Strict conflict-of-interest rules are dividing stakeholders in New Jersey's healthcare community as a federal deadline looms for creating a state health insurance exchange.

Consumer advocates and representatives of medical professionals back a Democratic bill that prevents members of a proposed state health-exchange board from working for or serving on the board of healthcare companies, brokers, trade groups, medical facilities, or other related entities. Representatives of the small business community, the insurance industry, and hospitals say such a ban would limit access to necessary expertise.

Bill S-2135, introduced in the state Senate on June 28 by Senators Nia Gill (D-Essex) and Joseph Vitale (D-Middlesex), would set up an exchange and an eight-member board of directors appointed by the state Legislature.

A similar bill, A-3186, was introduced in the Assembly on July 30, sponsored by Assembly members Herb Conaway (D-Burlington), Troy Singleton (D-Burlington), Upendra Chivukula (D-Somerset), Ruben Ramos (D-Hudson), and John Wisniewski (D-Middlesex).

The exchange is a chief component of the federal Affordable Care Act, signed into law by President Barack Obama in 2010 and upheld by the U.S. Supreme Court this summer. The law requires states to create exchanges and gives the federal government the authority to do so in states that do not comply. The state has a November 16 deadline to notify the federal government of its intentions.

The legislation has been referred to the Senate Commerce Committee and the Assembly Health and Senior Services Committee, but legislators said Wednesday during a forum hosted by the Health Research and Educational Trust of New Jersey at the New Jersey Hospital Association that it was unlikely anything would happen before the November 6 election.

Courting Another Veto?

According to Gill and Conaway, the legislation is not substantially different from the bill vetoed by Christie in May. While that raised some eyebrows among members of the audience -- which was made up primarily of people from the insurance and heathcare industries -- they said that the bill was a starting point and that they hoped it would generate discussion.

"We're still in the process of hammering out the details of the bill," Conaway said. "The finish line is not likely to come until after the election, but we are working across both sides of the aisle.

Gill, who was one of three legislators to participate in the forum along with Conaway and state Sen. Dawn Marie Addiego (R-Burlington), said she strove for balance in the creation of the exchanges and that it was important that the state "allow participation and influence by consumers, providers and insurers."

"It would be to little avail if we have a health exchange that is dominated by one interest group or another," she said.

Gambling with Heathcare


The legislation's conflict-of-interest provisions are based on those imposed on casino regulators and the state Casino Control Commission.

"We have to make sure the public understands the exchange and has confidence in it," Gill said.

Regulators should not be able to oversee an industry and set rules for it and then take jobs with those industries, she said.

"It is important to take the personal interest out of it," added Conaway, who also sat on the panel. "We have to have a plan for it and mitigate against it. We have to end the revolving door between industry and government. We're talking about tens of millions of government dollars that will be going to insurers under the exchanges."

During a second roundtable discussion that included representatives from the hospital and insurance trade groups, state medical providers, the New Jersey Business and Industry Association and NJ Citizen Action, the conflict-of-interest rules came under direct criticism.

Thomas Considine, chief operating officer for MagnaCare, which services companies that self-insure for employee health benefits, said that the ban would strip the board of directors of needed expertise that can only be gained by working in the industry. Considine served as commissioner of banking and insurance under Christie, until he stepped down in March to join MagnaCare.

"The absence of total conflict of interest leads to an absence of interest," he said. He believes that there needs to be industry representation on the board to ensure that all stakeholders are included, and that the board should be expanded to accommodate this.

Jeff Brown, representing Citizen Action, said the consumer advocacy group endorses the strongest conflict-of-interest rules and supports a smaller board made up of independent experts, such as unaffiliated academic economists and other outsiders who have studied the healthcare and insurance industries.

This elicited criticism both from the NJBIA and the New Jersey Association of Health Plans.

"How can you have expertise without conflict?" Christine Stearns, vice president for health and legal affairs for the NJBIA, asked.

Sarah McLallen, vice president of the NJAHP, said conflicts can be addressed easily without imposing a ban on membership.

"If the board needs to take a vote on a carrier, then representatives of that carrier shouldn't vote," she said. "You are not going to have experts on what might work if they haven't worked in healthcare."

Fred Hipp Jr., vice president for government relations for the Virtua hospital and healthcare network based in Burlington, Camden, and Gloucester counties, made a similar point.

"How can you navigate through these unknowns without people who have navigated these issues," he said.

Lawrence Downs, chief executive officer and general counsel for the Medical Society of New Jersey, which represents doctors, believes that independence is necessary, but said it was important that there be "clinical expertise" available to the board.

The legislators, who left after the early session, told the audience that the bill remains a work in progress and that the most important effort is to create exchanges that will expand coverage efficiently.

"How do we take the broad concepts we've been talking about and implement them and at the same time make sure we are in compliance with the federal government," Gill said. "We have to make sure that the board has the discretion, that it has the ability to regulate in a full and robust way when necessary and respond to changes in the market when necessary."

Hank Kalet is a veteran journalist and editor, who has covered economic issues, government, and entertainment in central New Jersey for more than two decades.