Horizon Blue Cross and Blue Shield building, Newark, NJ Carmen Natale

The Supreme Court has ordered the state’s largest health insurance company to turn over consultant reports and other materials it relied on when establishing its two-tier OMNIA system to hospitals relegated to the second tier. The justices overturned a decision by the Appellate Division that denied the discovery request, rejecting the panel’s conclusion that the broad discovery request was not warranted because the challenge to the OMNIA system lacked merit.

The justices ordered disclosure of a McKinsey & Co. report commissioned by Horizon Healthcare Services when it decided which hospitals would be designated Alliance partners, its term for those in the first tier of the OMNIA system. The order also encompasses documents relating to the formulation of Tier 1 criteria, performance scores for all Tier 1 hospitals and communication between Horizon and Tier 1 partners. The OMNIA plan, which offers lower premiums and deductibles to patients who use the seven large hospital systems in Tier 1, is under challenge by hospitals in the second tier.

The ruling doesn’t permit the public or the media to view the documents, based on a protective order, but it does allow the plaintiffs to obtain them to challenge their exclusion from Tier 1.

The ruling follows a decision by Superior Court Judge Frank Ciuffani, granting access to the discovery documents in a suit brought by St. Peter’s University Hospital in New Brunswick, and a similar ruling by Superior Court Judge Robert Contillo in Bergen County, who granted access to documents sought by CentraState Medical Center, Holy Name Medical Center and Valley Hospital. But Horizon appealed, and the Appellate Division reversed the two Chancery Division judges’ decisions after balancing the right to extensive discovery against claims that it considered weak.

But the Supreme Court took issue with the Appellate Division’s consideration of its own view of the strength of the case.

“We conclude the Appellate Division exceeded the limits imposed by the standard of appellate review both by assessing the information’s relevance against the panel’s own disapproving view of the merits and by giving no apparent weight or consideration to the protections afforded by the confidentiality orders,” Appellate Division Judge Clarkson Fisher, temporarily assigned, wrote for the court. “Having closely examined the record, we reject the Appellate Division’s determination that the chancery judges encharged with these matters abused their discretion.”

Michael Furey of Day Pitney in Parsippany, who represents Holy Name, Valley Health and CentraState, said in a statement that the Supreme Court ruling is “an important step in unraveling the secrecy surrounding the OMNIA plan by forcing Horizon to disclose important information regarding its selection process as detailed in the McKinsey report and the agreements Horizon has reached with the large hospital systems.

“The more we learn about the OMNIA plan through this lawsuit, the more we know that—instead of relying upon objective healthcare criteria—Horizon pre-selected the state’s largest and most expensive hospitals to be Tier 1 providers,” Furey said in the statement. “We are also suspicious that OMNIA is not a value based plan and OMNIA, in practice, is far different from how Horizon has described it publicly. We are confident that ultimately the our lawsuit will prevail and the public will learn the truth about Horizon’s ill-conceived OMNIA plan.”

Jeffrey Greenbaum of Sills, Cummis & Gross in Newark, who represented St. Peter’s University Hospital, said he was “gratified” by the Supreme Court ruling, adding that he looks forward to proceeding with discovery, which he hopes will demonstrate that his client was wrongfully excluded from Tier 1 status by Horizon.

Michael Kassak of White & Williams in Cherry Hill, who represented Horizon, referred a reporter to the company, which issued a statement referencing the participation of some plaintiffs in a similar, tiered program offered by another health insurance company, QualCare.

“Horizon accepts the New Jersey Supreme Court’s procedural ruling and is pleased that the Court noted, in remanding this case, that the Appellate Division had ‘balanced the right to discovery against what it viewed as relatively weak claims (noting the claims “rest[ed] on the slenderest of reeds”].’ We continue to agree with the Appellate Court’s characterization of plaintiffs’ cases and look forward to prevailing on the merits of the case.

“The hospitals suing to block OMNIA might be disappointed to discover — after almost two years of litigation so far — that the company, on behalf of its 3.8 million members, simply developed a lower-cost, high-quality product that is fully consistent with the objectives of the Affordable Care Act. And it has worked, insuring nearly 70,000 previously uninsured New Jerseyans. It is more than a little curious that the hospitals suing to block OMNIA on the one hand seem to have recognized the value of Horizon’s approach to lowering the costs of health care on the other having now entered into the very same kind of tiered network arrangement with QualCare.

“It is difficult to believe that, as the repeal and replace debate still unfolds in Washington, four New Jersey hospitals remain determined to strip affordable health insurance away from hundreds of thousands of Horizon consumers while entering into similar arrangements with QualCare. We continue to urge this small handful of hospitals to follow the lead of the hospitals that dropped out of this lawsuit and work with Horizon policyholders — not against them.”

The plaintiffs’ claims include breach of contract, breach of the covenant of good faith and fair dealing, and defamation. Horizon has said its use of tiers in OMNIA is designed to offer quality health care at a low cost. It maintains that the selection of top-tier hospitals is based on factors such as clinical quality, consumer preference data and the ability to offer a wide range of services. The OMNIA plan was first offered in January 2016 and signed up 260,000 subscribers in its first year.