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Health Program

Managed Care State Laws and Regulations, Including Consumer and Provider Protections

Updated: March 2008

More than 170 million Americans receive health care coverage or benefits through some type of "managed care" setting.1  By 2007 about 20 percent of these services are directly provided by a health maintenance organization (HMO), while the majority are served through other managed arrangements, 60 percent in Preferred Provider Organizations (PPO) and 13 percent in Point of Service (POS) plans.

Nearly all states have passed "patient protection" or consumer-oriented laws and/or regulations.  State legislation and resulting enacted laws were an intense focus from 1992 through 2002, with dozens of measures enacted yearly, amidst major media attention, anecdotal stories of patients denied treatment, and several major lawsuits. The U.S. Congress has not enacted comparable managed care consumer legislation, although different plans passed the Senate and/or House between 1999-2002.   This activity has dropped off dramatically since 2002, in part because so many states already had laws in place.  The Health Policy Tracking Service summarized this change as "state legislatures and regulatory agencies, consumers and managed care entities have reached a reasonable operational balance." 2  Since 2001 HMO enrollment has declined in many areas, but the enacted laws generally remain in place and in force. 

The details and the extent of these state laws vary considerably, but they remain in force as a mechanism for regulating HMOs and other forms of managed care organizations. The actual extent of these laws vary and is not detailed in this report.

STATE ROLES LIMITED BY ERISA: State health insurance laws only apply to about 45% of health policies - those "fully insured plans" in which mostly individuals and small and medium sized businesses and organizations pay premiums. Only federal ERISA law applies to the 55% "self-insured health insurance policies."  Many insurers offer and administer both types of plans.  Medicaid managed care plans are administered through state law but consumer and provider protections may be regulated separately from the statutes cited in this report.  See statute language for details.     (Source: EBRI, September 2007)

Access to Services - Table 1 Access to Services - Table 2 Appeals and Remedies - Table 3 Provider Flexibility and Report Cards - Table 4 Mandate Examples - Table 5 Comprehensive Consumer Rights Statutes with citations - Table 6 2005-07 Managed Care Laws - Table 7

.

Also see Managed Care Overview, an NCSL compendium of reports and documents, updated 2006.

Table I ~ Access to Services

• Comprehensive Consumer Rights Laws - These multi-purpose laws, often 20 to 50 pages in length, generally are designed to define and protect the rights of health care consumers enrolled in managed care. Often they are termed "patient protection" or "consumer rights" laws. Statute citations and links to full text are listed below, in Table #6
• Any Willing Provider - Numerous states require that managed care organizations contract with any provider (from physicians and hospitals to pharmacists and chiropractors) that is willing to meet the terms of the contract.
  Update: An April 2003 U.S. Supreme Court decision affirmed the Kentucky law, and the validity of such state regulation more generally.
• Continuity of Care - A number of states require managed care plans to provide current and new enrollees the opportunity to continue to receive care and services for a period of time with a provider that has been terminated or dis-enrolled from the plan.
• Direct Access to OB/GYN - Many states now allow women to see an obstetrician or gynecologist without first getting permission or a referral from a primary care provider. Some states also afford women the ability to designate their OB/GYN as their primary care provider.
• Direct Access to other health professionals.
• Specialist as Primary Care Provider - For people with a single chronic health problem, the usual HMO procedure of calling a primary care provider first for a referral can be frustrating and unproductive. A number of states now allow an enrollee to select a specialist (such as a neurologist, a mental health provider or a cancer specialist) to be their main provider.

 Index by First Letter of State A C D F G H I K L M N O P R S T U V W

Table II ~ Access to Services, Part 2

• Standing Referrals to Specialist - Many states call for health plans to institute procedures that provide an enrollee that requires specialized medical care over a prolonged period of time to receive a standing referral to a specialist. This is generally for people with a chronic, degenerative, disabling or life-threatening disease.
• Emergency Care Coverage - Numerous states require reimbursement for emergency care services. This includes screening and stabilization.
• Emergency Prudent Lay Person - Many state laws specify automatic coverage for emergency medical conditions "of sufficient severity, including severe pain, that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of medical attention to result in placing the person’s health in jeopardy."
• Emergency Room coverage.
• Freedom of Choice - Managed care organizations can not discount the price for their enrollees by reducing the selection of providers.
• Ombudsman/Consumer Assistance - These programs are state-funded, independent offices that act directly on behalf of a patient unable to get needed medical care or other services.

First Letter of State A C D F G H I K L M N O P R S T U V W

Table 3 ~ Appeals and Remedies

• Independent/External Review of denials - Many states now require an independent or "external appeal" panel to evaluate the validity of denied care. Once opposed as too costly by the managed care industry, this idea now is embraced as a "reasonable" alternative to court suits.
• Insurer Liability - These state provisions hold health maintenance organizations liable for health treatment decisions. NOTE: A landmark U.S. Supreme Court decision in July 2004 ruled unanimously that patients cannot sue their HMO under state laws for failing to pay for doctor recommended care.  Experts describe the decision as ruling that federal ERISA law "completely pre-empted such lawsuits brought in state court."  The listings below are retained for legislative history, but portions of the statutes may not be in effect.
• Liability: Ban on "hold harmless" clauses in Provider Contracts
• Liability, Financial: Enrollee
• Point of Service - Offers people the ability to receive services from an out-of-plan provider given that they are willing to pay higher out-of-pocket costs. Managed care organizations might offer this type of plan to eliminate the use of closed-panel HMOs.
• Right to a second medical or surgical opinion - 9 states formally mandate the option to obtain a second opinion, with costs covered by insurance.   These states are CA, MD, MN, MO, NJ, NY, RI, WV & WI. (not listed in the Table below) 

First Letter of State A C D F G H I K L M N O P R S T U V W

Table 4 ~ Provider Flexibility and Report Cards

• Bans on Financial Incentives - Many states prohibit a managed care plan from rewarding doctors for performing a less costly procedure or prescribing a less costly drug.
• Ban on Gag Clauses - Most states have laws prohibiting any agreement that limits doctors’ ability to inform patients of treatment options, especially if some choices may cost the insurer more. A 1997 federal law now bans gag clauses for Medicaid and Medicare managed care.
• Report Cards - In an effort to assist consumers in choosing a plan, several states now require publication of an evaluation booklet or, "report card" to report on the performance of a managed care organization. Also see NCSL Report.
• Medical Director Requirements - Some managed care organizations’ chief officers have business degrees rather than medical credentials. During the past few years, several states have established specific qualifications and responsibilities for HMO medical directors; most require a current in-state medical license.
• Hospital Stay after Childbirth - Many states require reimbursement for (typically) at least a 48-hour maternity stay. A federal law requiring coverage for a 48-hour stay took effect in January 1998.
• Ban on "All Products" Clauses - Some contracts between providers and managed care companies require the provider to contract for all products that are offered by the managed care entity.  Several states have banned the use of such requirements as an unfair trade practice. (updated 2006)

First Letter of State A C D F G H I K L M N O P R S T U V W

Table 5 ~ Mandates for Insurance Coverage (Examples)

These mandates are just four coverage examples of the 40+ types of mandated requirements enacted across all 50 states. A more detailed list, published by the Council for Affordable Health Insurance is available here: 50- state mandate information (.pdf).

• Diabetes - require coverage of pharmaceuticals, equipment, supplies and sometimes education for at-home treatment. Additional details at Diabetes mandates web page.
• Inpatient Care after Mastectomy - Coverage for a minimum number of hours in an inpatient hospital is mandated after a mastectomy or lymph node dissection.
• Post-Mastectomy Breast Reconstruction - Coverage for reconstructive surgery of cancerous breast and/or unaffected breast in order to achieve symetry.  "Yes" indicates that the reconstruction is covered IF mastectomy is also covered.
• Off-label Prescription Drug Use - For specific uses, like treating cancer or other life-threatening diseases, all prescription drugs are to be covered. This includes drugs that are not FDA approved.

First Letter of State A C D F G H I K L M