Legislative Program Review and Investigations Committee

Regulation and Oversight of Managed Care
Key Points

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Regulation and Oversight of Managed Care
Key Points

Background 

% Managed care is relatively new and still evolving. There is no single definition of Amanaged care.@ Managed care is on a continuum, with a number of plan types offering an array of features that vary in their abilities to balance access to care, cost, quality control, benefit design, and flexibility.  

C   Nationally, growth in enrollment in managed care plans, especially HMOs, has been dramatic. 

C   Connecticut=s  move to HMOs has mirrored the nation=s and currently about one-third of the state=s population is enrolled in an HMO. 

C   Connecticut=s percentage of uninsured remains one of the lowest in the nation. 

C   Connecticut had 85,000 more residents with private group  health insurance in 1995 than it did in 1994, reversing a previous trend, and bucking a national phenomenon of a growing  uninsured population. 

C   Connecticut=s aggregate premium costs continued to increase from 1980 through 1995. 

C   HMO enrollment covers about one-third of Connecticut=s population, yet HMO premiums account for about 25 percent of health care insurance premiums.  

C   Per-employee costs are less in HMO coverage than with indemnity plans in Connecticut and both cost less in 1995 than they did in 1994.        

Regulatory Structure 

%    The Department of Insurance has primary responsibility for regulating health maintenance organziations in the following areas: 

C        financial solvency;

C        licensure;

C        rate approval;

C        policy and forms approval, including ensuring that benefits meet state and federal mandates; and

C        assuring that the HMO has an internal dispute resolution system for handling complaints.  

% Greater protection is needed to prevent HMO insolvencies, because there is no HMO guaranty fund, and regular insurers must currently maintain higher financial reserves than HMOs.  

%    HMOs must have rates approved by the Department of  Insurance, but group rates of regular health insurers do not. 

%    Some judicial interpretations of the federal Employee Retirement Income Security Act (ERISA) have been inconclusive. Other court decisions clearly prohibit some state activities such as: mandating employers to pay for benefits; regulating terms and conditions of health plans; or directly taxing or assessing employer health plans. 

%    It is difficult to determine how many Connecticut residents are covered by ERISA self-funded plans. One national study indicates that about 40 percent of employees receive their benefits through a self-insured plan, but two other surveys indicate that the percentage of Connecticut employees may be less. 

%    ERISA offers employers a legitimate way to escape state mandates through self-funded plans. If increasing regulation prompts more employers to self fund their plans, the state loses the ability to oversee those plans and the ability to garner revenues from premium taxes. 

Consumer Protection Efforts 

% Consumers are generally satisfied with managed care but efforts are still needed to educate consumers about health care services as well as protecting and assisting consumers when they have a problem with their plans. 

C   The state should build on the existing efforts made by health plans and national accreditation organizations and work to compile a uniform data set, assess the accuracy of the data, and ensure that it is released in a format that is useful to consumers. 

C   Consumers must have a clear understanding of detailed benefits and exclusions and internal plan process before a person signs on with a plan. 

% Overall, the insurance department handles complaints in a prompt manner, and to the extent of its regulatory authority, services consumers well. However, its automated coding system is deficient. 

% There is a perceived threat to confidentiality in two areas: 1) broad interpretation of contractual access to provider records and 2) disclosure of personal information to third parties such as employers. 

C   New federal regulations pursuant to 1996 legislation and revised guidelines from the National Association of Insurance Commissioners will address these issues. 

Benefits, Utilization Review, and Protocols 

% State law requires that, at a minimum, HMOs provide the benefits contained in the Federal Health Maintenance Organization Act as well as Connecticut=s own statutorily mandated benefits. Most HMOs specifically exclude the benefits that are not required and sanctioned by the federal HMO act. 

% There are several deficiencies with utilization review and the way in which the current laws are implemented. 

C   Until July 1996, the insurance department had been collecting the $2,500 annual fee but had been doing little oversight of utilization review companies after the initial licensure. 

C   Because of the lack of dedicated staff to this oversight function, the utilization review companies have not fully complied with some statutory requirements, and the insurance department has not fully exercised it statutory authority in other areas. 

C   More information concerning utilization review companies is needed to adequately regulate them. 

C   Utilization review decisions that are made Apending@ further review creates confusion and ambiguity for providers and consumers about whether a procedure or treatment has been approved or not.  

C   Connecticut law is unclear in terms of what type of medical review it grants o patients or providers where a denial is upheld by the utilization review company on appeal.  

C        Utilization review companies must be responsible for their conduct in the market place including being accessible to consumers and providers. 

% Staff analysis of protocols suggests: 

C   Use of pre-established standards not universal among HMOs.  

C   There is variation between standard and practice.  

C   Actual stays are typically longer than standards. 

C   Standards can lag behind practices.  

C   Standards are used as guidelines, and  

C   Outpatient mastectomies are not common but were performed prior to July 1, 1996 when the controversial protocol became effective.  

% There must be a recognition that delivery systems vary in different areas of the country. 

% Input from local practicing physicians is necessary if protocols are to be accepted as workable. 

% Providers must be informed of guidelines and criteria under which they are expected to practice. 

Provider Credentialing and Contracting 

% HMOs must balance the need to have broad enough networks to satisfy consumer and employer demand with the need to have to select high quality providers who will provide good health care at reasonable costs.

C   After cost, the second most important criteria used by employers when selecting an employee health plan is accessibility and breadth of the provider network. Health care purchasers should be allowed to shop for health plans that are affordable for their needs.

% Few physicians have been Adeselected@ or failed to have their credentials reapproved.