A self-insurance plan covering doctors’ offices and other small businesses has filed for bankruptcy and is expected to close soon as it is unable to pay millions of dollars in pandemic-related testing and treatment costs.
Now the plan, Affiliate Physicians & Employers Master Trust, calls on Gov. Phil Murphy for an $ 18 million bailout out of the $ 6.2 billion pool of federal pandemic relief funds the state has received from the American Rescue Plan Act.
But consumer organizations say the governor should think twice before using taxpayer money to save the trust. They say its members lost all expectation of government support when they chose to join a lower-cost, self-financing scheme that is not legally required to keep a substantial amount of money in its reserves like its more regulated competitors.
In a letter to the governor on Thursday, the Chairman of the Trust, Larry Downs, called for a meeting to discuss an $ 18 million request on behalf of 2,500 medical and dental practices, long-term care facilities and other small businesses that belong to the Trust.
“The financial crisis is imminent,” according to the letter from Downs, who is also the executive director of the Medical Society of New Jersey, the largest medical lobby group in the state owned by the Trust. “We urge you to consider using some of the funding from the American Rescue Plan Act to alleviate the severe financial fallout that will affect these many New Jersey residents.”
The Trust did not qualify for previous rounds of pandemic assistance because it is a self-insured plan known as the Multi-Employer Social Protection Arrangement, or MEWA (pronounced mee-wah). The Trust is managed by a third-party contractor and has no employees, so it was not eligible for the paycheck protection program, according to Daniel Stolz, the bankruptcy lawyer representing the Trust.
With 25% of the Trust’s members working in healthcare and 50% of its members representing “essential workers,” the Trust is a worthy candidate for help, Stolz said.
“The heart of this country is small businesses,” he added.
The governor’s spokesperson could not be reached immediately for comment. On Wednesday afternoon, Downs said the governor’s office told him in an email that he had referred the matter back to the Department of Banking and Insurance for review.
Executives at Citizen Action New Jersey and the New Jersey Health Care Quality Institute, two consumer research and advocacy organizations, say they are not convinced by the Trust’s arguments.
“I think we have to start with what these plans really are. They were created to avoid our insurance requirements, their fees and their assessments, ”said Maura Collinsgru, health policy advocate for New Jersey Citizen Action.
“Yes, COVID certainly introduced extenuating circumstances,” Collinsgru added, “but it’s not the taxpayers’ responsibility. They had the responsibility to plan” for emergencies, she said.
Multi-employer social assistance plans were created to provide small businesses with a cheaper alternative to traditional group plans. They are not required to pay into the guarantee fund, which is established by state law to protect policyholders in the event an insurer becomes insolvent and unable to meet its financial obligations, according to the banks spokesperson. and insurance, Trish Graber.
These plans are also cheaper because the law requires them to maintain a surplus account based on 150% of complaints from a previous year – a figure more than three times lower than the amount required for more tightly regulated insurance products, Collinsgru said.
Linda Schwimmer, president and CEO of the Health Care Quality Institute in New Jersey, said the administration should be more concerned with the health of the market for the small employer groups it regulates, which has seen enrollments drop from 1 million to around 300,000 over the past decade, in part because companies opt for coverage in riskier alternatives, such as MEWAs.
The state should focus on safeguarding the small group insurance market by offering a tax credit program or removing some costly regulations, according to an analysis the Quality Institute released last year.
“MEWAs are taking people out of the New Jersey breakout market. They are not insurers, ”said Schwimmer. “Instead of bailing them out if they fail, we should use these taxes to support a healthier, more affordable small group market for all small businesses in New Jersey.”
Companies enrolled in the plan had another option to cover medical claims related to the pandemic, Schwimmer said. They could have submitted claims to the workers’ compensation fund, as healthcare workers who contracted COVID-19 likely got it at work, she said.
Downs disagreed that submitting claims through workers’ compensation coverage would have saved the Trust’s profitability. It costs money and time to prove to workers at health insurance companies that members have been infected on the job, he said.
The largest share of the Trust’s pandemic bills are for testing healthcare workers, Downs said. A recent report from Kaiser Health News comparing Medicare reimbursement for COVID tests, the average cost in New Jersey was $ 301, the most expensive in the country. A test costs $ 176 in New York City, $ 185 in Pennsylvania and $ 150 in Delaware, according to the report.
There are 2,500 companies and 27,000 members registered with the Trust, Stolz said. But before his financial woes from the pandemic, the 18-year-old Trust covered 4,000 small businesses with 35,000 members and audits said it was financially strong, he said.
Plan members who act as volunteer trustees include the Medical Society; the NJ Employers Association; Vista Health Care at the top; the New Jersey Chamber of Commerce; and physician offices affiliated with Trinitas Regional Medical Center, St. Clare’s Health and St. Joseph’s Health, according to bankruptcy records.
Members’ medical claims are still paid under an agreement with Aetna, which provides cash advances on drug rebates, Stolz said. “Our cash flow is good, but actuaries say if revenues stay at current levels, we won’t have enough funds.”
The trust owes Aetna $ 1.66 million in medical claims, according to bankruptcy records.
The Trust was successful in pushing for a state legislature rescue bill, which Senator Nellie Pou, D-Passaic introduced on June 21, according to the Legislative Services Office website. But the Senate adjourned for the summer of June 30 without making a decision on the bill.
Although the Trust has appealed to the governor for help, legislative leaders who sit on the Joint Budget Oversight Committee will play a role in deciding how parts of the American Rescue Plan Act are spent.
Downs said the Trust had a compelling case to make. Without help, the thousands of these small businesses will have to cover the costs of shutting down, which could lead to layoffs and other painful cost cuts, he said.
“We’ve had taxpayer bailouts for every business in this country,” Down said. “Why don’t we agree with a bailout for these companies? You don’t choose and you don’t choose … It seems the US bailout was designed for this.
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NJ Advance Media Staff Writer Samantha Marcus contributed to this report.