MANAGED CARE

CHAPTER 8 LECTURE NOTES

LAWS AND REGULATIONS IN MANAGED CARE

States are responsible for regulating MCOs/HMOs willing (called oversight)

States oversight traces its origins to the enactment of the McCarran-Ferguson Act by the U.S. Congress in 1945; this gave the authority to oversee insurance products, including health coverage.

As more individuals and employer groups purchased health insurance, states began passing laws regulating managed care.

The laws covered issues such as:

· Establishing solvency requirements

· Requiring coverage of certain medical conditions (aka mandated benefits)

· Establishing requirements for healthcare provider networks (aka access requirements)

· Setting standards for medical review of claims, including appeal of benefits coverage denials

· Standards for licensing MCOs and insurance agents

· Other consumer protections (e.g. EOCs, EOBs, HIPAA, etc.)

There is a great degree of interaction between state and federal laws and regulations. For example, the ACA of 2010 (a federal law) modified state laws and regulations affecting MCOs and managed care

I. MCO STRUCTURE AND ORGANIZTION

II. STATE REGULATION – At the state level, HMOs are regulated by more than one agency: insurance regulators (via the DOI–who manage financial aspect, (and in some states), external review, and by health regulators (via the DOH–who focus on quality of care issues, utilization patterns, and a provider’s ability to offer adequate care. Risk-bearing PPOs are usually regulated by departments of insurance (DOI).

State oversight applies to many aspects of managed care operation including:

A. Licensure – One of the most important type of state regulation of MCOs. HMOs obtain licenses by applying for a COA (Certificate of Authority), and applications are usually processed by the insurance department. In addition to granting licenses to MCOs, the state monitors performance on a regular basis (via quarterly reports and financial statement audits).

B. Enrollee Information – The HMO Model Act requires certain levels of communication with HMO enrollees. Individual and group contract holders are entitled to receive a copy of their contracts and regulators require that they are filed with and approved by the regulatory bodies in charge of reviewing contracts. Enrollees also receive an evidence of coverage document, information about how services can be obtained, a list of health plan providers, and notification regarding discontinued participation by the enrollee’s PCP. The PPA model act requires similar disclosure to PPO enrollees.

C. Access to Medical Services – Under the HMO Model Act, HMOs are required to ensure the availability and accessibility of medical services. The PPA Model Act requires that plans that offer a PPO option ensure a certain level of access to covered services.

D. Provider Issues – The HMO Model Act requires that MCOs applying for state licensure provide regulators with copies of provider contract forms, and the names and addresses of all contracted providers. It also requires that contracts include a hold-harmless clause, that protects employees against provider claims in the event of plan insolvency. The NAIC (National Association of Insurance Commissioners) Managed Care Plan Network Adequacy Model Act also includes several provider contract provisions.

E. Reports and Rate Filings – HMOs must file several reports including annual reports, schedules of premium rates, and updates to information contained in the original COA (Certificate of Authority). Every state requires MCOs to file benefits plans and premium rates before they’re administered.

F. Quality Assurance and Utilization Review – There are several acts that dictate HMO procedures regarding quality assurance and utilization review. Among them are requirements for an HMO to file a description of its quality assurance program; to have in place an internal system that identifies opportunities for improved care, measures provider performance, ensures a certain level of provider input, and collects and analyzes data on overutilization and underutilization of services; and to have in place written policies and procedures for credentialing all health care professionals.

G. Grievance Procedures – The NAIC (National Association of Insurance Commissioners) Model HMO Act requires that HMOs have written procedures designed to effectively address grievances. These procedures must be approved by the appropriate state agency.

H. External Appeals – Most states have policies giving enrollees the right to appeal some cases involving the denial of coverage to an external review entity.

I. Solvency Standards and Insolvency Protections – The HMO Model Act establishes specific capital, reserve, and deposit requirements that all HMOs must meet. This is in order to prevent HMO insolvencies and protect consumers and other parties fro the effects of insolvencies.

J. Financial Examinations and Site Visits – Regulators are able to conduct inquiries that examine HMO finances, marketing activities, and QA programs. The examination process may include site visits.

K. HIPAA Implementation – HIPAA set minimum requirements for health care standards. Many states’ requirements exceed those set forward by HIPAA.

L. Multi-state Operations – MCOs that operate in two or more states must comply with the regulations set forth by each jurisdiction/state.

III. ADDITIONAL STATE AUTHORITY

A. States have authority to regulate additional MCO products including POS (point of service plan) offerings, provider-sponsored organizations, specialty HMOs, utilization review organizations, third-party administrators, and self-funded plans.

B. Many states have laws that prohibit MCOs from contracting selectively with a limited group of providers (The Any Willing Provider Law). This has a significant effect on MCOs because the creation of provider panels is central to basic MCO operations.

C. Many states also have legislation to regulate the use of drug formularies. Such legislation often requires MCOs to disclose procedures through which, in certain circumstances, members can obtain non-formulary drugs.

D. Additional state regulations may address physician antitrust exemptions, utilization review, emergency care, and clinical mandates.

IV. Increasingly, MCOs and managed care are subject to federal laws and regulations in addition to state oversight.

There is a great degree of interaction between state and federal laws and regulations. But the federal government has assumed increasing oversight of the managed care industry in the U.S.

Typically, federal laws work in coordination with state laws; but in certain situations, federal laws take the place of state laws and regulations.

Federal regulations and oversight of MCOs is carried out by a number of agencies:

· DHHS

· DOL

· U.S. Department of Treasury

· DOJ

Although Congress has enacted an extensive set of laws/regulations that govern the managed care industry, there are 5 laws that have had the most significant impact on MCOs:

1. THE HMO ACT OF 1973

· Established the first federal requirements for “federally qualified HMOs and provided loans to HMO start ups

· Required HMOs to provide a specific package of “basic” and “health supplemental” services to enrollees.

· Required HMOs to meet solvency standards, provide procedures for handling member grievances and appeals

· Established programs for quality assurance

2. THE EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA)

· Enacted by Congress to provide a uniform legal framework for health and pension benefits offered by employers and unions

· The Employee Retirement Income Security Act of 1974 (ERISA) has directly impacted all health benefit plans and MCOs, especially self-funded plans.

· ERISA generally “ preempts” state laws affecting health benefits provided by unions/employers

· Unions/employers have 2 options for providing health coverage:

1. “ fully insure” the benefits by purchasing insurance from an MCO or health insurer, OR

2. “ self-fund” by assuming the risk for the benefits’ costs by setting aside sufficient financial resources to pay claims. The union or employer may contract with an existing MCO (typically a Blue Cross/Blue Shield plan in that state) or a TPA to handle administrative functions of the health plan.

· A self-insured employer is acting as an insurance company, but typically contracts with an insurance company/MCO (usually the state’s BCBS plan) to administer the benefits plans.

3. THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996 (HIPAA)

A. Enacted by Congress to provide a standard set of insurance market requirements for health insurers, including MCOs.

B. HIPAA is considered a watershed event because it is the first federal law that subjects all health plans to minimum standards of accessibility to health coverage.

C. HIPAA set out the first significant set of federal standards for managed care for individuals and coverage provided to employer and union health plans.

D. Established the first national requirements for health information privacy, data security, and electronic healthcare transactions and code sets

E. Under HIPAA, states share regulatory power with federal agencies that now have some regulatory authority over private health insurance and group health plans. The Act was the first direct regulation of the business of health insurance by the federal government.

F. In addition to portability and access standards, HIPAA includes tax incentives, antifraud and abuse initiatives, and administrative simplification requirements. The Act also benefits the self-employed by gradually increasing the deductibility of health insurance, providing tax incentive for the purchase of long-term care insurance, and authorizing a demonstration program for medical savings accounts.

G. Several nondiscrimination provisions are included in HIPAA. These provisions aim to improve access to health coverage in the group market for people with preexisting medical conditions. The Act provides that no health plan or insurers can establish certain rules for eligibility of enrollees and restricts the use of preexisting condition exclusions. It also prohibits health plans and insurers from requiring anyone to pay a premium or contribution larger than fees charged to a similarly situated person on the basis of a health status factor.

4. PATIENT PROTECTION AND AFFORDABLE CARE ACT (ACA) OF 2010

· The ACA significantly amended the standards set out in ERISA and HIPAA and imposed changes on how coverage is offered by MCOs.

· Provisions of the ACA also affect and in many cases, supersedes state laws governing managed care and MCOs.

· Some of the ACA’s provisions were enacted in 2010, while others (e.g. creation of the health insurance market exchanges) were not enacted until 2013 and 2014.

· The ACA provisions are still being implemented by the federal regulatory agencies, and the impact on MCOs and managed care will not be fully realized for many years.

5. FEDERAL TAX CODE

· Provides incentives for individuals and employers to purchase health coverage (e.g. the cost of health insurance is fully tax deductible to employers and their employees)

· Allows certain individuals to purchase coverage through an exchange to qualify for a tax subsidy

· The Tax Code recognizes a number of tax-advantage spending accounts (e.g. HRAs, HSAs, and FSAs). These accounts allow individuals to contribute $$ on a fully tax deductible basis and use the $$ for qualified medical expenses.

6. CONFLICTS, PREEMPTION, AND THE ROLE OF THE COURTS

· State and federal laws/regulations frequently address the same issues involving managed care and MCOs.

· While ERISA governs self-funded employer/union-sponsored health benefits plans (and is regulated by the DOL), states are responsible for oversight of the MCOs that provide insured health benefits plans.

· Determining whether state or federal laws should prevail and resolving conflicts poses challenges for MCOs and for state and federal regulatory agencies.

· There are 2 legal principles that govern whether a state law is preempted by the federal requirements:

1. State laws are preempted only if they directly conflict with a specific federal requirement

2. Under ERISA, which generally preempts any state attempt to regulate a self-funded employer/union

· Resolution of these conflicts is frequently handled by the judicial system

7. ROLE OF NONGOVERNMENTAL ORGANIZATIONS

MCOs are impacted by a number of nongovernmental organizations, including but not limited to:

· 2 different types of standard setting entities

· Independent review organizations (IROs)

· NAIC

V. There are 2 different types of standard setting entities that influence MCO operations: organizations that establish the electronic healthcare transactions and code sets, and health plan accreditation organizations

· Designated Standards Maintenance Organizations (DMSOs)-under HIPAA, the DHHS is responsible for the development, maintenance, and modification of relevant electronic data interchange standards that must be used by covered entities.

· An accredited organization/agency is an independent, private, nonprofit entity that looks at a MCO’s QM program and its impact on operation, how it’s carried out, and how the MCO treats its members, etc.

Accreditation is a form of oversight in which an outside organization reviews an MCO and determines if it meets specific criteria. If the MCO meets the criteria, it’s considered to be accredited.

· Health plan accreditation organizations also set standards that most plans follow, although unlike HIPAA transaction and code sets, being accredited by virtue of following accreditation standards is not mandatory.

Although accreditation is not mandatory in all states, but many employers will not contract with a plan unless it has earned some form of external accreditation.

· There are 3 commonly used Accreditation Organizations in the U.S: NCQA, URAC, and AAAHC

A. The NCQA (National Committee on Quality Assurance) is an independent group that accredits HMO and POS plans. It is the dominant agency for the managed care industry whose primary focus is quality. Review teams consist of one to two administrative and three or four physician/clinical reviewers. These teams review plans in the areas of quality management and improvement, utilization management, credentialing, member rights and responsibilities, preventive health services, medical records, and HEDIS performance.

HEDIS (Healthcare Effectiveness Data and Information Set) is a set of standardized measures that examine plan performance across a variety of areas within a MCO. It is the industry standard for reporting data to employers and some government agencies. HEDIS specifies not only what to measure, but how to measure it.

B. The Utilization Review Accreditation Commission (URAC) was founded in response to the concerns and frustrations with the variety of utilization review procedures, and the growing impact of utilization review on physicians and hospitals. It started accrediting health plans (including PPOs) in 1996 and reviews similar internal operational processes as NCQA—but are less detailed. URAC’s utilization management standards can be applied to stand alone utilization management organizations, or to utilization management functions that are integrated into health benefits programs.

URAC also offers both PPO and HMO accreditation programs that access standards in four areas – network management standards, provider credentialing, member protection, and quality management.

C. The Accreditation Association of Ambulatory Health care (AAAHC) was founded in 1979 to review and provide accreditation to ambulatory care facilities (e.g. endoscopy suites, amb/surg centers, office-based surgi-centers, student health centers, dental groups, etc.). AAAHC also accredits IPAs and some MCOs.

· Consumer Assessment of Healthcare Providers and Systems

Independent Review Organizations (IROs)

· State law and the ACA require claim disputes involving medically necessary determinations to be submitted for review by an independent review organization if an individual covered under a healthcare benefits plan wishes to appeal a coverage denial.

· The IRO provides a panel of medical experts who review claims

National Association of Insurance Commissioners (NAIC)

The NAIC is an association of chief state insurance and managed care regulators in the 50 states, District of Columbia, and U.S. territories.

· The NAIC provides the insurance regulatory agencies and their staffs with the opportunity to share information on developments involving MCOs and to discuss legal and regulatory challenges such as implementation of the ACA.

· Develops model insurance laws and regulations affecting managed care

· Responsible for creating the statutory accounting and risk-based $$ standards used by MCOs and other insurers in financial reporting to the agencies

· Provides the insurance regulatory agencies with opportunities to coordinate financial and market conduct reviews of MCOs that operate on a national basis

Conclusion

· All MCOs are subject to federal and state laws and regulations.

· In addition, private nonprofit accreditation agencies are increasingly reviewing the operations of MCOs to assure consumers, employers, and government agencies that they are meeting quality and performance criteria.

· Finally, information collected through these various channels is increasingly being made available to consumers.

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5 Laws Impacting Managed Care Organizations (MCOs)

ERISA

http://www.dol.gov/dol/topic/health-plans/erisa.htm

HIPAA

http://www.hhs.gov/ocr/privacy/hipaa/understanding/

Affordable Care Act

http://www.hhs.gov/ocr/privacy/hipaa/understanding/

Federal tax Code

Article: “The Tax Code Can be Simpler. But Not Three Pages.”

http://www.hhs.gov/ocr/privacy/hipaa/understanding/

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HSA vs. HRA vs. FSA

HSAs : What is a Health Savings Account (HSA)? – YouTube

HRAs : Health Reimbursement Account (HRA) – YouTube

FSAs: https://www.youtube.com/watch?v=jg15HrGIbU4

What's an HSA? HRA? FSA? – YouTube

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