Act,” penalize health care providers that submit fraudulent claims to a payer.