Although school employees do not have to pay more because Bayonne Medical Center is an out of network provider with Horizon – the carrier the Bayonne School District currently has a contract with – the district faces as much as a $7 million increase in premiums.
School Business Administrator Clifford Doll said Horizon is raising the cost of the contract based on the fact that Bayonne Medical Center has decided not to renew contracts with nearly all of the major insurance providers.
“I have been in contact with Bayonne Medical Center and they told me that this is a business decision,” Doll said.
“BMC has cancelled its contracts with all but one of the major insurance providers. We’re talking to the remaining carrier.” – Clifford Doll
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Although Doll said the actual increase to the district could be anywhere from $1 million to $7 million, the impact on the pending $117 million or more school budget will be significant.
In Bayonne, school employees do not pay for a portion of the basic premium, so that taxpayers will have to pick up the whole tab unless the district can find an alternative.
“BMC has cancelled its contracts with all but one of the major insurance providers,” Doll said. “We’re talking to the remaining carrier.”
Doll, however, said the premium for this carrier is several times higher than the current contract with Horizon, but if Horizon’s rate rises as expected, the district might have to accept the offer.
The district could also look into getting into an insurance program that is offered through the State of New Jersey. While higher than the original Horizon contract, it would still be cheaper than the proposed new Horizon rate.
Doll said this increase in premiums is affecting many businesses throughout Bayonne. But since the school district is the largest employer in the city, it is impacted the most.
Last year, Horizon warned school employees in a series of letters that they should stop going to BMC for services because the hospital is no longer an in-network provider.
BMC countered by offering the same charge to employees that they would pay as in-network.
The problem arises as a result of BMC’s billing the insurance company for the full price of services provided.
When a hospital signs a contract with an insurance provider, it offers the insurance company discounted rates for various procedures in exchange for the insurance company steering its membership to that hospital.
The premium the school district pays is based on how much the insurance company must pay out for these services. If the insurance company pays the discounted rate, the school district gets a lower yearly premium. But because the insurance company has to pay full price, it raises its rates to the schools.
“The employees might be paying the same amount,” Doll said. “But the school district and ultimately the taxpayers are paying a lot more.”
Horizon’s contract with BMC expired earlier this month. Brad Gingerich, an officer of Bayonne Medical Center, in a tour of various civic groups through the city, said cancelling the contracts will help keep the hospital solvent, while still allowing it to provide heath care to those who need it.
The low discount rate, BMC officials claim, is only part of the problem. Over the years, insurance carriers have often rejected legitimate claims, forcing hospitals to hire staff and attorneys to prove each claim is legitimate. Since the hospital provides the service in advance, it is saddled with the cost of paying doctors, nurses and other expenses while waiting and hoping to collect what it is due from the insurance carriers.
BMC emerged from Chapter 11 bankruptcy on Feb. 1 after a company called IJKG, LLC purchased the facility. The new company cancelled previous contracts with the insurance companies in order to negotiate better agreements.
Gingerich said the low payment on contracts was part of the reason why BMC went into bankruptcy in the first place.
In many cases, the insurance carriers are aware of how cash-strapped the hospitals have become. Due to this, the insurance carriers offer to settle the claims at a rate drastically below the original contracted price.
Hospitals desperate to get cash often agree, and, as a result, also lose money.