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Insurance and Managed CareIn this FAQ…
Whether you know it or not, you probably are in some form of managed care—along with 185 million other Americans. In 2003, managed care plans covered 91 percent of those who were commercially insured, 57 percent of Medicaid enrollees and 11 percent of Medicare enrollees (down from 16 percent in 1999).1 This is a sharp increase from 1992, when only about 70 million people were enrolled in managed care, but down from a peak in 1999. In regular (so-called indemnity) insurance, the insurance company is responsible for all health care costs, a role called “assuming risk,” and health care providers make medical decisions. Managed care plans reorganize the two roles—assuming risk and making medical decisions—in a variety of different ways that, in theory, make the health system more efficient. Managed care plans usually limit which providers are covered and make certain decisions about how and when care will be reimbursed. Twenty years ago, “managed care” referred to a specific kind of plan, a health maintenance organization (HMO). It typically was a closed system of health care providers that offered all levels of care, from primary care through hospital. A typical plan contracted with employers to provide all care to their enrollees for a prepaid, capitated price (a monthly payment per enrollee regardless of what care the individual actually receives). Today, this so-called “closed panel” model is less common, and many HMOs will include a network of providers throughout a community. A key feature of many HMOs is the use of a gatekeeper, a primary care provider who coordinates care and must approve or make all referrals to specialists. Definitions have blurred over time. Managed care has come to mean any of a number of systems that use a defined set of providers for a defined population and have some system for controlling care or costs. Many—but not all—of these managed care organizations (MCOs) coordinate care; many—but not all—negotiate discounts or capitation rates with providers; and most now have an option for care outside the panel, although at a higher price. Table 1 lists some of the different types of health plans. Although physicians in the earliest HMOs often were salaried employees or members of a prepaid group practice (PGP), individual practitioners soon joined to form competing networks. These independent practice associations (IPAs)—loosely affiliated physician groups organized to accept risk—are likely to contract with managed care plans to provide a defined range of services at a per capita rate. Many are responsible for only part of the gamut of health care costs (for example, all primary care); others form full-service plans and accept all risk themselves because they believe they can better manage hospitalization and referral costs. IPA and network models such as PHOs (physician hospital organizations) now dominate the managed care landscape. A backlash against managed care restrictions took place in statehouses and boardrooms in the late 1990s, leading to a shift to looser models of care management. Because many enrollees are concerned about being locked into a closed panel (a limited group of physicians defined by the health plan), many managed care variants now allow individuals to choose where they obtain care but provide financial incentives to use providers within the health plan network. For example, a point-of-service (POS) plan resembles a traditional HMO but includes an option for enrollees to obtain partially insured care outside the plan. These open plans cost more, but enrollees seem more satisfied. As of 2002, only 39 percent of workers enrolled in managed care were in HMOs. One criticism of managed care today is that it actually manages prices, not care, achieving cost savings chiefly through negotiated discounts. This is particularly true of preferred provider organizations (PPOs). These plans, which now enroll half of all participants in managed care, negotiate fee-for-service discounts with a set of providers that enrollees can see without a referral from a gatekeeper. PPOs also partially cover care from out-of-plan providers (typically reimbursing 50 percent of the negotiated rate, compared to 80 percent for in-plan care). In contrast with PPOs, exclusive provider organizations (EPOs) cover only care within the provider network and may be more like traditional HMOs or IPAs.
What is ERISA and why should it matter to state legislators? Sooner or later, most state health policymakers must deal with the Employee Retirement Income Security Act of 1974 (ERISA), which primarily deals with pension plans. ERISA also includes a crucial paragraph (Section 514) that limits states’ ability to regulate employer-based insurance. ERISA has three parts.
In practice, the only plans states can fully regulate are individual plans and state and local government health plans. States share jurisdiction with the federal government over employees in insured plans where coverage is purchased from an insurance company. However, self-insured plans, which may be managed by insurance companies, are solely regulated by federal authorities. Under ERISA, states cannot tell any employers to cover their workers, tax self-insured coverage as if it were insurance, or pass a law that takes special aim at self-insured plans. Self-insured programs cannot be required to comply with state mandated benefits laws. Table 2 shows how jurisdiction is divided. ERISA has large areas when insurance and services mix, as they do in managed care. According to ERISA expert Patricia Butler, states can regulate hospital rates and tax health care services as long as the rules are blind to whether a payer is a self-insured plan. When regulating managed care, lawmakers may want to pay particular attention to whether they are addressing the insurance aspect of a plan—which may be preempted by federal law for self-insurers—or medical practices, where states have greater discretion. Thus, state laws related to drive-by deliveries applied to all citizens when they were framed as regulations affecting hospitals, but were subject to ERISA preemption in states that wrote them as insurance mandates. Courts rulings continue to evolve on how ERISA applies in areas such as independent appeals and grievance requirements for HMOs, employer pay-or-play, and provider service organizations accepting risk from ERISA plans. A 2002 ruling by the Supreme Court (Rush vs. Moran) established that states can regulate HMOs as insurance and may set more restrictive rules than federal requirements without running afoul of ERISA. In 2004, the Court further ruled that states could require managed care plans to reimburse “any willing provider” that would accept their terms. In defining what constitutes insurance regulation under the terms of ERISA, Justice Scalia cited laws “specifically directed towards entities engaged in insurance,” and ones that deal with “risk pooling arrangement between the insurer and the insured.” On the other hand, a June 2004 Supreme Court decision unanimously overturned a state health plan liability law that allowed patients to sue managed care plans in state courts for damages resulting from their refusal to pay for care recommended by a doctor. The court determined that, in the two cases before it, care was being provided in accordance with the terms of the coverage contracts and the plaintiffs had channels to appeal the decision under ERISA that they had not pursued. Since they could have used ERISA to seek remedies, federal preemption voided the statute. By ruling that ERISA prevails in these cases, the court effectively limits recovery to the value of the benefit that was denied. An NCSL analysis of state liability laws identified 12 states that were likely affected by this decision.2 States with managed care liability laws and certain patient protection acts are examining their statutes to determine how this ruling affects them, and new models may emerge. There is renewed pressure for a national patient protection act. Lawmakers who are developing policy for managed care are well advised to have an ERISA expert work with them to ensure that the policy conforms with ERISA.
How do mandates affect the cost, availability and value of insurance and managed care? All states have requirements about what must be included in health plans that insurers sell. These laws, called insurance or coverage mandates, take several forms. Some require health plans to cover specific services (e.g., breast reconstruction after mastectomy), treat specific conditions (e.g., mental illness), or pay for particular types of providers (e.g., chiropractors). Others require plans to cover certain groups of people (e.g., job-leavers, pregnant spouses, adopted children.) Recently, consumer mandates in managed care have prescribed how and when certain types of care should be provided; for example, the length of a new mother’s hospital stay after delivery. Mandates often are controversial. Some critics claim that they increase the cost of insurance and make it unaffordable for marginal purchasers and that they reduce plan and provider flexibility. Mandates aimed at managed care practices have been specific about how care should be provided, to the point that physicians have questioned whether the legislature is trying to practice medicine. Other popular mandates have been based on anecdote rather than on science. To address such concerns, some legislatures require that proposed mandates be studied to estimate their likely effect on costs and health. Studies suggest that mandates probably increase the cost of insurance, although estimates of the size of this effect vary by an order of magnitude. Their effect on the cost of health, however, is another matter. It has proven challenging to measure what a mandate does to spending because so many other things change at the same time. Many mandates substitute one type of care for another, allow cheaper care, affect only a few people, or are inexpensive, so their effect on overall health costs is small or none. The largest premium increases due to mandates found in widely cited studies come from two mandates:
Mandates do not make health care per se more expensive: they limit insurers to a richer packet of benefits, raising the proportion of health care paid through insurance rather than out-of-pocket or through public programs, and may increase the amount of health care provided. In deciding whether a mandate is worthwhile, even if it raises insurance costs, policymakers will need to decide whether the enrichments are the equivalent of a Cadillac’s tailfins, or if they are more like seatbelts. Lawmakers will want to consider several factors when contemplating mandates: what good a mandate does, who pays the bill if a service is not insured, and what effect any cost increase is likely to have on coverage. For example, maternity coverage may be seen as generally beneficial to society. Mental health benefits may raise premiums, but could save the state money, since insurance takes the place of public spending. Substance abuse coverage saves money in the justice system and reduces other health spending for the insured and family members. A recent federal study of Vermont’s mental health and substance abuse parity law (a type of mandate that requires the same coverage for these services as for other covered benefits) found that costs rose very little because companies used managed care for the new benefits.3 Although it has been argued that the increased cost of insurance due to mandates erodes coverage, the actual effect of mandates on coverage is disputed. Most self-insured plans are at least as generous, even though they are exempt from mandates due to ERISA. To offset the effect of mandates of insurance, some states allow minimal plans with few mandates to be offered to new insurers. In the past, such offers have not found a market; buyers have shown little interest in such plans.
What are “insurance reform” and “HIPAA”? During the 1990s, in response to fears that the people who most needed coverage would not be able to get it, most states adopted some or all of a set of insurance market regulations collectively called health insurance market reforms (see table 3). In 1996, after all but three states had enacted reforms for small employer groups, Congress adopted the Health Insurance Portability and Accountability Act (HIPAA), which incorporated several of these reforms and extended them to self-insuring ERISA plans, which states do not regulate. The law also requires that each state have available a system where people can continue to buy coverage once they have had 18 months of employer-based insurance. However, unlike many of the state reforms, HIPAA does not address the price of coverage. State reforms usually require insurers to guarantee renewability and availability (sometimes through guaranteed issue and sometimes by requiring each carrier to offer a standard and a budget plan), limit preexisting condition exclusions to less than one year, and allow portability (see table) in small group plans. HIPAA imposes some standardization on these state rules, including setting the size of groups at two to 50. Most states enacted some sort of rating restriction as well, limiting the variation in prices a carrier can charge similar groups—something HIPAA lacks altogether. About half the states also had enacted some individual market reforms for non-group coverage before HIPAA. States and the federal government have adopted these rules in response to the concern that certain features of the insurance market make it difficult for the people who most need coverage to obtain and keep insurance. The problems revolve around how insurers set rates and how they pool risk among the people they insure. Insurance plans that “experience-rate” charge different premiums for different people depending on their expected costs, and sometimes refuse to sell at all to individuals or groups known to be at risk for expensive care. The process of estimating what to charge and setting higher premiums based on experience or characteristics is called underwriting. Insurance spreads costs across a group, known as a pool. The larger the pool, the more stable prices will be. When people and groups with different expectations of needing care (risk profiles) are sorted into different pools, the price for the worse-off group can rise rapidly, effectively forcing people who most need coverage out of the insurance market. Called risk segmentation, this phenomenon is most likely to harm individuals, small groups and people who are changing jobs. Historically, Blue Cross/Blue Shield plans selling community-rated policies dominated the small group and individual insurance markets in many states and created a single pool that was large enough to be stable. Under competitive pressure from experience-rating plans, however, many Blue Cross/Blue Shield plans stopped offering these guaranteed premiums in the 1980s and 1990s and joined with commercial carriers to segment the market. State insurance reforms and HIPAA are designed to improve the stability of insurance markets and reduce risk segmentation. Although they make coverage more available for certain narrow groups of people—job changers and people with high health care costs—they apparently have not had much effect on the total number of people covered. Because HIPAA is a federal law, it applies to all plans, ERISA and non-ERISA alike. State insurance reforms apply only to insured plans. HIPAA has many other provisions, some of which are not insurance-related. Unlike state insurance reforms, HIPAA does not address premium rates. While ERISA is administered by the Department of Labor, HIPAA is jointly administered by the departments of Labor, Health and Human Services, and Treasury.
It’s worth remembering that, before it became the target of irate consumers and providers, managed care was touted as the solution to the problem of skyrocketing costs. In the face of double digit health care inflation, corporate and government buyers encouraged insurance companies and health care providers to join to form entities that would contract to provide care while keeping costs down. During the 1990s, managed care is credited with stalling health care inflation, although not necessarily for the reasons that were predicted. Cost savings clearly grew in tandem with managed care. However, these savings often are the result of price breaks negotiated in a crowded market and care that is managed—some say rationed—by administrative systems that frustrate both patients and providers. A backlash ensued. In reaction to the restrictive rules and limited panels of the most tightly managed plans, providers dropped out, enrollees voted with their feet, employers began to offer more open programs, and state legislators passed laws limiting the restrictions that plans could impose and increasing their liability for health consequences. As managed care controls relaxed, the gap in prices between indemnity coverage and managed care shrank. In 2003, family premiums were actually higher on average for PPO and POS plans than for indemnity coverage. Although the more restrictive managed care plans, HMOs, still offer the lowest prices, their market share continues to fall.4 There seems to be agreement that the easy savings have been squeezed out through “managed cost” or “managed access.” Insurance premium rate increases are outpacing inflation again, as underlying cost pressures overtake the one-time savings achieved by reorganizing systems of care. In 2004, two strategies for managing costs stood out: increased cost-sharing (including higher premiums, copayments, and tiered prices designed to encourage enrollees to use the most efficient providers); and disease management (discussed below).
What are disease management and care management? Do they really work? Disease or care management has generated considerable interest among employers. Disease management involves identifying patients with chronic conditions that are likely to be costly and actively managing their care, including pharmaceutical management and secondary prevention. Care management refers to similar activities for people with multiple conditions, where management must be more individualized. The Veterans’ Administration is experimenting with something it calls “health management,” which includes remote monitoring of vital signs for people who might otherwise require institutional care. Management may be as intensive as individualized health coaching and support groups for people with similar needs, or may be as little as sporadic written communications about medications. These programs might be viewed as another step in the evolution of managed care or, conversely, as undoing managed care by separating care management from insurance. A number of firms—including physician groups, pharmaceutical consultants, insurance specialists and marketing groups—have developed and are marketing protocols to manage specific conditions such as asthma and diabetes. Other entities emphasize their ability to manage complex patients who have multiple needs. Because ensuring patient compliance with medication regimens is such an important component of these efforts, pharmaceutical companies have been directly involved in some Medicaid disease management programs. The 2003 Kaiser/Health Research and Educational Trust (HRET) survey found that two-thirds of firms believed that disease management was very or somewhat effective. Although cost savings are an article of faith for these programs, it has been difficult to measure actual results. Benefits in the form of improved health, quality of life, workplace or school attendance, and productivity may need to be estimated in addition to changes in health utilization. Identification and management of prospective program participants usually is proprietary, making it difficult to tell whether results are due to better management or to selecting healthier patients for the program. Methods for estimating savings—return on investment (ROI)—for spending on disease management will be the subject of Medicare “coordinated care” demonstrations under the 2004 Medicare modernization act (MMA).
What is the relationship between health insurance and risk? When discussing insurance and managed care, insurers attempt to separate the two different things being bought: the health care itself (services or managed care) and relief from uncertainty (insurance). Health care spending is quite skewed, with most people having no or low costs in a given year. The top 1 percent spend 30 percent of all health care dollars, the top 10 percent spend 70 percent of dollars, while the bottom 50 percent spend 3 percent. Although some of this variation is predictable, much of it is not. The larger a group, the more likely it is to have average costs overall. Smaller groups—small businesses, small self-insurers, and small managed care companies—are at higher risk due to random fluctuations in the incidence of health and injury. In its purest form, the insurance system allows participants in a pool to pay average costs for something that varies considerably. Expenses are shared with others who are willing to pay somewhat more than they would expect to actually spend in a given year, in order to protect themselves against the possibility of much higher costs. Setting the price for insurance depends on statistical averages for groups with known characteristics. In practice, health insurance tends to blur together two different kinds of risk: the unknown risk of an expensive, unpredictable thing happening, and the known risk—or hazard—due to treating a condition that is ongoing or predictable. Community rating puts together both kinds of risk when rates are set. Experience rating requires the insured to pay the expected cost of known hazards, such as a history of heart disease, while smoothing out costs due to unpredictable events. Solvency, reinsurance and risk-based capital relate to buying certainty, not to buying health care. The need for protection against the risk of rare occurrence has been a problem for physicians and hospitals that are trying to shift from the business of care to the business of insurance by creating IPAs, PHOs or other entities that assume some of the uncertainty inherent through risk-based contracts to provide care. Solvency means a company has sufficient reserves—money collected from premiums and its investment—to cover potential claims. Reinsurance is a sort of insurance for insurers, covering the chance that total claims will exceed a certain level (sometimes called the stop-loss). The lower that level, the higher the premiums, since the reinsurer is assuming a greater share of the uncertainty. Insurers often share this risk and form reinsurance pools. A number of state-sponsored reinsurance pools were created in conjunction with insurance reforms to guarantee issue enacted in the 1990s. Some small companies “self-insure” and then reinsure at very low levels to avoid oversight by state insurance regulators. A recent Supreme Court decision on state regulation of “any willing provider” appears to allow state regulation of reinsurance and plans under these schemes. Risk-based capital is important for provider groups that assume part of the risk for the cost of care for a patient group. Many managed care arrangements now render the providers themselves at risk for costs of care whether or not they provide it themselves. Insurance companies are in the business of managing money, so they are required to guarantee their solvency by maintaining reserves that are set by state insurance regulators based on their assessment of the market. Managed care plans and provider groups assume risk but also are in the business of providing care. To the extent that they actually can meet their obligations by providing services, they have argued that they should not be required to maintain the same kinds of reserves as insurers, who have to pay others to guarantee care. Risk-based capital requirements put this argument into action by basing the reserve requirements for providers on the level of their potential financial risk. Insurance regulators are concerned that, without such requirements, essential community providers might accept levels of risk they cannot meet, causing them to become insolvent and leaving people with no source of care.
What is the insurance cycle? Is that why rates increased recently? The insurance—or underwriting—cycle is a three- to six-year cycle in which insurance premium setting lags behind insurance claims and then rises more sharply than expected health cost increases. This happens because plans do not want to be the first to raise premiums in a competitive market. When the claims paid out are more than the premiums collected, the rates remain the same for a while as reserves are drawn down. Eventually, premiums increase sharply to compensate for losses, exaggerating fluctuations in underlying health costs. Recently, the health insurance cycle has been longer than usual, in part because managed care has actually led to lower prices as providers accept discounted reimbursement rates. After several years of very low inflation in the 1990s, inflation hit double digits again in 2001 as sellers anticipated rising costs and made up for past losses. Rate increases appear to be slowing again in 2004. Insurance premiums rise and fall as a result of:
Higher spending is not necessarily a bad sign. One reason health costs rise is something called “the failure of success:” we are able to keep people alive who would have died in the past, and people live much longer today with conditions that require continued and expensive care.
Unlike many other employee benefits, the value of employee health insurance benefits is not federally taxed, and employed individuals may make before-tax premium contributions. Premiums paid by self-employed individuals became fully deductible in 2003. However, individual health insurance and medical expenditures are deductible only if they total more than 7.5 percent of an individual’s income. The value of this tax treatment is sometimes called a tax subsidy, particularly by analysts who contrast the value of this benefit to the middle class and wealthy workers with governmental spending on health care for low-income people. The tax subsidy is considered a regressive way to fund coverage, since it is greater for higher earners whose incomes are taxed at higher rates. For several decades, health economists have speculated that this tax treatment of insurance induces employees to buy more insurance than they would buy with after-tax dollars, and that this actually leads people to overspend on health, thus driving up costs. Some current national health reform proposals would restructure the tax subsidy. The elements of these proposals vary. All include equal deductibility for individual or group coverage. Some include an individual mandate that requires all people to purchase coverage. Supporters believe a shift to individual coverage and credits will lead to more responsible health decision making and a more disciplined health care market, ultimately making care more affordable and available. Critics point to evidence that, when individuals reduce utilization because they are paying a higher share, they cut both needed and optional care. They also are concerned that the individual market is not sound enough to sustain such a shift. Where expanded access is an objective, a cap on exclusion or deductibility of premiums (for example, at the first $2,000 in value of the coverage) is sometimes coupled with tax credits for people whose incomes fall below a certain level. A key distinction among proposals is how they treat individuals with low incomes. Some propose using increased revenue resulting from a cap to fund a refundable tax credit or voucher, equivalent to the value of the tax subsidy, for those who earn too little to benefit from the tax subsidy. An experiment with tax credits recently was enacted as part of the Trade Adjustment Assistance Act (TAA) of 2002. Congress created a Health Coverage Tax Credit (HCTC) program for certain workers and early retirees who are affected by trade. This program, which is administered jointly by the departments of Labor and Treasury, gives eligible individuals a tax credit of 65 percent of the premium of a qualified plan, which can include continuation of an employer plan; a spousal plan if most of the premium is paid by the worker; or any of a number of state-designated coverage options, including a qualified high-risk pool, state employee health plans, and state-created purchasing pools.5 State tax laws generally follow federal laws, although a few states have experimented with tax incentives ahead of federal changes. State offers of tax credits for small employers had few takers in the mid-1990s, suggesting that state-level changes in tax treatment of health care spending are not effective unless there also are changes in the larger federal tax incentives. Given the growing gaps in employer-based coverage, legislators can expect more experimentation with tax treatment of coverage in the future, at both the state and federal levels.
One approach to shifting from employer-based to individual coverage is to encourage employers to channel a larger share of health spending into individually controlled health accounts. Federal rules for personal medical savings accounts with special tax treatment (MSAs, HRAs, HSAs) evolved rapidly during the last 10 years. When paired with insurance policies that include substantial cost-sharing, these accounts provide an alternative to traditional insurance plans. The cost-sharing can take the form of a higher share of premiums or can be higher deductibles or copayments. These pairings are intended to harness the market power of individual purchasers to lower costs and improve outcomes. They also are a reaction to the loss of choice experienced with the rise of managed care. The theory behind these approaches is that such plans will raise consumers’ awareness of the true costs of health care by giving them a stake, information, and the opportunity to make their own purchasing decisions. Through their purchasing decisions, individuals will make health care more efficient. Earlier versions of this strategy were limited because the tax code did not allow pre-tax funds did to carry over from year to year (FSA—flexible spending accounts). Tax-free Medical savings accounts (MSAs) were created in 1996 under HIPAA, but availability was deliberately limited. After several years of congressional deadlock on increasing the availability of these accounts, the Treasury Department defined a fully employer-funded health reimbursement account (HRA) in 2003. HRAs are accounting obligations that are not controlled by employees until health expenses are incurred; they cannot be converted to other uses. The latest incarnation of these plans, created under the Medicare Modernization Act of 2004, is the Health Savings Account (HSA). These can be purchased by individuals or employers, in any combination. Account holders must have a high deductible insurance policy (at least $1,000 for individuals and $2,000 for families) that also limits out-of-pocket costs. The individual owns the account and can treat it like other tax-preferred savings accounts. Within the federal parameters, benefit consultants are creatively designing and marketing products to encourage consumers to use such accounts without being too much at risk. The rubric of “consumer-driven health plan” embraces a confusingly broad range of approaches. At one extreme, defined contribution plans can be simply fixed accounts that employees draw upon to pay the premium for their choice among insurance options. High deductible plans combined with spending accounts take advantage of the new vehicles, HRAs and HSAs. Consumer education and access to information about price and value are considered to be important elements in these programs and are areas where public policy can play a role. Like the MMA prescription benefit, most of these plans have a small amount of risk between the amount that may be set aside in the account each year and the point where insurance coverage begins. The size of the gap, how funds carry over and accumulate and how it is adjusted for the characteristics of the insured group will affect how attractive this approach is to individuals and employers. Critics are concerned that, if the gap is too large, these plans will mainly serve to further segregate the risk pool, making health care more expensive for people with high needs. On the other hand, if healthy people are able to accumulate unspent funds and leave with them, employers may find themselves at a net loss. As with managed care a generation ago, a steep learning curve is likely as purchasers explore the potential of these new health financial tools.
Bare-bones plans. Defined basic insurance plans, usually with few mandates. Capitation, capitated payment. A monthly payment per enrollee, regardless of the care the individual actually receives. Community rating. The same premium for all, regardless of health or demographics. Modified community rating allows demographic rating but not health rating. Disease management. Identifying patients with chronic conditions and actively managing their care. Drug formularies. Defined list of covered pharmaceuticals. Experience-rate. Different premiums are charged for different people, depending on their expected costs. Gag clauses. Prohibition against discussing treatment alternatives that are not covered by the plan or that are beyond the standard protocol. Gatekeeper. A primary care provider who coordinates care and must approve or make all referrals to specialists. HMO. Health maintenance organization. Any of a variety of health plans that contract with a defined group of providers (usually on a capitated basis) to provide health care to a defined population. Indemnity insurance. Traditional insurance plan that reimburses providers (chosen by the enrollee) on a fee-for-service basis. IPA. Independent practice (or practitioner or provider) association. A group of physicians or other providers who form an entity to accept risk—either through contracting with managed care plan(s) or by marketing themselves as a health plan. MCOs. Managed care organizations such as an HMO, PPO, POS or other types of organizations. Medical underwriting. Setting premiums based on experience or characteristics of the insured. MSAs. Medical savings accounts are tax-free savings accounts that allow individuals to carry deductible medical savings forward from year to year. PHO. Physician hospital organization. A managed care plan or IPA structured around a hospital and a network of affiliated providers. POS. Point-of-service. Hybrid plan with features of managed care and insurance. Traditional HMO that also partially reimburses care received outside the plan. PPO. Preferred provider organization. Discounted indemnity coverage. Health plan that offers full or high coverage for a defined panel of providers (who accept discounted fees) and more limited coverage for care outside the plan. Patients’ bill of rights. A set of consumer-oriented managed care rules. Pool. Group that shares insurance risks. Risk selection. Basing the decision to buy coverage on the expectation care will be needed. Segmentation, risk segmentation. Groups with different risk profiles put in different pools, allowing the price for one pool to rise rapidly. Staff, group or closed panel HMO. Sometimes called a traditional HMO or a prepaid group practice. A single entity owns and hires or establishes exclusive contracts with all providers, from primary care through hospital care. Tax subsidy. The value of health insurance benefits that are not federally taxed.
Staff Contacts: Kala Ladenheim
NCSL resources on liability, managed care, ERISA and HIPAA at http://www.ncsl.org/programs/health/healthmc.htm. NCSL summary of HIPAA: http://www.ncsl.org/statefed/HR3103.htm. Bill of Rights and HMO liability: http://www.ncsl.org/programs/health/liable.htm. ERISA 101 links: http://www.ncsl.org/programs/health/forum/ac/e101links.htm. Industry sources Two national trade organizations that deal with managed care and insurance have merged recently. The Health Insurance Association of America and the American Association of Health Plans are now America’s Health Insurance Plans: http://www.ahip.org Blue Cross Blue Shield Association: http://www.bcbshealthissues.com Managed care fact sheet: http://www.mcareol.com/factshts/factshet.htm Employee Benefits Research Institute: http://www.ebri.org For consumers Georgetown University Institute for Health Care Research and Policy consumer guides for insurance in each state: http://www.healthinsuranceinfo.net/. Families USA carries out consumer advocacy in managed care and insurance: http://www.familiesusa.org/, select “private insurance.” Think tanks The Urban Institute (http://www.urban.org) Insurance reform: http://www.urban.org/pubs/hinsure/insure.htm Patient protection: http://newfederalism.urban.org/html/occa28.html The Heritage Foundation HSAs: http://www.heritage.org/Research/HealthCare/wm481.cfm The Galen Institute Consumer Driven Health Care: http://www.galen.org/ccdhc.asp AcademyHealth Defined Contribution: http://www.hcfo.net/pdf/definedcontribution.pdf Regulators ERISA Preemption Manual for State Health Policymakers: http://www.statecoverage.net/pdf/erisa2000.pdf Kentucky’s “Any Willing Provider” Law and ERISA: http://www.nashp.org/Files/GNL51_ERISA.pdf National Association of Insurance Commissioners: http://www.naic.org State insurance regulators: http://www.naic.org/state_contacts/sid_websites.htm |
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