Sep 21, 2008

Group Medical Expense Benefits, Managed Care Plans - Reactions to Consumer and Provider Concerns

As previously mentioned, the majority of employers and employees are reasonably satisfied with managed care plans but have increasing concerns. However, the satisfaction of physicians and other providers is much more negative, primarily because of decreased control over medical decisions for their patients and a loss of income. As a result, there has been what the media describe as a "backlash against managed care." In some ways, this terminology is inaccurate. First, some of the public's concerns, such as the lack of mental health parity and the lack of coverage for certain preventive medical screenings, apply to the entire health care system. Second, while some of the concerns are aimed at all types of managed care plans, many are aimed solely at practices of HMOs.

This backlash has had several results:

  • States continue to enact legislation that addresses many of the concerns.

  • Managed care organizations voluntarily modify their practices in light of legislative activity and competitive forces.

  • The federal government continues to grapple with consumer legislation.

  • State Reform
    State legislatures in recent years have passed several types of laws aimed at managed care reform. Many of these laws, which have been passed by from 12 to almost all states, include the following:

  • Antigag-clause rules

  • Grievance, review, and appeal procedures

  • Any-willing-provider laws

  • Mandatory POS options

  • Continuity of care

  • Provider protection

  • Emergency room coverage

  • Mental health parity

  • Diabetes health benefits

  • Minimum stays for certain procedures

  • Plastic surgery mandates

  • Direct access to providers

  • A smaller number of states have passed other types of reform legislation.

  • It should be noted that some of these changes tend to bring managed care plans closer to traditional indemnity plans in terms of both coverage and cost.

    Antigag-Clause Rules. Most states have passed legislation preventing managed care organizations from including provisions in their contracts that prevent physicians from discussing with patients treatment options that may not be covered under their health plans or from referring very ill patients for specialized care by providers outside the plan.

    Grievance, Review, and Appeal Procedures.
    A concern of many consumers over the years has been that managed care plans did not have adequate procedures to receive complaints or appeals about denials of coverage or to make decisions in a timely fashion. As a result, all states have passed some type of legislation that requires managed care plans to follow specified grievance, review, and appeal procedures. At a minimum, this legislation requires that enrollees be informed of the procedures, usually in writing. There is often a specific time period in which a plan must respond to a grievance, particularly when emergency care is needed. Some states have gone farther and require an independent external review process if an enrollee is dissatisfied after going through the plan's grievance and appeal process. The decision of the independent review organization is usually binding on the parties, but it is nonbinding in a few states.

    Any-Willing-Provider Laws.
    There has been some concern, particularly by physicians, that managed care organizations exclude or expel physicians for providing care and/or tests that the physician, but not the managed care organization, feels is necessary. As a result, several states have passed "any willing provider" laws. These laws require that HMOs and other networks of medical care providers accept any provider who is willing to agree to the plan's basic terms and fees. This legislation has been opposed by managed care plans on the basis that it will prevent them from negotiating for the best possible terms with highly qualified and efficient providers.

    Mandatory POS Options. As is discussed later, closed-panel HMOs have traditionally required that enrollees seek treatment from network providers. Several states have recently adopted legislation that requires that managed care organizations permit enrollees to seek treatment from nonnetwork providers by paying a portion, but not all, of the expenses incurred with these providers. In effect, such legislation turns a traditional HMO into a POS plan. In some states, this legislation applies only to HMOs with a minimum number of members, such as 10,000. In other states, a POS option must be made available to employer groups above a certain size, such as 25 employees.

    Continuity of Care.
    One drawback to receiving care through a managed-care plan is that continuity of care may be lost if the provider ceases to be a part of the provider network, for whatever reason. Several states have recently addressed this issue through legislation. For example, one state requires that the managed care plan continue to pay for care for as long as 60 days, if such a continuation is appropriate. Many of the state laws deal primarily with pregnant patients and may, for example, require coverage to be continued until birth or shortly thereafter for any woman who is in the third trimester of a pregnancy at the time of her obstetrician's departure from the network.

    Provider Protection. Most states now require that managed care plans disclose their criteria for selecting medical care providers, give these providers advance notice of contract termination, and provide them with procedures for contesting the termination. One purpose of this legislation is to address the concern that providers who give quality care might lose their provider contract if this care was more expensive or extensive than that the managed care plan deemed necessary.

    Emergency Room Coverage.
    Managed care organizations have been criticized for often refusing to pay for emergency room care, claiming that emergency room treatment was unnecessary. For example, some plans do not pay if a person who goes to an emergency room with chest pains is found to have indigestion rather than a heart attack. The majority of states now require that a plan pay emergency room charges whenever a prudent layperson considers a situation to be an emergency. In addition, care cannot be delayed to get plan authorization for treatment.

    Mental Health Parity.
    Some states have passed mental health parity laws that go beyond the federal law in that they require either complete parity for benefits arising from physical illnesses and mental illnesses or complete parity for physical illnesses and certain severe mental illnesses, such as schizophrenia, depression, or bipolar disorder. These types of laws apply to benefits provided under both traditional insurance contracts and managed care contracts.

    Diabetes Health Benefits. Many states require that insurance contracts or managed care plans pay for certain education, equipment, and supplies required by diabetics. With proper care, diabetics can often avoid many serious complications of the disease, such as blindness, amputations, strokes, heart disease, and kidney disease. It is interesting to note one difference between the passage of the laws for mental health parity and diabetes health benefits. The push for mental health parity was partially a result of some managed care plans providing more restrictive benefits than many traditional major medical contracts. On the other hand, the diabetes legislation was probably encouraged by the publicity and success of practices adopted by some managed care plans that were not used in traditional major medical contracts.

    Minimum Stays for Certain Procedures. As a result of concerns that some HMOs were compromising proper health care by forcing new mothers and their babies to leave the hospital too soon, most states adopted laws requiring minimum stays for mothers and newborns following deliveries. As a rule, these are for the same periods of time now required by the federal legislation. Most states also mandate that coverage be provided for minimum stays following surgery for breast cancer. For example, several states mandate coverage for stays of 48 hours for mastectomies and 24 hours for lymph node dissections.

    Plastic Surgery Mandates. As a result of publicity over several cases where HMOs denied coverage for reconstructive surgery (for example, to deformed children), several states enacted legislation to require all health insurance contracts or health plans to provide coverage for certain types of reconstructive surgery. This legislation may apply to the repair of birth defects only or to a broader list of situations in which reconstruction might be needed as a result of mastectomies, trauma, infections, tumors, or disease.

    Direct Access to Providers.
    Most states have passed laws to allow women covered under managed care plans to have direct access to an obstetrician/gynecologist without obtaining approval or a referral from their health plan. A few states require direct access to other types of providers, such as dermatologists.

    Other Legislation.
    Other types of legislation have been introduced in several states, but the number of states adopting the legislation has been small to date. The following are examples:

  • Allowing managed care organizations to be sued for medical malpractice if their denial of medically necessary treatment results in harm or injury to a patient. Under a typical state law, a managed care plan cannot be sued for medical malpractice because it is not considered to be practicing medicine.

  • Requiring that patients and/or state regulators be informed of financial incentives offered to providers.

  • Granting patients access to all prescription drugs approved by the government for sale.

  • Making health care plans disclose their policies for covering experimental treatments.

  • Improving state monitoring of managed care plans by requiring that these plans report the status of patient grievances to the states.

  • Voluntary Reform by Managed Care Organizations
    Many managed care reforms have been initiated voluntarily by managed care organizations. Some reforms are probably a result of the natural evolving of a new form of financing and providing health care. Other changes have occurred because of competition among managed care organizations for market share. However, most of the reforms probably are reactions to legislation that is proposed or passed by the states. After a few states pass a certain type of managed care legislation, there is often a tendency for managed care organizations nationwide to revise their plans to address the concerns that resulted in the legislation. There then may be little need for other states to adopt similar legislation, and, in fact, managed care bills introduced in state legislatures are often not enacted if the legislature learns that the managed care industry has already resolved the problem.

    The threat of legislation, at either the state or federal level, is a major impetus for voluntary changes by managed care plans, just as it is for other types of businesses. Such voluntary reform may dampen the likelihood that more restrictive government regulation will result.

    Federal Reform
    Congress has addressed some health care concerns with the passage of such legislation as the following acts, the Mental Health Parity Act, the Newborns' and Mothers' Health Protection Act, and the Women's Health and Cancer Rights Act.

    In late 2000, there are numerous bills in Congress that would add significant federal legislation to the health care environment. Sometimes referred to as a patient's bill of rights, this type of legislation seems to have bipartisan support. However, there are differences of opinion as to what should be done, and these often vary by political party. The following discussion addresses a few of these issues.

    There is disagreement whether the legislation should apply to all health insurance plans or to self-funded plans only. For the most part, ERISA exempts self-funded benefit plans from state regulation; therefore, the types of state reforms previously described apply only to "insured" plans in the sense that they apply to insurance contracts and managed care plans over which the states have legislative control. There are arguments that federal legislation should apply only to self-funded plans because the states are already regulating the plans that are not self-funded. There are other arguments that federal legislation should apply to all health insurance plans because of a lack of legislation in some states and less-stringent regulation in many states.

    Much of the proposed federal regulation is in fact broader than that found in most states, and even the Congressional Budget Office agrees that a federal bill would increase the cost of health care plans. Unfortunately, increased health plan costs lead to an increase in employers and employees being unable to afford coverage. This has resulted in a debate over what should be the proper balance between availability and cost.

    There is also disagreement over the issue of health plan and employer liability. Some proposed legislation would allow employees to sue health plans and their employers if they are injured by a delay or denial of benefits. There are concerns that this type of legislation would benefit trial lawyers more than consumers. In addition, there are concerns that the potential liability might result in many employers terminating health care plans and giving employees pay increases with which they would have to arrange their own health insurance coverage. Such a result would undoubtedly increase the number of uninsureds because some employees would find other uses for the money. Some bills do not impose liability on employers; rather, they provide a process of external review over medical decisions of managed care plans.

    If there is no federal legislation prior to the 2000 elections, health care reform is an issue that the new president will certainly face. Readers should follow legislative developments and their potential effect on health care plans.


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