Newark Officials Respond to Industry Critiques of New Health Plan

Newark Human Resources Director Tiffany Stewart has clarified how the city's new health care plan will work, following criticism by health care industry professionals who say the reference-based pricing model can have negative consequences.

City officials said last week that the model, which goes into effect July 1, is an "enhancement" for its municipal employees' health care benefits and will provide cost savings and no disruption in provider access.

Officials from the New Jersey Hospital Association (NJHA) and New Jersey Association of Health Plans (NJAHP), however, claimed that employees under the RBP model can be left vulnerable to unexpected out-of-pocket costs and may have to shop around for providers or services that were previously covered.

Stewart said that organizations such as the NJHA and NJAHP would inherently be against Newark's RBP model because it lowers their profits.

"RBP cuts those costs [determined by negotiations between providers and insurance companies] – that's the reason why we are doing it: It saves the city and employees money," Stewart said.

Newark's health care plan offers open access, but the primary network the city will use is MagnaCare. Based on the city's disruption analysis, about 90% of Newark's employee population will be able to continue receiving care from their current providers.

"These providers already operate under contracted rates aligned with our RBP model," Stewart said. "As a result, the majority of employees will not be at risk for balance billing."

Under the RBP model, the city will use Care Empowered by Insurance Design Administrators (IDA). IDA is responsible for administering the self-funded health plan on behalf of Newark, including claims processing, eligibility management, customer service and plan design customization.

"Care Empowered" is a branded service model provided by IDA, and MagnaCare is the provider network used for the Care Empowered plan that Newark employees will have access to. City employees are not required to join the RBP plan.

A NJHA report attested that if a provider is not satisfied with the payment, there is nothing to stop them from billing the patient for the unpaid portion of the claim. For example, if the standard reference price for a service is $30,000, but the hospital charges $40,000, then the patient would be subject to $10,000 in balance billing.

But, Stewart pointed out, even outside the MagnaCare direct network, 92% of providers historically accept the RBP-aligned payment without issue.

Only a small segment of the Newark employees under the RBP plan – estimated at 8-10% – may encounter balance billing if they choose to continue care with an out-of-network provider.

The Phia Group, contracted through IDA, will provide dedicated legal advocacy and resolution services for any balance-billing disputes.

The NJHA report also asserts that patients seeking health care will have to engage in an additional layer of "shopping around" for services that were previously covered by their insurer.

Stewart emphasized that city employees won't need to search for new providers, as 90% of their current providers are already in-network through the MagnaCare system and accept the RBP-aligned payment structure.

"But all employees can continue to see their providers, whether in or out of network, as this is an open-access plan," Stewart said. "More importantly, the scope of covered services remains unchanged, ensuring continuity of care and peace of mind."

Newark's RBP plan enhances affordability with lower copays and deductibles, according to Stewart. Under the traditional plan, a primary care visit copay is $15 and specialist visit copay is $25. Under the new RBP plan, primary and specialist visit copays are $5 each.

The RBP plan also reduces out-of-pocket costs for emergency room visits and ambulance services, Stewart said.

It's not clear whether any of the other 563 municipalities in New Jersey utilize the RBP model, as a NJAHP official was not aware of any other town that uses this plan.

However, Stewart pointed out that the State Health Benefits Program has been evaluating the adoption of RBP. In 2023, the State Health Benefits Program Plan Design Committee formed a subgroup to research and assess the feasibility of implementing an RBP program within its framework.

A New Jersey Senate bill, introduced in the 2024-2025 legislative session, mandates a comprehensive review and implementation plan for RBP within the State Health Benefits Program.

"These developments indicate a growing interest in New Jersey public entities in adopting RBP models to control escalating health care costs while maintaining quality care for employees," Stewart said.

Stewart noted that other states have implemented the RBP model such as Oregon, which implemented it for its Public Employees' Benefit Board and Oregon Educators Benefit Board plans. Oregon reported savings of $112.7 million.

Despite critiques from health care industry professionals, Stewart stated that Newark's health care strategy is firmly grounded in transparency, fairness and fiscal responsibility.

"Our payment model references federally established benchmarks—specifically, the Medicare allowable cost for services plus a reasonable profit margin," she said. "This ensures that providers are compensated fairly, while also protecting the city's taxpayers and employees from inflated or unregulated pricing structures."

Unlike the "narrowly defined interests of industry associations," Stewart said, Newark's health care plan is designed with both the consumer and provider in mind by ensuring equitable payment for services while maintaining access and quality for the city's employees and their families.