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In re Matter Of The Failure By The Department Of Banking And Insurance To Transmit A Proposed Dental Fee Schedule To The Oal For Publication In The New Jersey Register

January 17, 2001


Before Judges Wefing, Cuff and Lefelt.

The opinion of the court was delivered by: Lefelt, J.A.D.


Argued December 11, 2000

On appeal from Inaction by New Jersey Department of Banking And Insurance.

This appeal concerns delay by the Department of Banking and Insurance ("Department") in revising a dental fee schedule, set forth in N.J.A.C. 11:3-29.6(b), to reflect inflation. The fee schedule was last revised in 1996 and, according to the New Jersey Dental Association ("NJDA"), must be adjusted mandatorily, under N.J.S.A. 39:6A-4.6a, every two years to reflect inflation. Hoping to force the Department to update the fee schedule, NJDA filed this appeal from the Department's inaction. NJDA claims it is entitled to a judgment declaring that the Department shall "forthwith" adjust the fee schedule upward for inflation; apply the new rates retroactively to June 30, 1999; and readjust the fee schedule every two years, with the next adjustment scheduled for June 30, 2001. We decline to issue the judgment NJDA seeks and dismiss the appeal, but express dismay with the Department's progress in complying with the legislative mandate.


The Legislature first enacted N.J.S.A. 39:6A-4.6 in 1988 as a cost containment measure. P.L. 1988, c. 119, §10. The statute required the Department to promulgate medical fee schedules on a regional basis for the purpose of paying health care providers, including dentists, for services rendered where personal insurance protection ("PIP") automobile insurance was involved.

In 1990, the Fair Automobile Insurance Reform Act of 1990 ("Fair Act"), P.L. 1990, c. 8, was enacted to revise the State's motor vehicle insurance laws to achieve economy and lower insurance costs. P.L. 1990, c. 8, §2(d). Through the Fair Act, the Legislature amended N.J.S.A. 39:6A-4.6 to require, among other things, that reimbursement rates established within the fee schedule "incorporate the reasonable and prevailing fees of 75% of the practitioners within the region," and that the fee schedule be reviewed biannually (every six months). P.L. 1990, c. 8, §7. The Fair Act also prohibited health care providers, including doctors and dentists, from demanding or requesting any payment in excess of those permitted in the fee schedule. Ibid. Thus, the fee schedule established maximum reimbursable fees for services rendered to individuals receiving treatment or goods under PIP coverage.

On November 26, 1990, in response to the Fair Act, the Department adopted a medical fee schedule for dental services on an emergency basis, 22 N.J.R. 3809(a), and published the fee schedule at N.J.A.C. 11:3-29.6(b). In the six following years, the dental fee schedule was amended once on August 19, 1996. 28 N.J.R. 3962(a).

The 1996 revision increased the upper limit dollar amounts of the fee schedule to account for inflationary trends, by approximately twenty-three to thirty-percent over the 1990 schedule. According to the Department, the amended 1996 dollar amounts were based on proprietary data consisting of billed fees, obtained by the Department from the Health Insurance Association of America.

In 1997, the Legislature again amended N.J.S.A. 39:6A-4.6 by authorizing the Department to "contract with a proprietary purveyor of fee schedules for the maintenance of the fee schedule, which shall be adjusted biennially [every two years] for inflation and for the addition of new medical procedures." P.L. 1997, c. 151, §33. When no action was taken concerning the dental fee schedule after this amendment, on March 11, 1998, NJDA filed a Notice of Petition for Rulemaking, N.J.A.C. 1:30-3.6, requesting an increase in the dental fee schedules. 30 N.J.R. 1438(a). The petition indicated that because the last revision of the schedule occurred on August 19, 1996, to comply with the 1997 amendment, the fee schedule should be revised as of August 19, 1998.

On May 18, 1998, the Department responded to the petition by indicating that "No exact deadline is imposed on the Commissioner by the amended statute and the initial two-year compliance period may be reasonably interpreted to run from [June 30, 1997] the effective date of the new requirement" rather than from August 19, 1996, the date of the last adjustment. 30 N.J.R. 1866(a).

Meanwhile, one day after the Department responded to the petitioner's rulemaking petition, on May 19, 1998, the Governor signed the Automobile Insurance Cost Reduction Act ("AICRA") into law. P.L. 1998, c. 21 and c. 22. AICRA authorized the Department to adopt regulations defining, with precision, standard treatment protocols and diagnostic tests and services that will be reimbursed under the PIP component of automobile insurance policies. These regulations, N.J.A.C. 11:3-4, were adopted in December 1998 and made effective on March 22, 1999. AICRA intended to reduce costs to the insurance system by reducing unnecessary insurance company expenses.

On May 15, 1998, almost one year after the effective date of the 1997 amendment to N.J.S.A. 39:6A-4.6, four days before AICRA was signed into law, and a few days before the Department responded to petitioner's rulemaking petition, the Department issued a Request for Proposal, soliciting bids from contractors to assist in revising and adjusting the medical fee schedule regulations. Medicode, Inc., a proprietary purveyor of fee schedules, submitted a bid proposal to the Department on July 6, 1998. Medicode proposed to revise the existing fee schedules and create new fee schedules in approximately four months.

On October 20, 1998, the Department accepted Medicode's proposal and entered into a contract with the corporation. The Department claims to be working diligently with Medicode, now called Ingenix, to prepare a proposal for the New Jersey Register revising the dental fee schedule.

Meanwhile, one day before the Department's Request for Proposal seeking professional help to revise the fee schedules, on May 14, 1998, NJDA filed a notice of appeal in the Appellate Division. This appeal pursued NJDA's position that the Department must revise the dental fee schedule two years from the last revision, August 19, 1996. After efforts to accelerate its appeal failed, however, NJDA withdrew the appeal on August 17, 1998.

With no dental fee schedule revision yet in sight, on March 5, 1999, NJDA wrote to inquire "when the Department expects to transmit to the Office of Administrative Law a proposed revision to the Dental Fee Schedule for publication in the New Jersey Register." The Department responded on April 13, 1999 that it was "not yet in position to transmit a proposal," but expressed hope that "this will be accomplished within the next month or so." When, once again the Department ...

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