SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3312-99T3
COALITION FOR QUALITY HEALTH
CARE, PHYSICIANS UNION OF
NEW JERSEY, LOCAL LODGE 8,
NEW JERSEY ASSOCIATION OF
OSTEOPATHIC PHYSICIANS AND SURGEONS,
ASSOCIATION OF TRIAL LAWYERS
OF AMERICA-NEW JERSEY, and
RICHARD CALLAHAN,
Plaintiff-Appellants,
v.
NEW JERSEY DEPARTMENT OF BANKING
AND INSURANCE, DIVISION OF
INSURANCE,
Defendant-Respondent,
and
NATIONAL ASSOCIATION OF INDEPENDENT
INSURERS, AMERICAN INSURANCE ASSOCIATION,
INSURANCE COUNCIL OF NEW JERSEY, and
ALLIANCE OF AMERICAN INSURERS,
Respondents-Intervenors.
Argued January 16, 2002 - Decided March 4,
2002
Before Judges Conley, A. A. Rodríguez and
Lisa.
On appeal from the New Jersey Department of
Banking and Insurance, Division of Insurance.
Richard Wildstein argued the cause for
appellants (Goldstein, Ballen, O'Rourke &
Wildstein, and Sagot, Jennings & Sigmond,
attorneys; Richard Wildstein and James Katz,
on the brief).
Doreen J. Piligian, Deputy Attorney General,
argued the cause for respondent (John J.
Farmer, Jr., Attorney General, attorney;
(Nancy Kaplan, Assistant Attorney General, of
counsel; Ms. Piligian, on the brief).
Thomas P. Weidner argued the cause for
intervenors (Windels, Marx, Lane & Mittendorf,
attorneys; Mr. Weidner, of counsel and on the
brief; David F. Swerdlow, Elizabeth J. Boyd,
and Michael J. Canavan, on the brief).
Gerald H. Baker argued the cause for amicus
curiae New Jersey State Bar Association (Barry
D. Epstein and Baker, Garber, Duffy &
Pedersen, attorneys; Mr. Baker, on the brief).
The opinion of the court was delivered by
LISA, J.A.D.
In this case we consider the validity of approvals issued by
the Commissioner of the Department of Banking and Insurance
(Commissioner/DOBI) to precertification plans and policy forms of
various insurers under the provisions of the Automobile Insurance
Cost Reduction Act, L. 1998, c. 21 (AICRA) and regulations
promulgated by the DOBI under AICRA. Appellants challenge the
precertification plans on both procedural and substantive grounds.
The challenges to the policy forms implicate provisions that
establish copayments for certain diagnostic testing services but
waive copayment if the insurance company's approved network is
utilized, that compel submission of personal injury protection
(PIP) disputes to dispute resolution, and that place restrictions
on the assignment of PIP benefits. A challenge is also made to the
DOBI's approval of a tier rating system that allows consideration
of payment of PIP benefits arising out of a non-fault accident in
charging a higher premium. We affirm the challenged actions of the
DOBI and its Commissioner. However, we remand on the issue of care
path diagnostic tests, noting they do not require precertification,
and directing the DOBI to review the provisions in all approved
plans and policies to assure their correctness and clarity in this
regard and to require any modifications as may be necessary.
Appellants represent health care providers and attorneys, who
contend, generally, that the asserted unlawful actions of the DOBI
will adversely affect claimants injured in automobile accidents and
their health care providers. Appellant Richard Callahan is an
Allstate insured who presents the tier rating challenge. Amicus
curiae, New Jersey State Bar Association, supports appellants'
position. Although the individual insurance companies whose plans
and policies are affected were served with the notice of appeal,
none have participated in the proceedings before us. Their
interests are represented, however, by the intervenors, National
Association of Independent Insurers, American Insurance
Association, Insurance Council of New Jersey, and Alliance of
American Insurers.
The DOBI asserts that appellants lack standing to challenge
the Commissioner's approval of the individual insurance company
policy forms. Rule 4:26-1 provides that "[e]very action may be
prosecuted in the name of the real party in interest. . . ."
"Standing 'refers to the plaintiff's ability or entitlement to
maintain an action before the court.'" In re Baby T.,
160 N.J. 332, 340 (1999) (quoting New Jersey Citizen Action v. Riviera Motel
Corp.,
296 N.J. Super. 402, 409 (App. Div.), certif. granted,
152 N.J. 13 (1997), appeal dismissed as moot,
152 N.J. 361 (1998)).
"Entitlement to sue requires a sufficient stake and real
adverseness with respect to the subject matter of the litigation
. . . [and] [a] substantial likelihood of some harm." Ibid.
(citation omitted). "Standing has been broadly construed in New
Jersey as 'our courts have considered the threshold for standing to
be fairly low.'" Triffin v. Somerset Valley Bank,
343 N.J. Super. 73, 81 (App. Div. 2001) (quoting Reaves v. Egg Harbor Tp.,
277 N.J.
Super. 360, 366 (Ch. Div. 1994)). Moreover, "[w]here the public
interest is involved, only a slight additional private interest is
necessary to confer standing." Jersey Shore Med. Center-Fitkin
Hosp. v. Estate of Baum,
84 N.J. 137, 144 (1980). However,
"[o]rdinarily, a litigant may not claim standing to assert the
rights of a third party." Ibid.
Appellants are legal and medical professionals representing
and treating automobile accident victims. The manner of treatment
and compensation for care of such individuals is impacted by the
Commissioner's approval of the policies. Moreover, even if
appellants' interests are somewhat attenuated, in light of the
importance of the issues, and the interests of the organizations'
members, we are satisfied that appellants have standing to
challenge approval of the policies. See Independent Energy
Producers of N.J. v. N.J. Dep't of Envtl. Prot. and Energy,
275 N.J. Super. 46, 56 (App. Div.) ("Although [appellant's] interest in
the [agency's] determination may be considered speculative and
likened to that of a spoiler, we are satisfied that the public
interest will best be served by judicial resolution of the
questions presented"), certif. denied,
139 N.J. 187 (1994).
In 1972 New Jersey enacted its first "no-fault" automobile law, the New Jersey Automobile Reparation Reform Act. N.J.S.A. 39:6A-1 to -35. This law provided for mandatory PIP benefits, payable without regard to fault. N.J.S.A. 39:6A-4; New Jersey Coalition of Health Care Professionals, Inc. v. N.J. Dep't of Banking and Ins., Div. of Ins., 323 N.J. Super. 207, 215-16 (App. Div.), certif. denied, 162 N.J. 485 (1999). Its goal was to compensate a larger class of citizens than the traditional tort-based system, with "greater efficiency" and at a lower premium cost. Id. at 216 (quoting Emmer v. Merin, 233 N.J. Super. 568, 572 (App. Div.), certif. denied, 118 N.J. 181 (1989)). Inherent in the no-fault system was a limitation on conventional tort-based personal injury lawsuits. Ibid.
However, automobile insurance premiums continued to rise. In the succeeding twenty-six years, the Legislature adopted numerous provisions in an attempt to reduce insurance rates within the no- fault system. Ibid. For example in 1983, the Legislature enacted the "New Jersey Automobile Insurance Freedom of Choice and Cost Containment Act" which introduced the concept of tort options and the choice between monetary thresholds for soft-tissue injuries. Ibid.; N.J.S.A. 39:6A-8(a) (repealed 1988). In 1988, the Legislature replaced the monetary threshold with a newly defined "verbal threshold," and added a $250 medical deductible, and a 20% copayment for some medical expenses. New Jersey Coalition of Health Care, supra, 323 N.J. Super. at 217; Oswin v. Shaw, 250 N.J. Super. 461, 464 (App. Div. 1991), aff'd, 129 N.J. 290 (1992). And in 1990 the Legislature enacted the "Fair Automobile Insurance Reform Act"(FAIRA), N.J.S.A. 17:33B-1 to -63, which provided, among other reforms, for a maximum payment of $250,000 per person per accident for reasonable medical expenses, an option to make the insured's health insurance the primary source for payment of medical and hospital expenses, and a revision of the medical fee schedule provisions. New Jersey Coalition of Health Care, supra, 323 N.J. Super. at 217.
These reforms, however, were not successful, and in 1998 the Legislature enacted AICRA, which made further comprehensive changes to the no-fault automobile insurance laws in an effort to "preserve the no-fault system, while at the same time reducing unnecessary costs" which had resulted in increased premiums. N.J.S.A. 39:6A- 1.1b. The Legislature found that although New Jersey's no-fault law had "provided valuable benefits in the form of medical benefits,"
[s]ince the enactment of the verbal threshold in 1988, the substantial increase in the cost of medical expense benefits indicates that the benefits are being overutilized for the purpose of gaining standing to sue for pain and suffering, thus undermining the limitations imposed by the threshold and necessitating the imposition of further controls on the use of those benefits, including the establishment of a basis for determining whether treatments or diagnostic tests are medically necessary. . . .
[Ibid.]
The Legislature recognized that "in order to keep premium costs
down, the cost of the benefit must be offset by a reduction in the
cost of other coverages, most notably a restriction on the right of
persons who have non-permanent or non-serious injuries to sue for
pain and suffering." Ibid. In addition, the Legislature found
that fraud, stemming from unnecessary medical treatments and the
overutilization of medical services and diagnostic tests used to
satisfy the verbal threshold, combined with an arbitration system
that did not effectively eliminate payment for unnecessary
treatment and tests, had directly contributed to New Jersey's high
insurance costs. Ibid. The Legislature compelled an overall 15%
premium cost reduction, and a 25% PIP cost reduction. N.J.S.A.
17:29A-51.
To facilitate those reductions, AICRA substantially revised
the process for resolving disputed PIP claims, and amended the
mandatory PIP coverages to provide for treatment in accordance with
protocols, or care paths, and for the precertification of certain
medical procedures, treatments, tests or other services. N.J.S.A.
39:6A-3.1, -4, and -5.1.
The Legislature directed that plans for protocols, or care
paths, be submitted to the Commissioner for approval, and that
[t]he policy form . . . shall set forth the
benefits provided under the policy, including
eligible medical treatments, diagnostic tests
and services as well as such other benefits as
the policy may provide. The commissioner
shall set forth by regulation a statement of
the basic benefits which shall be included in
the policy. Medical treatments, diagnostic
tests, and services provided by the policy
shall be rendered in accordance with commonly
accepted protocols and professional standards
and practices which are deemed to be commonly
accepted as being beneficial for the treatment
of the covered injury. Protocols and
professional standards and practices which are
deemed to be commonly accepted pursuant to
this section shall be those recognized by
national standard setting organizations,
national or state professional organizations
of the same discipline as the treating
provider, or those designated or approved by
the commissioner in consultation with the
professional licensing boards in the Division
of Consumer Affairs in the Department of Law
and Public Safety. The commissioner, in
consultation with the Commissioner of the
Department of Health and Senior Services and
the applicable licensing boards, may reject
the use of protocols, standards and practices
or lists of diagnostic tests set by any
organization deemed not to have standing or
general recognition by the provider community
or the applicable licensing boards. Protocols
shall be deemed to establish guidelines as to
standard appropriate treatment and diagnostic
tests for injuries sustained in automobile
accidents, but the establishment of standard
treatment protocols or protocols for the
administration of diagnostic tests shall not
be interpreted in such a manner as to preclude
variance from the standard when warranted by
reason of medical necessity.
[N.J.S.A. 39:6A-3.1a (the basic plan).]See footnote 11
With regard to precertification, the Legislature directed
that
[t]he policy form may provide for the
precertification of certain procedures,
treatments, diagnostic tests, or other
services or for the purchase of durable
medical goods, as approved by the
commissioner, provided that the requirement
for precertification shall not be
unreasonable, and no precertification
requirement shall apply within ten days of the
insured event. The policy may provide that
certain benefits provided by the policy which
are in excess of the basic benefits required
by the commissioner to be included in the
policy may be subject to reasonable copayments
in addition to the copayments provided for
herein, provided that the copayments shall not
be unreasonable and shall be established in
such manner [as not] to serve to encourage
underutilization of benefits subject to the
copayments, nor encourage overutilization of
benefits.
[Ibid.]See footnote 22
To facilitate implementation of these reforms the Legislature
granted the Commissioner broad powers to "promulgate any rules and
regulations . . . deemed necessary in order to effectuate the
provisions of this . . . act." N.J.S.A. 39:6A-1.2.
Thereafter, on November 30, 1998, in accordance with its
delegated authority, the DOBI adopted N.J.A.C. 11:3-4 (Personal
Injury Protection Benefits; Medical Protocols; Diagnostic Tests)
and N.J.A.C. 11:3-5 (Personal Injury Protection Dispute
Resolution). The regulations establish a series of medical
protocols or care paths as the standard course of "medically
necessary treatment" for certain soft tissue injuries of the neck
and back ("identified injuries," N.J.A.C. 11:3-4.2), N.J.A.C. 11:3-
4.6(a), "injuries which the DOBI thought were fraught with
potential for unnecessary treatment and overutilization of
benefits." New Jersey Coalition of Health Care, supra, 323 N.J.
Super. at 223. These medical protocols or care paths were adopted
with the assistance of a health-benefits consultant and an ad hoc
committee of the professional boards. Id. at 224. "The care paths
use a flow-chart method which presents a diagrammatic view of
expected treatment patterns based on patient symptoms and objective
evaluations by practitioners. . . . [and] contain projected
utilization norms for assessing intensity and length of treatment."
Id. at 223, See N.J.A.C. 11:3-4, Appendix. The care path
regulations thus establish typical courses of treatment for certain
common automobile-related injuries and serve as standards for
measuring medical necessity, but do not "prescribe a course of
conduct for a particular patient." New Jersey Coalition of Health
Care, supra, 323 N.J. Super. at 224. Treatments that vary from the
care paths are "reimbursable only when warranted by reason of
medical necessity." N.J.A.C. 11:3-4.6(c).
Decision point review occurs at certain junctures during the
treatment, as designated in the care paths, and may require a
second opinion, development of a treatment plan, or case
management. N.J.A.C. 11:3-4.6(b). Decision point is defined as
"those junctures in the treatment of identified injuries where a
decision must be made about the continuation or choice of further
treatment . . . . [and] tests." N.J.A.C. 11:3-4.2. The failure to
comply with decision point review procedures may result in
additional copayments not to exceed 50%; however, such review does
not require an affirmative response by the insurer and failure by
an insurer to respond to notice of a proposed course of care path
treatment, indicates that the treatment may continue. N.J.A.C.
11:3-4.7(b)3; New Jersey Coalition of Health Care, supra, 323 N.J.
Super. at 225-26.
In contrast, precertification is defined as "a program,
described in policy forms in compliance with these rules, by which
the medical necessity of certain diagnostic tests, medical
treatments and procedures are subject to prior authorization,
utilization review and/or case management." N.J.A.C. 11:3-4.2.
The regulations for precertification adopted by the DOBI which were
in effect when the actions under review occurred (N.J.A.C. 11:3-
4.8(a)) provided that "[i]nsurers may file for approval policy
forms that provide for a precertification of certain medical
procedures, treatments, diagnostic tests, or other services, non-
medical expenses and durable medical equipment by the insurer or
its designated representative." New Jersey Coalition Health Care,
supra, 323 N.J. Super. at 283 (Appendix). Subsequent to the
disputed actions and the filing of this appeal, that section was
amended to provide that "[i]nsurers may require precertification of
certain specific medical procedures, treatments, diagnostic tests,
other services and durable medical equipment that are not subject
to decision point review and that may be subject to
overutilization." N.J.A.C. 11:3-4.8(a)(emphasis added). A new
section was added which provides that "[p]recertification
requirements shall be included with a decision point review plan
submission but the medical procedures, treatments, diagnostic
tests, durable medical equipment or other services that require
precertification shall be identified separately from decision point
review." N.J.A.C. 11:3-4.8(b).
Under the earlier and amended versions, these regulations
prohibit a precertification requirement within ten days of the
insured event, N.J.A.C. 11:3-4.8(c), require that precertification
be based exclusively on medical necessity and not encourage over or
under utilization of the treatment or test, N.J.A.C. 11:3-4.8(d),
allow a requirement that injured persons obtain durable medical
equipment directly from the insurer or its designee, N.J.A.C. 11:3-
4.8(g), and authorize inclusion in policy forms of an additional
co-payment not to exceed 50% of the eligible charge for medically
necessary tests, treatments, surgery, durable medical equipment and
non-medical expenses for non-compliance with precertification
requirements. N.J.A.C. 11:3-4.8(h).
Appellants do not appeal the regulations. In neither version
did the DOBI specifically designate which procedures, services, or
treatments could be subject to precertification.See footnote 33
Against this background, we consider the precertification issues raised by appellants. Appellants' initially attack the DOBI's approval of precertification plans on procedural grounds, asserting that in the approval process the DOBI issued and distributed an administrative rule in violation of the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -24. Substantively, appellants challenge various provisions in the precertification plans. They contend the plans are overly broad, encompassing within their scope the equivalent of all medical treatment and testing, they impermissibly equate decision point review with precertification, and they impermissibly require precertification for care path diagnostic tests. Our analysis requires that we first recount the events culminating in the Commissioner's approval of the disputed precertification plans and policy provisions.
In March and April 1999, the DOBI reviewed and approved decision point review and precertification plans submitted by five insurers: Allstate; Prudential Insurance Company (Prudential); State Farm Insurance Company (State Farm); First Trenton Indemnity Company (First Trenton); and Palisades Safety and Insurance Association (Palisades). These plans required precertification for virtually all PIP medical care. For example, Allstate required "precertification for all services, treatments and procedures, diagnostic tests, prescription supplies, durable medical equipment or otherwise potentially covered medical expense benefits."
On May 3, 1999, the Commissioner issued Bulletin No: 99-07, suspending those approvals, stating that the DOBI had
received and reviewed a number of precertification plan filings pursuant to [AICRA] and the Department's rules . . . and has determined it is necessary to develop additional standards for approval of these plans.
This bulletin is intended to advise insurers that additional standards will be promulgated in the near future, which will require revisions to the documents submitted to the Department and to the procedures implementing the plans.
Some insurers have undertaken to precertify all, or virtually all, medical care provided to injured motorists either by designating in the plan that all medical treatment must be precertified or by including an exhaustive list of treatments or procedures for which precertification is required. I am not authorizing the approval of such broad precertification plans, and the precertification plans already approved with overly broad precertifications requirements are suspended and must be revised and refiled.
More precise standards for the approval of precertification plans will be promulgated by the Department shortly. In the meantime, insurers with already approved plans should prepare to promptly file amendments to your plans upon receipt of the revised standards
. . . .
Meanwhile, in 1998 the appellants in this case, among others, challenged the DOBI's adoption of N.J.A.C. 11:3-4 and -5. New Jersey Coalition of Health Care, supra, 323 N.J. Super. at 214-15. We issued our opinion in that case on June 14, 1999, upholding the validity of all of the challenged regulations (except one not relevant here). Id. at 215. We held that
[t]he establishment of standard treatments and diagnostic tests established in N.J.A.C. 11:3-4 are consistent with the legislative intent to discourage the performance of unnecessary medical services. The regulations are designed to provide all necessary medical care to those injured accident victims in need of treatment. They neither deny patients access to care nor interfere with physicians' ability to practice medicine. What the regulations do, however, consistent with AICRA's objective, is to establish meaningful standards against which to measure the reimbursement of medical treatments and diagnostic tests. We conclude the regulations are authorized by AICRA's plain language and consistent with the legislative intent.
[Id. at 239.]
We further held that
[t]he establishment of basic benefits,
standard treatment protocols and diagnostic
tests, provided for in N.J.A.C. 11:3-4, is
expressly authorized by AICRA. Not only is
N.J.A.C. 11:3-4 authorized by the plain
language of AICRA, it rationally serves the
legislative public policy of ensuring that
medically necessary care is reimbursed while
placing limitations on medically unnecessary
treatments and diagnostic testing; this will
result in lower insurance premiums for New
Jersey consumers. Appellants' criticisms of
the care paths fall short of overcoming the
presumption of validity and reasonableness
accorded to the Department's regulations.
[Id. at 253-54.]
We did not, however, address the precertification regulations,
in light of the Commissioner's decision, expressed in Bulletin 99-
07 (issued nine days prior to oral argument), to withdraw her
earlier approval of certain plans and to "reconsider these
procedures before issuing new directives or regulations on
precertification of treatment or tests." Id. at 223.
In July 1999, the DOBI issued a short guideline memorandum,
developed in the course of its ongoing discussions with insurance
companies, intended to serve as guidance to insurers of acceptable
uses for a pre-certification program. The guideline provided that
the DOBI would approve of plans requiring precertification of: 1)
tests and procedures identified in N.J.A.C. 11:3-4.5(b)See footnote 44
(diagnostic tests) as acceptable for use in certain circumstances;
2) non-emergency surgical procedures; and 3) "other services and
supplies," including home health care, skilled nursing care, non-
emergency hospital care, infusion therapy, and durable medical
equipment priced over a stated dollar amount.
However, the DOBI cautioned that the
[m]andated use of pre-certification, in
connection with medical treatment of injuries
addressed in the Department's care paths is
problematic. Decision point review already
sets the manner in which treating
practitioners must interact with an insurer or
its representatives.
Pre-certification of an entire course of
treatment involving care paths can be
voluntary. No penalty co-payments should be
imposed during the period of insurer review,
outside examination or until a determination
is communicated, while treatment may continue
uninterrupted pursuant to decision point
review and the care paths.
Pre-certification may also be identified
for use as a tool to monitor overutilization
of treatment of injuries outside of care
paths. The plan should not, however, be
structured too broadly. It should be limited
to the kinds of injuries or treatments that
are subject to overutilization. But again,
the program should not be structured to
interrupt care, nor to impose penalty co-
payments for treatments generally unless and
until approved by insurer or its
representative. To apply penalty co-payments,
specific treatments, services or diagnostic
tests must be identified in order for the
Department to assess the reasonable use of the
proposed pre-certification program.
In the summer of 1999, insurers began to submit to the DOBI
revised decision point review and precertification plans for
approval. At that time the DOBI engaged in considerable dialogue
with Parkway Insurance Company (Parkway) and Parkway's vendor,
regarding its plan. The DOBI approved Parkway's plan on August 19,
1999.
The approved Parkway plan provided that decision point reviews
were to occur at various stages during the standard course of
treatment of soft tissue injuries of the neck and back, as
designated in the care paths. In contrast, precertification was
required only for certain non-care path treatments, including: 1)
non-emergency hospital admissions and confinement (to include the
appropriateness and duration of the hospital stay); 2) non-
emergency surgery; 3) durable medical equipment costing greater
than $50, or rental greater than thirty days; 4) extended care and
rehabilitation; 5) home health care; 6) hospice care; 7) infusion
therapy; 8) prosthetic devices; 9) non-emergency mental health
services; 10) physical, occupational, speech, or other restorative
therapy; 11) non-care path pain management services; and 12) non-
emergency dental restoration. Precertification was also required
for the diagnostic tests listed in N.J.A.C. 11:3-4.5. Care path
injuries, treatment or tests rendered during emergency care, and
treatment within ten days following an accident were not subject to
precertification. Failure to comply with the precertification and
decision point review requirements would result in an additional
50% copayment.
In the event a request for precertification was denied, the
Parkway policy provided that a medical provider could request
reconsideration by a physician advisor, and if unsuccessful, submit
the case for appeal to dispute resolution. The policy also
provided for the assignment of benefits to a medical provider, but
required that the provider "hold harmless the insured and the
Carrier for any reduction of benefits caused by [their] failure to
comply with the terms of the Decision Point/Precertification plan."
The Parkway plan provided additional copayments for: 1)
diagnostic imaging and electrodiagnostic testing (30% per person
per service); 2) durable medical equipment (30% per person per
service); 3) prescription drugs ($10 per prescription); and 4) all
other medical services (20% per accident up to $5000). However,
that copayment was waived if the insured used "the voluntary
utilization network."
Upon finalization and approval of Parkway's plan, the DOBI
redacted the name of the company and vendor, and distributed it to
insurance companies that were in the process of formulating plans
as a "Sample Acceptable Decision Point Review/Precertification Plan
Layout" (sample). The sample included decision point review,
mandatory precertification, the appeals process, voluntary network
services, and assignment of benefits.
Thereafter, the DOBI individually reviewed, and eventually
approved, decision point review and precertification plans
submitted by approximately twenty other insurance companies. Some
of these policies are substantially similar or identical to the
sample plan, while others contained varied provisions.See footnote 55
Appellants contend the precertification portion of the DOBI's sample constitutes an administrative rule, adopted in violation of the procedural requirements of the APA, and is therefore invalid and requires invalidation of plans and policy forms approved in conjunction with it. We reject this contention.
"Where a legislative body establishes basic policy in its enabling statute, it may grant broad authority to an administrative agency to make rules and regulations to effectuate those policies." New Jersey Coalition of Health Care, supra, 323 N.J. Super. at 228. "[T]he grant of authority to an administrative agency is to be liberally construed in order to enable the agency to accomplish its statutory responsibilities and . . . courts should readily imply such incidental powers as are necessary to effectuate fully the legislative intent." New Jersey Guild of Hearing Aid Dispensers v. Long, 75 N.J. 544, 562 (1978).
Agencies are accorded "wide latitude in improvising appropriate procedures to effectuate their regulatory jurisdiction." Metromedia, Inc. v. Dir. Div. of Tax., 97 N.J. 313, 333 (1984). "[A]dministrative agencies possess the ability to be flexible and responsive to changing conditions." In re Pub. Serv. Elec. and Gas Co. Rate Unbundling, 167 N.J. 377, 385 (2001)(citation omitted). "This flexibility includes the ability to select those procedures most appropriate to enable the agency to implement legislative policy." Ibid. In that regard, "[a]n agency has discretion to choose between rulemaking, adjudication, or an informal disposition in discharging its statutory duty. . . ." Northwest Covenant Med. Ctr. v. Fishman, 167 N.J. 123, 137 (2001).
However, the manner in which the agency exercises its discretion in choosing an appropriate procedure may be governed by the procedural requirements of the APA. Id. at 137; Metromedia, supra, 97 N.J. at 333-34; St. Barnabas Med. Ctr. v. N.J. Hosp. Rate Setting Comm'n, 250 N.J. Super. 132, 142 (App. Div. 1991). Thus if an agency's action constitutes a rule, it must comply with the APA requirements of notice and opportunity for comment. N.J.S.A. 52:14B-4(a)(1), (2); Woodland Private Study Group v. State, Dep't of Envtl. Prot., 109 N.J. 62, 63-64 (1987). The purpose of the notice requirement is "to give those affected by the proposed rule an opportunity to participate in the rule-making process not just as a matter of fairness but also as 'a means of informing regulators of possibly unanticipated dimensions of a contemplated rule.'" In re Adoption of Regulations Governing Volatile Organic Substances in Consumer Prods., N.J.A.C. 7:27-23, 239 N.J. Super. 407, 411 (App. Div. 1990) (quoting American Employers' Ins. v. Commissioner of Ins., 236 N.J. Super. 428, 434 (App. Div. 1989)).
Of course, not every action of a State agency constitutes rulemaking. State v. Garthe, 145 N.J. 1, 7 (1996). Distinguished from rulemaking is informal agency action, defined as "any determination that is taken without a trial-type hearing, including investigating, publicizing, negotiating, settling, advising, planning, and supervising a regulated industry." Northwest Covenant Med. Ctr., supra, 167 N.J. at 136-37. Indeed, "'informal action constitutes the bulk of the activity of most administrative agencies.'" Id. at 137 (quoting In re Request for Solid Waste Util. Customer Lists, 106 N.J. 508, 518 (1987)).
In contrast, the APA defines an "administrative rule" as an
agency statement of general applicability and continuing effect that implements or interprets law or policy, or describes the organization, procedure or practice requirements of any agency. The term includes the amendment or repeal of any rule, but does not include: (1) statements concerning the internal management or discipline of any agency; (2) intraagency and interagency statements; and (3) agency decisions and findings in contested cases.
[N.J.S.A. 52:14B-2(e).]
In determining whether agency action constitutes rulemaking courts inquire whether the agency action:
(1) is intended to have wide coverage encompassing a large segment of the regulated or general public, rather than an individual or a narrow select group; (2) is intended to be applied generally and uniformly to all similarly situated persons; (3) is designed to operate only in future cases, that is, prospectively; (4) prescribes a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization; (5) reflects an administrative policy that (i) was not previously expressed in any official and explicit agency determination, adjudication or rule, or (ii) constitutes a material and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nature of the interpretation of law or general policy.
[Metromedia, supra, 97 N.J. at 331-32.]
These factors are applicable whenever the authority of an agency to act without conforming to the requirements of the APA is questioned, for example, in adopting orders, guidelines, or directives. Doe v. Poritz, 142 N.J. 1, 97 (1995); Woodland Private Study Group, supra, 109 N.J. at 67-68; Bullet Hole, Inc. v. Dunbar, 335 N.J. Super. 562, 580 (App. Div. 2000). However, not all of these factors must be present for an agency action to constitute rulemaking; instead the factors are balanced according to weight. State v. Garthe, supra, 145 N.J. at 6.
Application of the Metromedia factors to the sample leads us to conclude that the DOBI did not engage in rulemaking. To be sure, some factors are present. The sample was intended, for example, to have "wide coverage" encompassing both a large segment of the regulated insurance industry and the general public served by those insurers. Metromedia, supra, 97 N.J. at 331; See Doe v. Poritz, supra, 142 N.J. at 97 (holding factor one was satisfied because guidelines for community notification under Megan's Law were intended to have wide coverage, although in applying all of the factors the Court concluded that the guidelines did not constitute rulemaking); St. Barnabas Med. Ctr., supra, 250 N.J. Super. at 144 (holding factor one was satisfied because agency's approval of a settlement plan containing caps on the amount of settlement that each hospital could collect had wide coverage).
However, application of the second factor, which requires a showing that the action was "intended to be applied generally and uniformly to all similarly situated persons," weighs in favor of a finding of informal action, not rulemaking. Metromedia, supra, 97 N.J. at 331. The sample was intended to serve as an example of an approved policy to be used as a guideline for insurance companies to assist them in preparing their precertification plans. It was not a blueprint form containing an exhaustive list of services for rigid adherence by all insurers. Notably, some of the subsequently approved policies differed from the sample, containing more or less extensive lists of services requiring precertification. But see St. Barnabas Med. Ctr., supra, 250 N.J. Super. at 144 ("Exceptions to the caps on the amount of settlement did not prevent them from being applied generally and uniformly to all similarly situated hospitals").
The third factor, whether the action was designed to operate only prospectively, is present because the sample was to be used as a guide by insurance companies seeking approval of decision point review and precertification plans. Metromedia, supra, 97 N.J. at 331.
However, the remaining factors are not present. The sample does not prescribe "a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization," a factor which deserves significant weight. Ibid; See Doe v. Poritz, supra, 142 N.J. at 98 (according the greatest weight to this factor in assessing whether promulgation of guidelines constituted rulemaking). Here the enabling statutory provisions state that
[t]he policy form may provide for the precertification of certain procedures, treatments, diagnostic tests, or other services or for the purchase of durable medical goods, as approved by the commissioner, provided that the requirement for precertification shall not be unreasonable, and no precertification requirement shall apply within ten days of the insured event.
[N.J.S.A. 39:6A-3.1a and -4a.]
Of course the specific types of services requiring precertification are not expressly provided for in the enabling statute, and thus adoption of a legal standard or directive specifying a mandatory list of services subject to precertification would have constituted rulemaking. Metromedia, supra, 97 N.J. at 334. But here the sample did not prescribe a "legal standard or directive." Id. at 331. The sample did not define minimum acceptable standards, instead it served as a non-binding example, promulgated to assist, and not prescribe, the preparation of insurance policies. Insurers were not required to incorporate any of the language or provisions of the sample into their plans, and were free to develop their own individual list of services. See B.C. v. Cumberland Reg. Sch. Dist., 220 N.J. Super. 214, 234 (App. Div. 1987) (holding athletic guidelines prepared by an agency in the form of questions and answers to illustrate suggestive solutions to hypothetical factual situations, constituted informal action, not rulemaking); but see Shapiro v. Albanese, 194 N.J. Super. 418, 425-31 (App. Div. 1984) (holding circular letter sent by the Department of Human Services to all counties was an administrative rule).
Similarly, factor five, whether the action reflects a material change in administrative policy, was not satisfied. Metromedia, supra, 97 N.J. at 331. Here the DOBI has consistently taken the position, in accordance with its enabling statute, that it would not approve policies that require precertification of all, or essentially all, services. N.J.S.A. 39:6A-3.1 and -4. In its July 1999 "guideline," the DOBI indicated that it would approve plans requiring precertification of: 1) diagnostic tests and procedures identified in N.J.A.C. 11:3-4.5(b); 2) non-emergency surgical procedures; and 3) "other services and supplies," including home health care, skilled nursing care, non-emergency hospital care, infusion therapy, and durable medical equipment priced over a stated dollar amount. The sample is entirely consistent with that policy in that it does not require precertification for all services, and essentially repeats the services set forth in the July 1999 "guideline." Thus because the sample does not constitute a material change in policy, this factor was not satisfied.
Finally, the sixth Metromedia factor was not satisfied because the sample does not represent "a decision on administrative regulatory policy in the nature of the interpretation of law or general policy." Metromedia, supra, 97 N.J. at 331-32. Again, the sample is simply a guide to be used by insurance companies in preparing their precertification plans. It is not a statement of policy. In fact, as the DOBI subsequently explained, it did not define in its regulations what treatments, diagnoses and tests are subject to overutilization, and therefore require precertification, because it
believes that insurers are in the best position to decide those treatments, diagnoses or tests for which the benefits of precertification in reducing unnecessary treatment outweigh the cost of administering a utilization review program. The treatments or tests that are overutilized may change over time and the rules recognize that flexibility is necessary.
[ 32 N.J.R. 4005, 4008 (November 6, 2000).]
The DOBI's decision not to promulgate a rigid precertification rule addresses the concerns expressed by some insurers that "the costs associated with development, implementation and operation of a system capable of exercising the kind of supervision and control over PIP medical expenses as required by the rules will far exceed any possible savings realized." 30 N.J.R. 4401, 4410 (December 21, 1998). The DOBI responded that insurers can
develop pre-certification plans which the Department believes can also generate substantial cost savings. Each insurer must, of course, exercise this opportunity in a manner that considers both the expense and the cost savings. The Department notes that indemnity health insurers have developed appropriate systems that balance the expense and the cost savings, and believes that auto insurers can do likewise.
[Ibid.]
By addressing the policy approvals on a case-by-case basis, the DOBI granted insurers the flexibility to assess their own PIP claims to determine which tests or services were overutilized, and plan their precertification requirements accordingly. That flexibility is not, however, unlimited, as any precertification plan must conform to the relevant statute, regulations, and the informal guidelines distributed by the DOBI. N.J.S.A. 39:6A-3.1 and -4; N.J.A.C. 11:3-4.8.
Moreover, where medical treatment or tests are improperly denied, the insurers' internal appeals process, the dispute resolution process, and the Commissioner's intensive monitoring of decision point and precertification determinations serve as adequate safeguards. N.J.S.A. 39:6A-5.1; N.J.A.C. 11:3-4.10. For example, pursuant to N.J.A.C. 11:3-4.10, insurers must file monthly implementation reports with the DOBI, which information is reviewed by the Personal Injury Protection Technical Advisory Committee (PIPTAC), whose membership includes representatives of the professional boards, who then "closely" monitor the "proper implementation and application of the regulations" and "insure that reimbursement for medical care is not arbitrarily denied." New Jersey Coalition of Health Care, supra, 323 N.J. Super. at 235. The DOBI can thus monitor the success of the different precertification approaches to determine which plan most effectively reduces unnecessary medical expenses, while at the same time ensuring that patients receive medically necessary treatment.
We therefore hold that upon applying and weighing the Metromedia factors, the DOBI's development and distribution of the sample constituted appropriate informal action, not rulemaking, and was not subject to APA requirements. We further note that the Parkway policy, upon which the sample was based, once approved, was a public record. Any other insurer would have had access to it if it wanted to see what kind of precertification plan and provisions were deemed acceptable by the DOBI. During this period, insurers were engaged in discussions with the DOBI in formulating their proposed plans. Insurers were inquiring of the DOBI regarding the status of any new guidelines or regulations to assist them in this endeavor. Under these circumstances, circulation of the sample by the DOBI as a non-binding guide was a sensible measure, consistent with the DOBI's regulatory function and the public interest.
Subsequent to the distribution of the sample, the DOBI approved decision point review and precertification plans submitted by approximately twenty insurance companies. Appellants argue that the Commissioner exceeded her authority in approving these plans because they are inconsistent with AICRA, the regulations, and the objectives of the no-fault automobile statute.
Administrative agency actions are presumed to be valid if they are within the statutory authority delegated to the agency, and the burden is on the party challenging the agency action to overcome this presumption. Hills Dev. Co. v. Bernards Tp. in Somerset Cty., 103 N.J. 1, 45 (1986); New Jersey Coalition of Health Care , supra, 323 N.J. Super. at 229. Deference to an administrative agency is especially appropriate where new and innovative legislation is being put into practice. Newark Firemen's Mut. Benev. Ass'n, Local No. 4 v. City of Newark, 90 N.J. 44, 55 (1982). "Particularly, in the field of insurance, the expertise and judgment of the Commissioner may be given great weight." New Jersey Coalition of Health Care, supra, 323 N.J. Super. at 229.
In addition to the Commissioner's broad general authority to promulgate rules necessary to carry out the goals of AICRA, N.J.S.A. 39:6A-1.2, the Legislature also granted her specific authority to approve precertification plans. N.J.S.A. 39:6A-3.1a and -4a. Statutes should be interpreted in accordance with their plain meaning, and where a statute is clear and unambiguous, courts may not impose an interpretation other than the statute's ordinary meaning. National Waste Recycling, Inc. v. Middlesex Cty. Imp. Auth., 150 N.J. 209, 223 (1997); Munoz v. N.J. Auto. Full Ins. Underwriting Ass'n, 145 N.J. 377, 384 (1996). "Where the statutory language is 'clear and unambiguous,' courts will implement the statute as written without resort to judicial interpretation, rules of construction, or extrinsic matters." Bergen Commercial Bank v. Sisler, 157 N.J. 188, 202 (1999) (quoting In re Estate of Post, 282 N.J. Super. 59, 72 (App. Div. 1995)).
The plain language of N.J.S.A. 39:6A-3.1a and -4a authorizes precertification of "certain" but not all, "procedures, treatments, diagnostic tests, or other services or for the purchase of durable medical goods. . . ." The term "certain" is defined as "[a]scertained; precise; identified; settled; exact; definitive; clearly known; unambiguous," Black's Law Dictionary 225 (6th ed. 1990), or as 1) fixed, settled, proved to be true; 2) of a specific but unspecified character, quantity, or degree; 3) dependable, reliable, indisputable; 4) inevitable, incapable of failing, destined; and 5) assured in mind or action. Webster's New Collegiate Dictionary 182 (8th ed. 1977). Here a logical reading of the statute conforms with these definitions, namely that the procedures or services subject to precertification are definite or known, but not yet specified. The term, as used in this context, does not denote a quantity or percentage.
Appellants note that "certain" has, in at least one dictionary, been defined as "some though not much," such as in "a certain reluctance." Webster's New Universal Unabridged Dictionary 242 (2d. ed. 1992). They argue that in accordance with this definition the Legislature intended that only a small portion of possible treatment, tests, goods and services should be subject to precertification. We reject the contention that this obscure definition should apply. If the Legislature intended such a result it would have expressed it clearly. We are confident that the clear and plain meaning of the term was intended. Our confidence is bolstered by the qualifications in the statute that the Commissioner, with her broad delegation of authority and her expertise, must approve the items subject to precertification, and they may not be unreasonable.
Thus, the plans and policies ultimately approved in this case are consistent with the statutory language, because although the policies require precertification of many health services and treatments, precertification is not required for all services. It is not required, for example, for treatment within ten days after an accident, treatment subject to care path protocols (which represents the overwhelming majority of automobile accident injuries), emergency care (hospital, surgery or psychiatric), some physician visits, and durable medical equipment under specified dollar amounts. The Commissioner thus acted within her authority in approving policies requiring precertification of some, but not all, services.
Nevertheless, appellants argue that the approved precertification requirements are inconsistent with the no-fault law's policy of reparation, because they will allow insurers to "thwart the ability of claimants" to meet the lawsuit thresholds. Reparation is a general policy goal of the no-fault law. Aponte-Correa v. Allstate Ins. Co., 162 N.J. 318, 323 (2000).
However, "AICRA's mandate to balance the reparation's objective and the cost-containment aspect of the no-fault act [is] manifest . . . ." New Jersey Coalition of Health Care , supra, 323 N.J. Super. at 237. Moreover, AICRA sought to eliminate the overutilization of medical benefits for the purpose of gaining standing to sue for pain and suffering. N.J.S.A. 39:6A-1.1b. In New Jersey Coalition of Health Care, we stated that
the Legislature intended, when it directed the Commissioner to adopt regulations implementing AICRA, to establish some standard of measure and a mechanism to check the prior abuses of the system.
Clearly, AICRA was designed to reduce not only unnecessary PIP medical costs but also to reduce payments on the bodily injury component of auto policies.
[323 N.J. Super. at 238.]
Here the approval of the precertification lists does not limit reparation for legitimate, medically necessary care. Instead it implements AICRA's cost-containment goals by providing insurers with the means to control overutilized and unnecessary care, sought solely to bolster a personal injury suit.
We need not address appellants' argument that "[n]othing in the Legislative history supports the breadth of precertification programs which the Commissioner has authorized," because the clarity of the statutory language makes resort to the legislative history unnecessary. Bergen Commercial Bank, supra, 157 N.J. at 202. Accordingly, we determine that the plain language and policy objectives of AICRA support the Commissioner's interpretation of the statutory provisions governing precertification provisions.
Next, appellants argue that the "approval of such broad based precertification plans makes a sham of the lengthy regulatory process which was undertaken with the care paths, and represents a significant extension of the PIP regulations, without any medical standards or input from the medical profession." We disagree. N.J.S.A. 39:6A-3.1a and -4a authorize the DOBI to develop protocols or care paths in consultation with the medical licensing boards, which it did. N.J.A.C. 11:3-4.6. However, AICRA does not require the same process to be utilized for approval of precertification requirements, and instead requires only Commissioner approval of precertification plans. N.J.S.A. 39:6A-3.1a and -4a. The Legislature treated the two subjects differently for a logical reason. Protocols establish typical treatment patterns for certain injuries, and thus benefit from review by the professional boards, while the precertification process does not. We therefore find that approval by the Commissioner of the precertification plans without resort to a lengthy regulatory process, including review by the professional boards, was within the scope of her authority and entirely consistent with AICRA.
We next consider appellants' contention that the Commissioner abused her discretion in approving plans which "impermissibly" treat decision point review and precertification alike.
The approved policies make the required substantive distinctions between decision point review and precertification, defining each in accordance with the relevant statutes and specifically identifying which injuries are subject to decision point review, and which services, treatment, tests, or equipment are subject to precertification. Although the approved policies incorporate similar methods for administering the two procedures, we find nothing inherently improper in this arrangement. Subject to our following analysis and conclusions regarding precertification of care path diagnostic tests, we are satisfied that approval of plans and policies which treat the administration of decision point review and precertification similarly, while at the same time properly defining the substantive differences between the procedures, is within the Commissioner's authority.
The final attack on the precertification requirements is appellant's contention that the plans and policy forms require precertification for care path diagnostic tests. We agree that such a requirement would be contrary to the plain language of the DOBI's own regulation, as amended, effective November 6, 2000: "Insurers may require precertification of certain specific medical procedures, treatments, diagnostic tests, other services and durable medical equipment that are not subject to decision point review and that may be subject to overutilization." N.J.A.C. 11:3- 4.8(a)(emphasis added).
This amendatory provision is consistent with the DOBI's July 1999 guideline memorandum, which stated that "[m]andated use of pre-certification, in connection with medical treatment of injuries addressed in the Department's care paths is problematic. Decision point review already sets the manner in which treating practitioners must interact with an insurer or its representatives." The provision is also consistent with the enabling statutory provisions, which authorize the Commissioner to establish protocols, which "shall be deemed to establish guidelines as to standard appropriate treatment and diagnostic tests." N.J.S.A. 39:6A-3.1a and -4a(emphasis added). It is also consistent with a response by the DOBI to a commenter on the proposed amendment: "As noted by the commenter, the diagnoses and tests subject to the Decision Point Review requirements, including the Care Paths, cannot be subject to precertification because the decision point review notice system already provides insurers a way to monitor treatment of those injuries." 32 N.J.R. 4005, 4008 (November 6, 2000)(emphasis added).
Having established the care paths, with the assistance of a health-benefits consultant and an ad hoc committee of the professional boards, New Jersey Coalition of Health Care, supra, 323 N.J. Super. at 224, and after a thorough regulatory process, the DOBI has incorporated various testing procedures into the treatment of identified injuries. Such tests are thus deemed to be standard appropriate measures when designated in the care paths, subject, of course, to the overriding requirement that they are medically necessary and clinically supported. N.J.A.C. 11:3- 4.7(b)1. See also, N.J.A.C. 11:3-4.6(a) ("Commissioner designates the care paths . . . as the standard course of medically necessary treatment, including diagnostic tests, for the identified injuries." (emphasis added)).
Whether a provider submits a proposed diagnostic test to an insurer pursuant to decision point review or for precertification, the insurer has the right to consider it and determine whether it is clinically supported and medically necessary. Under either procedure, therefore, the purpose of AICRA to avoid the overutilization of tests is achieved. The difference is that under decision point review, the burden is on the insurer to object:
Notification to the insurer during the decision point review does not require an affirmative response by the insurer in order for the provider to continue providing treatment. Rather, the decision point review requires notice of a proposed course of treatment in order to provide the insurer with the opportunity to confirm that treatment is medically necessary. 30 N.J.R. 4409. Failure by the insurer to affirmatively deny treatment based on certain established procedures indicates that the treatment may continue.
[New Jersey Coalition of Health Care, supra, 323 N.J. Super. at 225-26.]
With precertification, on the other hand, unless the insurer affirmatively gives prior approval, N.J.A.C. 11:3-4.2, the applicable co-pay penalty may be imposed. N.J.A.C. 11:3-4.8(h).
The DOBI does not disagree with these principles, but correctly points out that, while precertification is not required for care path diagnostic tests, decision point review is. N.J.A.C. 11:3-4.7(a) directs insurers to provide a decision point review plan "for the timely review of treatment of identified injuries at decision points and for the approval of the administration of the diagnostic tests in N.J.A.C. 11:3-4.5(b)." (emphasis added). Similarly, N.J.A.C. 11:3-4.7(b) directs the decision point review plan to provide for submission of "prior notice . . . together with the appropriate clinically supported findings that additional treatment or the administration of a test in accordance with N.J.A.C. 11:3-4.5(b) is medically necessary." (emphasis added). Thus the regulations do provide for submission of all proposed diagnostic tests for identified injuries for decision point review. The distinction between this procedure and that applicable to