MANAGED CARE AND THE STATES

Updated: October 2009

     In the past 15 years managed care became the predominant form of health care in most parts of the United States.  More than 70 million Americans have been enrolled in HMOs (health maintenance organizations) and almost 90 million have been part of PPOs (preferred provider organizations). Overall enrollment numbers in HMOs peaked in 2001 and are declining substantially in almost every area, but managed care generally remains a dominant type of health care and coverage.  

In 2008 the breakdown of enrollment by plan type was as follows: HMO (health maintenance org.) 20% PPO (preferred provider org.)   58% POS (point of service)               12%    NON-MANAGED CARE: HDHP (hgh deductible health plan)  8% Conventional/Indemnity            2% (source: Employer Health Benefits, 2008,  See Graphic, Sec. 5, Kaiser Family Foundation

STATE ROLES LIMITED BY ERISA: State health insurance laws only apply to about 45% of health policies - those "fully insured plans" in which mostly small and medium sized businesses pay premiums.      Only federal ERISA law applies to the other 55%, "self-insured plans". Some 73 million American workers and their dependants were covered by these  plans—that is, one in which the employer assumes the financial risk for providing health care benefits to its employees, rather than buying insurance.      (Source: EBRI, February 2008)

Managed Care in Medicaid

     Medicaid managed care grew rapidly in the 1990s.  In 1991, 2.7 million beneficiaries that were enrolled in some form of managed care.  By 2004, that number had grown to 27 million, an increase of 900%.  Of the total Medicaid enrollment in the United States in 2005, approximately 63% are receiving Medicaid benefits through managed care.  All states except Alaska, New Hampshire and Wyoming have all, or a portion of their Medicaid population enrolled in an MCO.  States can make managed care enrollment voluntary, or seek a waiver of section 1915(b) of the Social Security Act (the Act) from CMS to require certain populations to enroll in an MCO. "

Medicaid Managed Care State Contracts - The George Washington University's Department of Health Policy publishes a series of unique studies of managed care contracts.  State-by-state profiles are included (click on states at the top of the page) These state profiles show the various components of each state's contract with health plans, including performance standards, reporting requirements, definition of actuarially sound rates, conditions under which money must be returned, etc.  Contact GWU for access to this material, at http://www.gwumc.edu/sphhs.

In Medicare, "Medicare Advantage" managed care plans saw a surge in enrollment as a result of the launch of "Part D" prescription drug coverage in 2006.    

The State Legislative Role:  Over the years, state legislatures have responded by passing numerous laws on the subject of managed care -- over 900 in the past 15 years, in all 50 states. [See a definition of managed care].   NCSL has a variety of print and web-based resources describing these efforts - see the list below

In 2001-2002 the U.S. House of Representatives passed an amended Patients' Rights bill; the U.S. Senate passed a somewhat different bill. However, at the end of the congressional session the bills died in a House-Senate conference committee, primarily on issues related to liability and the right to sue. Similar federal measures were filed for 2003-06, but were not voted on.

• Managed Care State Laws and Regulations, Including Consumer and Provider Protections - NCSL 50-state tables of laws, 1990-2005.  Updated 2008. 
• Managed Care State Laws for Ombudsman, Report Cards and Provider Profiles - updated 2008

• State Insurance & Managed Care Mandated Coverage - Updated: 2008

  • • Childhood Immunizations
    • Clinical Trials Coverage
    • Colorectal Cancer Screening
    • Contraceptives
    • Dependent Coverage
    • Diabetes
    • Genetics and Health Insurance: State Anti-Discrimination Laws
    • Infertility Treatment
    • Mental Health Benefits - state laws requiring full parity, coverage or offerings.
    • Newborn Hearing Screening
    • Newborn Genetic & Metabolic Disease Screening

• Making the Best of Managed Care - State Legislatures article, June 2001.

• Managed Care Insurer Liability - describes eleven states with "right to sue" laws (impacted by the adverse '04 Supreme Court decision), plus "hold harmless" laws and activities in other states, reposted 2006.
•  

These are selected research, academic and advocacy publications.  NCSL is not responsible for the contents or opinions expressed within these pages.

• STATE REPORTS & MATERIAL: Arizona Health Care Market Report, 2008 - "Following the Money,"1/09.  Full report, 58 pages.  California Health Care Market Report 2006 - Summary released by Allan Baumgarten, 3/07. Colorado Health Market Review 2008 -  Health insurers and hospitals alike enjoy strong profits but face risks; HMO enrollment still dropping  - An analysis of the state market including graphics and links to local media coverage. Summary released by Allan Baumgarten, 2/09. Illinois Managed Care Review 2006 - shows Hospital systems and HMOs are enjoying strong profitability, higher than in recent years. Summary released by Allan Baumgarten, 4/07. Kentucky Health Care Market Report 2007 - Foundation for a Healthy Kentucky, research by Allan Baumgarten. [76 pages PDF] 2/08. Michigan Health Market Review, 2008 -Michigan employers have fewer HMOs to choose from in 2008 and many have left for other health benefit plans. HMO profitability declined again in 2007. Summary released by Allan Baumgarten, 7/28/08. Minnesota Health Market Review 2008 - Enrollment in insured commercial plans declined again. Enrollment in insured commercial (employer-sponsored) HMO plans dropped by about 27,000 lives in 2007, down to 409,000. Summary released by Allan Baumgarten, 8/22/08. Minnesota Managed Care Review 2007 - Employers and Health Plans Continue Migration Away From HMO Models; Profitability Falls for 2nd Year, 9/21/07.    New York: The Big Picture: Private and Public Health Insurance Markets by Peter Newell and Allan Baumgarten. Funded by United Hospital Fund of New York. 10/22/09. [150 pages ] Ohio Managed Care Review 2007 -HMO employer group plans have declined steadily but enrollment in Medicaid HMOs has more than doubled in the last 18 months. Summary released by Allan Baumgarten, 6/2/08. Texas Health Market  & Managed Care Review 2009. - summary, released by Allan Baumgarten, 10/09. Wisconsin Health Market Review 2008 - Hospitals Report Record Profits. Summary released by Allan Baumgarten, 1/09. Full reports are available for purchase from http://www.AllanBaumgarten.com.

• America's Health Insurance Plans - the major trade association, a merger of former AAHP and HIAA.

• "HMOs Propose Lowest Rate Increases in Five Years." Preliminary analysis indicates that HMO rates will increase approximately 12.4 percent nationally in 2006 -- representing the lowest rate of increase in more than 5 years -- according to global human resources services firm Hewitt Associates. Released 6/9/05
  Regional rate charts for 2004-2006, [PDF]

• 2004 Medicaid Managed Care Enrollment Report - online by CMS, 2006 [56 pages, 10 mb]

OHIO HMO Enrollment at a Glance, 1992-2007  -excerpt from Alan Baumgarten report 6/08.

• PPOs Most Popular Form of Health Insurance
  In 2006, PPOs continue to be the most common form of health coverage, with more than half (60%) of all employees with health coverage enrolling in a PPO.  HMOs, which cost significantly less than PPOs, cover about 20% of covered workers, down from 25% in 2004. Conventional, or indemnity, benefit plans have all but disappeared, covering just 3% of covered workers. Source: The 2006 Annual Employer Health Benefits Survey by the Kaiser Family Foundation and Health Research and Educational Trust.
• Language Barriers Pose a Risk for One Million+ California HMO Enrollees - UCLA Center for Health Policy Research, May 2006
   
• A Consumer Guide to Handling Disputes with Your Employer or Private Health Plan, 2005 Update, by Kaiser Family Foundation and Consumers Union -  "an updated guide to help consumers through the process of resolving disputes with their health plans. The resourceincludes information about how consumers can take advantage of their health plans' internal processes to resolve disputes, as well as external review processes as allowed under state laws."  The vast majority of Americans now receive their health coverage from Preferred Provider Organizations, Health Maintenance Organizations, or other types of managed care plans. This guide can help consumers to understand their coverage under these plans, their rights under the governmental rules that health plans must follow, and the role that state external review programs play in resolving disputes. 8/05.
• Minnesota: Medical costs up 12 percent; industry reports second year of operating losses MN Council of Health Plans, 4/07
• U.S. Supreme Court Strikes Down State HMO Liability Laws. 
  On June 21, 2004 the Supreme Court ruled unanimously that patients cannot sue their HMO under state laws for failing to pay for doctor recommended care.  Experts descibe the decision as ruling that federal ERISA law "completely pre-empted such lawsuits brought in state court." 
  This ruling against the states will have substantial adverse legal impact on the enacted laws in the ten states listed below, plus two additional states, although the number of active cases brought under these state laws evidently is not large.  Also, note that some of the "right to sue" provisions are part of broader laws, affecting rights to independent appeals and other managed care procedures. 
  - Summary and Full Text of Court Opinion - Aetna Health v. Davila (02-1845) and Cigna v. Calad et al. (03-83)-23 pages
  - "High Court Limits Patient Rights to Sue HMOs" - June 21, 2004, Reuters News (c)
  - "Patients' Rights Seen Hurt by Supreme Court HMO Ruling" - June 22, 2004 Dow Jones Newswire
• "Managed Care Magazine" provides timely updates useful to policymakers, researchers and professionals. NCSL is cited periodically. 6/04
• "America's Health Insurance Plans" Chart a Course for Improving Quality, Access and Affordability" details of the industry merger and directions for 2004, 3/04.
• Kentucky's "Any Willing Provider" Law and ERISA: Implications of the Supreme Court's Decision for State Health Insurance Regulation. In a case that helps to define state authority to regulate health insurance, the U.S. Supreme Court held in April 2003 that ERISA (the federal Employee Retirement Income Security Act of 1974) does not preempt Kentucky's Any Willing Provider (AWP) law. This Issue Brief outlines ERISA preemption principles, explains the Supreme Court's opinion, and discusses the ruling's implications for state laws regulating Health Maintenance Organizations (HMOs) and other health insurers. By Pat Butler for the National Academy of State Health Policy. 12 pp. June 2003.
• HMO Enrollment Continues to Decrease in 2001-2002: The biggest decreases have been in employer sponsored plans. Enrollment dropped in all seven states, ranging from 875,000 lives in Texas to 21,000 in Minnesota. (Minnesota HMOs lost many commercial enrollees prior to 2000.) On average, HMOs in these states lost 17% of their commercial members, a decrease of nearly 2.6 million. Source: Baumgarten Trend Notes, 2003.
• Trend Notes: HMO Enrollment Continues to Decrease in 2001-2002 - by Allan Baumgarten (includes 3 graphs of enrollment changes 1994-2002) - April 2003
• Individual Health Insurance: New Studies Shed Light on Issues of Affordability, Access, and Plan Design - article in HealthPlan magazine, Jan-Feb., 2004.
• Quality Ratings Have Small Impact on Consumer Decisions - Harris poll shows 22% view HMO ratings - October 2002 |
  see Managed Care State Laws for Report Cards - NCSL report, updated 12/02.
• HMOs and Rural California - The CA Legislative Analyst's Office issued a 20 page report discussing the reasons for the recent withdrawals of health coverage by health maintenance organizations (HMOs) from rural areas and recommend a number of steps the authors believe will create a more attractive health care marketplace for HMOs.- August 2002 On June 20, 2002, the court confirmed the validity of laws in 42 states that provide for an independent review or appeal when care is denied. Although these laws are separate from HMO liability statutes, virtually all of the liability laws are intertwined with the appeals rights addressed in this case.
  Rush Prudential HMO, Inc. V. Moran et al.- text of the opinion, 31 pages.
  Stateline news story - 6/21/02 | News story - Washington Post, 6/21/02.
• U.S. Supreme Court Upholds authority of states to protect patients.
• "The Factors Fueling Rising Healthcare Costs" - new report by PriceWaterhouseCoopers prepared for the American Association of Health Plans (AAHP) - April 2002
• "The Challenge of Managed Care Regulation: Making Markets Work?" a report by Academy for Health Services Research and Health Policy, August 2001 [12 pages]
• American Association of Health Plans - AAHP, a trade association in Washington, DC
• • statement Jan. 10, 2001 by Karen Ignani
• AARP - consumer association in 50 states
• Families USA - consumer association in Washington, DC
• Employees with Employer-based Coverage Who Can Choose Conventional, PPO, HMO, POS, and HDHP/SO Plans, 2006 - KFF-Avalere-AHA, April 2007

• Employer-sponsored Health Insurance Enrollment by Type of Plan, 1988 – 2006 - KFF-Avalere-AHA, April 2007

• Medicaid Beneficiaries Enrolled in Medicaid Managed Care, 1992–2005 - Avalere-AHA, April 2007

• HMO Plan Median Operating Margins, 1990 – 2005 -  Health Leaders-Interstudy, Avalere-AHA, April 2007

Return to Health Menu Page