Regulation of Managed Care

1. Regulation of Managed Care

2. Plan for Today • Why (and why not) regulate? • What is regulated? • Who regulates what? • Recent developments • Federal insurance market reforms • Proposed federal legislation to protect patients • Your views of patient protection legislation

3. Systems Framework for Understanding Managed Care EMPLOYERS Plan Choices, Employee Premiums, Information Contract for Product, Premiums/Benefits, Risk Marketing, Product Development Job preferences, Wage and Benefit Preferences Payment, Risk, Practice Guidelines, Profiling MCO Type of Plan, Philosophy and Procedures for Selection/Retention Member services Utilization management Select Products, Join Plan CARE Provider Network PHYSICIANS CONSUMERS Enrollees Marketing, Advertising, Information, Reputation Specialty, Style of Care, Discounts, Form of Organization Taxes, Votes Contract for Product, Risk, Premiums, Benefits Discounts, Specialized Services Employee Plans, Medicare, Medicaid, Information Treatment Facilities and Prescribed Services Customer Volume Admissions, Prescriptions, Referrals Regulate Allowed Products, Behavior Relationships GOVERNMENT HOSPITALS & OTHER SUPPLIERS Adapted from Gold , Medical Care Research and Review52(3): 307-341, Figure 1.

4. Types of regulation affecting managed care • Insurance licensure and regulation • HMO licensure and regulation • Rules governing malpractice liability suits • Date privacy and standards • Fraud and abuse • Certificate-of-need • Anti-trust

5. State and federal roles in regulating HMOs and insurance • McCarren-Ferguson Act of 1945 • States given exclusive right to regulate health insurance plans • Employee Retirement Income Security Act of 1974 (ERISA) • Prohibits state laws “relating” to employee benefits, except for regulation of insurance

6. Effect of ERISA Feds regulate employer sponsored benefits States regulate insurance plans and HMOs Employer buys plan for employees Plan sells insurance or HMO product Employer self-insures health benefits

7. State regulation • General laws applying to insurance (Department or Commissioner of Insurance) • Special laws and licenses for HMOs (Department of Health)

8. Regulation and Licensure of Insurance(Traditional Areas) • Financial requirements (solvency, reserves) • Premium taxes, guaranty funds • Grievance procedures • Marketing and disclosure • Premiums • Administrative charges • Mandated benefits

9. State Reforms of Individual and Small Group Insurance Markets • Guaranteed issue • Guaranteed renewal • Restrictions on exclusions of pre-existing conditions • Restrictions on rating factors (such as health status) • Community rating or modified community rating

10. State Regulation and Licensure of HMOs • Financial requirements (solvency, reserves) • Adequacy of provider networks • Member rights, information, marketing • Grievances and appeals • Provider contracting • “Any willing provider” • Prohibition on “gag clauses” • Report on finances and operations to state

11. ERISA protections are weaker • Administered by US Dept of Labor • Plan description for employees • Fiduciary responsibility to operate in interests of employees • No financial standards for health benefits • No formal provision for individual complaints • Legal remedies limited to cost of benefits denied (no other economic or punitive damages)

12. Effect of ERISA Feds regulate employer sponsored benefits States regulate insurance plans and HMOs Employer buys plan for employees Plan sells insurance or HMO product Employer self-insures health benefits

13. Health Insurance Portability and Accountability Act of 1996 (HIPAA) • Introduced federal regulation of health plans for the first time • New role for the Health Care Financing Administration (the Medicare-Medicaid Agency) • Some provisions apply to insured and self-insured plans • States generally allowed to go beyond HIPAA’s minimum requirements

14. Key Provisions of HIPAA • Limits exclusions for pre-existing conditions (portability) • Guaranteed issue in small group market (2-50 employees) • Guaranteed renewal in individual and small-group market • Guarantee conversion from group to individual coverage if • At least 18 months of continuous group coverage • Exhausted all other sources of coverage • No restrictions on premiums

15. Consumer Bill of Rights and Responsibilities • Issued by President Clinton’s Advisory Commission on Consumer Protection and Quality in the Health Care Industry (1997) • Adopted by all federal health programs by executive order • Basis for Democratic bill introduced in 105th Congress (elected in 1996) • “Patient Bill of Rights Act (PBOR)” • Bipartisan House bill and Republican Senate bill in 106th Congress (elected in 1998)

16. Similarities - House and Senate Bills106th Congress (elected 1998) • Prudent layperson standard for emergency care • POS option if no choice of provider networks • ObGyn as primary care provider, access without referral • Transitional care when patient or provider leaves plan • Network physicians involved in developing drug formulary • Must cover participation in clinical trials

17. Similarities - House and Senate Bills106th Congress (elected 1998) • Timely response to pre-authorization requests • Formal Grievance procedures • Internal appeals • External appeal to independent review

18. Right to sue employer-sponsored health plans in state courts for economic damages • House bill only • Limiting current ERISA preemption • Not if plan in compliance with external review decision • Employers only liable if exercised “discretionary authority” over denial

19. Population covered • House bill applies to all group health plans • 161 million people • Senate bill applies only to self-insured group plans • Plans exempted from state regulation by ERISA • 48 million people

20. PBOR effect on premiums • Congressional Budget Office estimates of average increase in premiums • Total: +4% • Right to sue: +1.2% • Grievance process: +0.3%