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Sarlo Bill Would Establish Independent Third Party Administrator to Adjudicate, Pay Healthcare Claims

Sarlo Hospice

Major cost-saving legislation would give state full access to medical cost data and control over payment of billions of dollars in public sector healthcare claims

TRENTON – Senator Paul Sarlo, the chairman of the Senate Budget and Appropriations Committee, announced today that he will introduce legislation next week to create an independent Third Party Administrator that will adjudicate and pay claims for the state and school employee health plans.  The involvement of a new, independent third party will provide greater transparency and eliminate millions in overpayments on health care claims for public employees and retirees.

“Establishing an independent Third Party Administrator that will be responsible for monitoring and paying billions in healthcare claims will provide major cost savings for state, county and municipal governments and school districts in New Jersey,” said Senator Sarlo (D–Bergen/Passaic). “We owe it to taxpayers and to public employees to guarantee that we do not pay a dime more than we should for healthcare costs.”

“It’s clear that allowing giant health insurance companies or their subsidiaries to self-monitor the propriety of healthcare claims is like the fox guarding the henhouse,” said Senator Sarlo. “My legislation will give the state full access to the medical claims and cost data we need to properly analyze and reform healthcare delivery. And to ensure that we maximize cost savings as quickly as possible, my bill provides for an expedited contracting process.”

Senator Sarlo called for an independent Third Party Administrator last spring during the debate over out-of-network legislation, and made a direct request to Treasurer Elizabeth Muoio in April urging her to support and implement the idea.

Implementing a Third Party Administrator plan was one of the health benefit reforms recommended last month by the bipartisan Economic and Fiscal Policy Workgroup of economists, academics and fiscal policy experts that was chaired by Senator Sarlo, Senator Steve Oroho (R-Sussex) and Assembly Majority Leader Lou Greenwald (D-Camden).

Senator Sarlo’s legislation would create separate Trust Funds under the State Health Benefits Plan and the School Employees Health Benefits Plan to hold the billions of dollars in state and local tax dollars and employee premium payments set aside for public employee and retiree healthcare costs, rather than giving the money to the health insurance companies to pay out.

“New Jersey’s health care plans are self-insured, and the best way to make sure we are paying the proper amount for claims is to hold onto the money ourselves and then have the independent third party verify and pay the claims.” Senator Sarlo said.

Under the new system, the insurer will provide access to a network of providers while the Third Party Administrator will be responsible for claims adjudication and payment.  This will ensure that the state will have real-time access to all of the claims and cost data that health insurance companies have been reluctant to provide.

Some of the largest corporations in the country have acted to bring this type of cost-controlling function “in house” instead of relying on the insurance companies, Senator Sarlo noted.

“We know that transparency works because we already have seen positive results from the ongoing monitoring of prescription drug bills through the Pharmacy Benefits Manager program,” Senator Sarlo said. “That’s one of the reasons prescription drug costs are dropping by 18 percent to 20 percent under the State Health Benefits Plan. I am hopeful we can achieve large savings on hospital and other healthcare costs through the Third Party Administrator program.”