HMO enrollment is growing slowly in Indiana. Its 52 HMOs, which include 13 limited-service plans, enroll only 14 percent of the insured population. The Indiana legislature enacted new reform measures in 1995, which included guaranteed one-year renewal, portability of coverage, and limitations on pre-existing condition exclusions. However, in 1996 it rejected a patient protection bill in favor of a legislative task force to investigate the alternatives; a new bill was later passed in 1998. The state also instituted an any-willing-provider law for preferred provider organizations (PPOs).
Indiana has obtained a 1915(b) waiver, designated Hoosier Healthwise, which requires recipients eligible for the program (primarily children and pregnant women who qualify for Medicaid) to select either a prepaid or a fee-for-service primary care provider. The state also began enrolling a small number of disabled recipients in one county into the program on a voluntary basis.
The Indiana Department of Insurance (DOI) is the single oversight agency for commercial HMOs. DOI issues licenses; evaluates plan solvency; requires plans to institute grievance procedures and quality assurance plans; and tracks consumer complaints. However, the agency is not empowered to change treatment decisions by HMOs or to settle grievances against them.
The Indiana State Department of Health (SDH) licenses hospitals, surgery centers, and nursing homes. SDH does not directly oversee commercial HMOs. The department also acts as the leading collector of health care data.
The Indiana Family and Social Services Administration (FSSA) runs the state's Medicaid program through its Office of Medicaid Policy and Planning (OMPP). Although OMPP contracts with DOI-licensed HMO plans, it has developed its own expertise for evaluating plan performance and quality to supplement DOI oversight. OMPP relies on contractors to administer many of its programs.
Indiana has a part-time Legislature (senate and house). The legislature is a powerful player in state government, as it can override a gubernatorial veto with a simple majority vote. During the 1995 session, the legislature expanded on earlier insurance reforms by passing several measures: to limit preexisting condition exclusions; to require guaranteed renewal for one year of coverage; and to protect portability of coverage. During the 1998 session, the legislature enacted the Managed Care Consumer Protection Law. The legislature has also directed FSSA and SDH to cooperate on improving the operation of the state's Medicaid managed care program.
Even though managed care penetration is still low, Indiana's health care market is rapidly changing. Two of the state's largest hospitals merged in 1996, and other mergers are expected, which may create regulatory anomalies. Indiana's definition of a commercial HMO is straightforward. Any entity that contracts directly with an employer, even on a single service basis, is defined and regulated as an HMO. However, DOI does not oversee downstream risk contracting or capitation agreements.
Indiana is one of the few states to have enacted regulations that specifically apply to PPOs. The state's any-willing-provider statute requires PPO plans to spell out clearly the terms and conditions for providers to join the network, and it does not permit PPOs to limit provider contracts to hospitals.
DOI's licensure review has been the only significant form of quality oversight of private HMOs in Indiana. The Patient Protection Bill, which was considered during the 1996 session, represented a major shift in direction. That bill, which failed to pass, mandated that HMO enrollees receive direct access to a variety of specialists; required that plans offer a point-of-service option; and dealt with "gag" rules. After the bill was rejected, the legislature established a task force to explore other approaches to the problem; subsequent legislation has addressed many consumer protection issues.
The legislature did pass several measures in 1996 that dealt with HMOs, including a bill that requires the use of relevant specialist protocols for determining postpartum stays. Another bill, which was sponsored by a member of the Health and Environmental Affairs Committee, requires HMOs to allow OB/GYN physicians to serve as primary care physicians and outlaws the so-called "gag" rules. These provisions were supported by "mom and apple pie" arguments, explains DOI's deputy commissioner, who testified during the hearings on the HMO bills that she found no evidence of serious problems and that she could not cite a single case of any woman either being denied OB/GYN access or being forced to curtail her postpartum stay despite medical indications. However, supporters showed documentation that their policies did not allow OB/GYN physicians as primary care physicians. Other supporters provided anecdotal evidence, like the testimony of a woman whose baby was allergic to milk and who claimed that her child might have experienced problems had it been born in the existing health care system.
The two legislative sessions since the failure of the 1996 Patient Protection Act have altered the health insurance environment. In 1997 several laws were passed providing more protections for health insurance consumers, including the requirement that all individual and group health policies cover diabetic supplies and services. A new law on HMO grievance procedures was passed. A state version of federal mental health parity was adopted. A law restricting the use of genetic testing when making health insurance decisions is now in effect. Breast reconstruction after a mastectomy must now also be covered when mammography coverage is included in a health insurance policy.
In 1998 the legislature expanded consumer protections under HMO plans. Among other requirements, HMOs must now offer a point-of-service option to enrollees. The legislature also adopted into state law several provisions of the federal Health Insurance Portability and Accountability Act (HIPAA). Since July 1997, the DOI, as required by federal regulations has been informing consumers of their protections under HIPAA.
In the near future, Indiana will license provider sponsored organizations (PSOs) in reaction to the federal Balanced Budget Act of 1997 (BBA), which made changes to the delivery of Medicare benefits. Under an agreement with the Health Care Financing Administration (HCFA), Indiana will attempt to license PSOs before HCFA will accept a waiver of state licensure from those PSOs wishing to conduct business in Indiana. The DOI's view is that state licensure of PSOs is the best way to assure solvency and consumer protection.
OMPP relies heavily on contracting and market mechanisms to control costs and improve quality. The state is divided into three Medicaid regions. OMPP's goal is to award contracts with two HMOs in each of the three regions, constituting a maximum total of six HMO contracts for the entire state. In 1998, OMPP had only four contracts––two in the central Indiana region, and one each in the north and south regions. The agency intends to compare HMOs with fee-for-service plans on a service-by-service basis, using a range of consumer satisfaction surveys and other actuarial techniques.
OMPP has linked the success of the Medicaid program to its experience with contracting. Extensive use of outside contractors to monitor HMOs and perform other program functions has allowed the state to keep staff levels low––OMPP staff number only approximately 60 people for a budget of $2.5 billion. As a result, OMPP does not have a lot of state employees devoted to processing claims and other functions, and believes the office is well situated to make the transition to managed care.
Indiana has divided responsibility for managed care oversight between two agencies: DOI oversees the private market and FSSA is responsible for the Medicaid program. There are many providers and some members of the legislature who would like SDH to run the Medicaid program, especially in light of the advent of the federally funded Children's Health Insurance Program (CHIP). There has been no effort to coordinate purchasing between Medicaid and state employees to date.
The Indiana state health commissioner expects more market change in Indiana: more linkages and mergers, bigger physician practice groups. He believes that there will be more indigent providers connected with HMOs, although legislators from rural areas point to the lack of providers for Medicaid recipients. Despite the probability that new oversight measures will be debated by the legislature, he does not expect a lot of regulatory oversight of the market, owing to the political climate. In his opinion, the effective alternative is to gather health information and to build computer networks for dissemination, educational and data collection functions the department has performed since it came into existence. ISDH is moving away from direct provision of health services, partly because of costs but also because other providers are capable of providing efficient services. The department is looking into working with managed care on community health initiatives and data collection, and it would like to move in the direction of developing a consumer guide to clinical quality and services in cooperation with the managed care industry.
The challenges for Indiana in the future will be to optimize its health data collection and to develop an effective quality oversight policy for managed care that will be acceptable to providers, consumers, legislators, and regulators.
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.state.in.us/idoi
www.state.in.us/isdh
www.state.in.us/fssa
(Last updated April 6, 1998)
There are 12 HMOs licensed in Iowa, but estimates of the exact level of penetration differ. One member of the Iowa Senate Human Resources Committee, a vice president for Blue Cross/Blue Shield, estimates that less than 11 percent of the insured population is in a managed care plan. However, the insurance commissioner points out that Iowa has a variety of health plans that manage care in arrangements other than closed panels typical of HMOs and ODSs (provider-run organized delivery systems). A number of Iowans are insured through preferred provider organizations (PPOs), or through traditional insurance plans that rely on utilization review and other managed care concepts.
The Iowa legislature passed a series of important reforms several years ago, which were intended to improve access to insurance; to encourage the expansion of managed care; and to promote the collection and dissemination of data. The reforms included the development of health insurance purchasing alliances (HIPCs); the authorization of organized delivery systems (ODSs), to be regulated by the state's Department of Public Health; and the creation of a centralized health data repository, the Community Health Management Information System (CHMIS), which has since been repealed.
In May 1994, the governor adopted the recommendation of the Iowa Health Reform Council and created the Health Reform Transition Team to coordinate the implementation of the various ongoing health care reforms. The transition team completed its work and disbanded in October 1995, after recommending a full review of the state's regulatory structure; this review was being carried out by an interagency task force.
The Iowa Medicaid Department operates MediPASS, a primary care case management program in 84 of the state's 99 counties. The state Medicaid office also contracts with five HMOs in 51 counties and has carved out two capitated prepaid health plans (PHPs) for mental health and substance abuse. Medicaid managed care will continue to expand until it becomes statewide.
The Iowa Division of Insurance (DOI) is the sole state agency responsible for licensing HMOs. The division monitors solvency and marketing practice, the organizational structure of plans, and quality of care. The data collection issue still must be addressed, since CHMIS continues to falter. In fact, the General Assembly approved a sunset date of February 28, 1999, for CHMIS, after a final report from the CHMIS board.
The division uses an outside nonprofit auditor, the Iowa Foundation for Medical Care (IFMC), to review HMO quality of care. The foundation also audits Medicaid managed care contracts for the Department of Human Services.
The Department of Public Health (DPH) licenses and oversees the new, provider-based ODSs, whose regulatory and quality requirements will differ from those of private HMOs. DOI and the DPH are discussing long-term strategies for improving health care access and quality.
The Iowa Department of Human Services (DHS) operates the states Medicaid program. The department oversees a primary care case management program, MediPASS, in 84 counties; contracts with HMOs in 51 counties; and monitors the quality and solvency of the mental health and substance abuse PHPs. Medicaid officials plan to contract with the ODS plans as well after federal reforms have been enacted.
The Iowa Legislature (senate and house) has worked actively on issues of health care, including individual and small group insurance reform, delivery systems, data collection, and quality of care.
DOI licenses and monitors all commercial HMOs in Iowa and is empowered to consider a broad range of criteria in its oversight. Before issuing a license, the division reviews capitalization requirements and also looks at various organizational components: the corporate structure of the HMO; provider contracting practices; and enrollee participation on the board of directors.
DPH is responsible for licensure and oversight of ODSs; there are two ODSs in the state, although the director of public health reports that there have been several other inquiries. ODS plans must comply with most regulations applicable to HMOs, including federal Health Insurance Portability and Accountability Act and state group insurance reform laws. DPH has contracted out responsibility for evaluating ODS solvency to DOI. DOI and DPH officials meet regularly to discuss issues of common interest.
DOI is closely following the recommendations of the National Association of Insurance Commissioners' Health Plan Accountability Working Groups. Insurance officials also work with the Iowa Coalition for Quality Health Care, a coalition of providers, insurers, and employer groups interested in managed care. The coalition has been actively studying policy issues related to managed care, including the provider selection process and disclosure guidelines. The insurance commissioner points out that this working relationship is a good example of cooperation between the public and private sectors in Iowa.
In licensing an Iowa HMO, DOI reviews several quality factors: access to providers, grievance procedures, quality assurance systems, and consumer complaints. For example, the agency requires that providers in a licensed HMO be located within 30 miles of the enrolled population. The division requires that all insurers and HMOs doing utilization review follow the guidelines established by the Utilization Review Accreditation Commission.
DOI uses IFMC for much of its quality oversight. The foundation audits each HMO every two years, more frequently if the commissioner deems it necessary. IFMC reviews medical files and minutes from quality assurance, credentialing, grievance and other committee meetings, and reports its findings to DOI.
The division itself responds to complaints about HMO coverage and service. The insurance commissioner says she deals with them "in the same manner as other insurance complaints." The division tracks complaints about particular plans and reviews the number and pattern of complaints during the regular financial audit. In addition, IFMC reviews division complaint records and HMO complaint files during its biennial quality-of-care audit.
DPH plans to monitor ODS quality differently, according to the director. DPH will employ health outcome measures, relying partially on HEDIS criteria and partially on internally developed standards. The director points out, however, that the state of the art for outcome measurement is limited.
Iowa's Department of Human Services Medicaid program operates four managed care programs: MediPASS; HMO contracts for managed care; and two prepaid health plans for mental health and substance abuse. Under MediPASS, physicians apply to the state to act as a patient manager and are paid a small monthly fee. All treatment is provided on a fee-for-service basis. The Medicaid agency relies on a peer evaluation review committee to produce a quarterly profile on each doctor's record of utilization and quality.
The Medicaid program contracts with licensed HMOs in the 44 counties where they exist, using a capitation arrangement. The department has hired a consultant to assist in creating a more efficient rate mechanism and has developed a reduced capitation rate schedule. DHS relies on the DOI to oversee the solvency of HMOs. Program officials responsible for the prepaid health plans do their own contracting and solvency oversight. For quality oversight of both HMOs and PHPs, the department uses customer satisfaction surveys, reviews by the University of Iowa, and reviews by IFMC.
The various Iowa health care agencies maintain good relations both with each other and with providers and consumers. The Iowa Coalition for Quality Health Care and the Health Reform Transition Team are examples of such collaboration. DOI and DPH meet regularly to discuss common concerns related to access, quality, and affordability. DOI oversees the solvency of HMOs, and all the agencies depend on the nonprofit IFMC to monitor quality, thereby ensuring continuous coordination of oversight.
A critical element of coordination is the maintenance of accurate, reliable information systems, but two attempts to improve information quality and access encountered problems. In order to promote increased access to insurance coverage, the legislature authorized the formation of health care purchasing alliances (HIPCs). The law required HIPCs to produce report cards on various insurers and relay this information to the public. Only a single HIPC was formed; this entity, which included 600 businesses and covered 4,550 employees and dependents, has since merged with Blue Cross/Blue Shield. According to the director of public health, as of mid-1996, there were no independent HIPCs in Iowa. The single HIPC was not successful, and no other HIPCs have been attempted.
The Iowa Medicaid program is committed to expanding its capitated managed care program. Human Services' Medicaid director says the state is becoming more concerned about the rising costs. The plan is to "see how much money we really free up" by using HMOs. He would like to use some of the savings to cover more of the indigent uninsured.
Many in the state have high expectations for the new ODS plans. HMOs offer services in only 51 of 99 counties, and the Medicaid program is counting on ODS development so that Iowa can expand its capitated program to cover the entire state. The director reports that provider groups are also eager to "cut out the middleman," the HMO, and contract directly with the state. He acknowledges, however, that the state may face a "greater element of risk" in contracting with these entities because the providers lack experience in calculating and assuming risk.
Iowa's director of public health is more cautious about the potential for ODS expansion. There are only two licensed ODSs, and other potential groups are taking a "wait and see attitude to see how the market will evolve." It is not clear what Medicaid will do if the ODS plans fail to develop as expected.
Despite many creative and positive initiatives, it is still unclear how health reform will develop in Iowa.
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.state.ia.us/government/com/ins
www.idph.state.ia.us
www.dhs.state.ia.us
(Last updated August 9, 1999)
HMO enrollment in Missouri increased 70 percent between 1994 and 1996. A Missouri Department of Insurance (DOI) analyst estimated statewide penetration of managed care in mid-1996 at approximately 30 percent, with more than 42 percent penetration in the St. Louis area. Membership is expected to continue to grow as officials and employers seek ways to control health care costs.
The Missouri Division of Medical Services (DMS) has been actively enrolling Medicaid clients in MC+, a managed care program, under a 1915(b) waiver. As of December 31, 1998, Missouri had approximately 135,000 MC+ recipients enrolled in five HMOs in the five-county St. Louis (Eastern) MC+ region, almost 31,000 MC+ recipients enrolled in four HMOs in an 18-county Central Missouri MC+ region, and approximately 71,000 MC+ recipients enrolled in four HMOs in the seven-county Kansas City (Western) MC+ region.
The Division of Medical Services submitted an 1115 demonstration waiver to the Health Care Financing Administration (HCFA) in June 1994. An amendment to the 1115 demonstration waiver was submitted to HCFA on August 26, 1997. The 1115 demonstration waiver, as amended, was approved by HCFA on April 28, 1998. The waiver amendment constitutes Missouri's commitment to improving medical care to low-income children and supports families moving from welfare into jobs. The MC+ For Kids program was implemented on September 1, 1998. As of December 31, 1998, there were 10,500 children enrolled in the MC+ For Kids program in managed care areas. Of these, approximately 4,000 children were enrolled in three HMOs in the five-county St. Louis (Eastern) MC+ region, 2,400 children were enrolled in the three HMOs in the 18-county Central MC+ region, and approximately 4,075 children were enrolled in three HMOs in the seven-county Kansas City (Western) MC+ region. MC+ For Kids children receive services through the fee-for-service program in non-managed care areas.
The Missouri Consolidated Health Care Plan (MCHCP), created by statute in 1992, is a state-sponsored health insurance purchasing alliance for employees of state and local governmental agencies. MCHCP began offering health insurance options to non-state governments, including HMO plans, in 1995. Within a year, 75 percent of the MCHCP's members had enrolled in an HMO or POS. Currently 95 percent of all of its members are enrolled in one of these options.
The 1994 Show-Me initiative recommended five "foundation" reforms: revising health insurance; instituting Medicaid managed care; improving the public health infrastructure; creating an effective primary care system; and installing a health care information system that would reach consumers at all levels. The legislature has enacted several reforms: Medical Savings Accounts; the Small Employer Health Insurance Availability Act; and the Missouri "Hi-Risk" Health Insurance Pool.
The Missouri Department of Insurance (DOI) is the licensing agent for HMOs in Missouri. It oversees solvency, responds to consumer complaints, reviews HMO forms and contracts, and is responsible for approving HMO mergers and conversions from nonprofit to for-profit status. However, the division does not oversee preferred provider organizations (PPOs), because they entail a different assumption of risk. However, if the PPO is assuming financial insurance risk their plans are reviewed by the DOI to determine the insurance authorities or licenses that may be required. In some situations such as the PPO accepting monetary risk by capitation, the DOI would advise the PPO on how to obtain HMO licensure.
During the summer of 1996, the legislative leadership appointed an interim, bipartisan Joint Legislative Committee on Managed Care. More than 200 persons testified, including consumers, consumer advocates, health care professionals, state officials, health care providers, business and government purchasers of managed care, and representative from the managed care industry. As a result of these managed care public hearings, the 89th General Assembly of Missouri overwhelmingly passed House Bill 335, which was signed into law by Governor Carnahan in August 1997. This comprehensive bill extended consumer protections in such areas as utilization review, emergency coverage, provider network adequacy, disclosure statements to an enrollee or potential enrollee, how the enrollee may file a grievance, establishment of a binding grievance review by a peer review committee, and the publication in some HMO forms and documents of the DOI's consumer complaint hotline telephone number.
The Missouri Division of Medical Services (DMS) within the Department of Social Services contracts only with state-licensed HMOs for its Medicaid managed care. At the end of 1998, DMS had approximately 277,000 recipients enrolled in the MC+ program.
The Missouri Department of Health (DOH) licenses hospitals, hospices, and home health agencies. As a result of the 1997 managed care legislation, HMOs are required to provide data regarding the quality of care, access to care, member satisfaction, and member health status to DOH. The department will be publishing an annual consumer guide based on this information.
The Missouri State Legislature (senate and general assembly) has been active in health care reform. The Joint Interim Committee on Managed Care began meeting in late 1996, which resulted in the comprehensive managed care legislation passed in 1997 as outlined above. Other health-related legislation passed in 1997 included bills mandating insurance coverage for reconstructive surgery after a mastectomy, diabetes treatment, and formulas for patients with phenylketonuria (PKU) or any inherited disease of amino and organic acids.
A DOI planner describes Missouri's solvency oversight programs as strong, including the department's recovery program, which assists financially vulnerable HMOs in the transition to solvency. DOI performs market conduct and solvency examinations of each HMO every three years. Agency staff analyze quarterly and annual reports carefully for solvency issues, track all consumer complaints, and publish a report. Most complaints to the DOI Consumer Affairs Department about HMOs relate either to denial of treatment or to billing problems. If a particular plan receives a large number of complaints, it can trigger an earlier review.
Missouri has taken "a cautious approach" to managed care oversight, according to a member of the state legislature who is active in health care issues. The state made a conscious decision to take a market-oriented approach to health delivery regulation. The legislator notes that the Missouri health care market has been turbulent, as the state has seen many mergers and acquisitions and has instituted very few "rules" of operation. The DOI planner agrees that mergers are a significant factor in Missouri, citing two in 1995-96. The DOI must approve all HMO mergers; however, the department negotiates its concerns with the parties, as it did in the 1995 United Healthcare Corporation (UHC) acquisition of MetLife, rather than disallow the contract. According to a senior DOI spokesman, virtually all approvals are tied to special conditions or divestiture requirements because of the increasing concentration in the managed care market.
The DOI has been reviewing the proposed conversions of Blue Cross/Blue Shield of Missouri and Blue Cross/Blue Shield of Kansas City from nonprofit to for-profit entities. The MDI is concerned about the Blues' abandonment of their charitable responsibilities to the public after they have enjoyed nonprofit status for more than 60 years.
DOI does not oversee or collect data on PPOs, which are a large component of managed care in the state, because these organizations normally do not accept the monetary risk required by capitation.
Quality oversight of Missouri's private market has received more attention as a result of the 1997 managed care legislation. HMOs are required to provide data regarding the quality of care, access to care, member satisfaction, and member health status to DOH. The department will use this information to publish an annual consumer guide. The DOI Consumer Affairs Department does not report a high volume of quality-of-care complaints from enrollees.
The Missouri Department of Social Services, through the Division of Medical Services (DMS), is undertaking the development of a coordinated care system for Medicaid-eligible and physically disabled beneficiaries. Coordinated care is an integrated health care system, the goal of which is to monitor and coordinate the health care needs of an individual in an effort to obtain high-quality, cost-effective services that are rendered in the most appropriate settings.
Missouri has developed a Program of All-Inclusive Care for the Elderly (PACE), which is a comprehensive service delivery system and finance model for the frail elderly that replicates the original model pioneered at the San Francisco On Lok site in the early 1980s. PACE is an integrated service system that includes primary care, restorative therapy, transportation, home health care, inpatient acute care, and even long-term care in a nursing facility when home and community-based services are no longer appropriate. The Health Care Options Plus (HCO+) Program is still in the development stage.
The Missouri Consolidated Health Care Plan, the Gateway Purchasing Association, and the Department of Health have collaborated on quality indicators. The Departments of Health and Social Services also work closely together to develop and monitor quality indicators for the Medicaid population.
With the implementation of MC+, the Missouri Medicaid managed care program, the Division of Medical Services (DMS) developed a Quality Assessment and Improvement (QA&I) plan for the purpose of oversight. The QA&I plan includes on-site audits of health plans' operations, collection, and analysis of utilization and health indicator data, annual member satisfaction surveys, and an annual independent external review. An integral part of the QA&I plan is the Consumer Advisory Group, which provides recommendations for the improvement of the quality of services that are available through the MC+ program.
Health reform and managed care oversight issues will continue to be high profile issues in Missouri as legislators and state officials balance consumer protection and the delivery of quality care against both costs and provider and insurers interests. More time is needed to evaluate the impact of the provisions contained in the 1997 managed care legislation.
Insurance reform is another important area. A Missouri Department of Health report shows an estimated 755,000 citizens had no health coverage during 1995. This represents an increase of non-elderly uninsured from 1993, when there were an estimated 630,000 uninsured. Total health care charges for uninsured non-elderly Missourians increased from $1 billion in 1993 to $1.3 billion in 1995. A bill to allow small employers to obtain medical coverage through MCHCP was introduced in the 1998 legislative session.
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.insurance.state.mo.us
www.dss.state.mo.us/dms
www.health.state.mo.us
(Last updated August 23, 1999)
Managed care continues to grow at a rapid rate in New Jersey. By the end of 1997 more than 2.3 million of New Jersey's 7.7 million residents were enrolled in HMOs, and it is estimated that another 1 million were enrolled in other forms of managed care.
The state's Medicaid program has moved aggressively into managed care. Using a 1915(b) waiver and building on its very successful voluntary program, New Jersey in 1997 completed enrollment in a statewide mandatory managed care program for clients meeting the eligibility criteria for the former Aid to Families with Dependent Children (AFDC) program. As of August 1998, more than 93 percent of eligible AFDC/TANF (Temporary Assistance to Needy Families) individuals were enrolled. Because of the Medicaid program's intensive attention to client education during the process of selecting a managed care plan, New Jersey experiences one of the nation's lowest default assignment rates, as well as remarkably low disenrollment rates.
New Jersey has introduced several programs to expand access to insurance coverage, including one for small companies, the Small Employer Health Benefits Program (SEH), and one for workers without access to insurance through their employer, the self-employed, and the unemployed, the Individual Health Coverage (IHC) program. Both include elements of guaranteed issue and renewal, standard plans, minimum loss ratios, and portability. In 1995, the state introduced Health Access New Jersey, a program to provide financial assistance to uninsured, low-income residents in purchasing health insurance in the individual market. In 1997, the state redirected its focus to expanding insurance coverage for uninsured, low-income children. NJ KidCare, a subsidized children's insurance program, began operations in February 1998.
The New Jersey Department of Health and Senior Services (DHSS) is one of two state agencies responsible for licensing HMOs. In 1997, comprehensive new HMO regulations were adopted articulating extensive consumer rights, including an independent medical necessity appeals system. Subsequently, the legislature passed the Health Care Quality Act (HCQA), which expanded and extended these consumer protections to other insurers offering comprehensive managed care plans (e.g., preferred provider networks). As a result, for all forms of comprehensive managed care, the department handles quality assessment, focusing on network adequacy, performance reporting, and complaint resolution. In addition, the new law extends the independent medical necessity appeals system to any insurer that engages in utilization review.
The department also administers the state's charity care program, which reimburses hospitals for services provided to low-income uninsured people. As directed by a 1996 state law, the department developed a program for incorporating managed care principles into the delivery of charity care, and secured the approval of the Health Care Financing Administration (HCFA) in February 1998. Under the 1996 law, hospital participation in the charity care managed care program was to be mandatory, and the program was to be statewide. However, in June 1998, legislation was enacted eliminating the prior program and creating a two-year voluntary pilot project to test the use of hospital-based coordinated care networks. Since then, the state has explored models for hospital-based health care programs for the low-income uninsured, and is submitting such a model to HCFA for review.
The New Jersey Department of Banking and Insurance (DBI) holds joint responsibility for licensing HMOs and sole responsibility for licensing other insurance carriers, oversees insurer and HMO solvency, and works with DHSS to track consumer complaints. HCQA required DBI and DHSS to make recommendations to the legislature by February 1999 on whether and how to license other types of managed care entities that are interested in assuming insurance risk, such as provider-sponsored organizations. In addition, the SEH and IHC programs are administered by independent boards housed within DBI.
The Department of Human Services (DHS) manages the state Medicaid program for all services except long-term care, manages the NJ KidCare program, contracts with licensed HMOs for Medicaid and NJ KidCare managed care, and collects information related to a variety of quality measures. New Jersey plans to expand its mandatory Medicaid managed care program to the SSI population, as well as to behavioral health care services, starting in 2000. DHS also administers NJ KidCare. When fully implemented it should provide coverage to more than 100,000 uninsured children from low-income families. Children in families up to 350 percent of the federal poverty level are eligible for NJ KidCare. An interagency task force led by the governor's office is exploring ways to make affordable health insurance available to uninsured children and families in a cooperative effort with employers.
The New Jersey State Legislature (assembly and senate) has been active in reforming New Jersey's insurance system and extending access to coverage, beginning in 1992 with the IHC program, which offers insurance to the self-employed, the unemployed, and others who cannot get coverage through the workplace; and with the SEH, which assists businesses with two to fifty employees to obtain insurance. These programs are characterized by guaranteed issue, portability of coverage, minimum medical loss ratios, pure (IHC) and modified (SEH) community rating, and standardized plans (although the SEH also allows considerable room for variation. In 1997 lawmakers passed the Health Care Quality Act, which expands and extends managed care consumer protections beyond HMOs. It also required the commissioners of DHSS and DBI to make recommendations to the legislature on the regulation of all risk-bearing entities, including PSOs. Legislators also renewed and increased funding for the charity care program, enacting a doubling of the tobacco tax as one of several ongoing sources of funding. Finally, they enacted legislation creating NJ KidCare and authorized up to $47 million per year in charity care funding to match federal funds available through the new Children's Health Insurance Program.
Legislative oversight of the Medicaid program has focused on budgetary review. While the program remains within budget, lawmakers have left the operational management to DHS.
The market-driven hospital environment continues to promote integration of the delivery system, with operational models ranging from loose affiliations to integrated corporate structures. Concomitant growth in managed care has increased downstream risk assumption by providers. The HMO regulations adopted in 1997 allow HMOs to contract for the delivery of health care services with an entity that is not licensed to assume risk under certain circumstances. Pending legislation would allow "organized delivery systems" to become licensed by DBI and accept financial risk. Provider-sponsored systems also are seeking changes in state law that would allow them to engage in direct insurance contracting, subject to market entry and asset valuation standards that are different than those applying to HMOs. Currently such systems must obtain an HMO license in order to engage in direct contracting.
Under the Medicare + Choice provisions of the federal Balanced Budget Act of 1997, provider-sponsored organizations that are unable to obtain state certification to accept insurance risk have the opportunity of operating Medicare-only managed plans for three years under a federal waiver. There appears to be interest in pursuing such waivers by some New Jersey integrated systems.
In the fall of 1997, DBI and DHSS urged HMOs to enter into a voluntary agreement with state agencies to follow the same provider prompt payment guidelines that apply to indemnity insurers: payment of clean claims within 60 days, with a 10 percent interest penalty when exceeding the target. The agencies undertook this initiative as a result of mounting complaints by providers of excessive delays by managed care plans in paying claims. Independent agency review confirmed that significant problems existed. All major HMOs signed the voluntary agreements, and the agencies continue to monitor the situation. Regulations were adopted in 1998 to make prompt payment a requirement for all HMOs. Subsequently the legislature passed Health Information Network Technology (HINT), making the time frame even more stringent.
Amendments to HMO regulations, adopted in March 1997, established new financial reserve, deposit, and net worth requirements, giving DBI effective tools to monitor solvency. These regulations were tightened in June 1999. Included in the regulations is a requirement that an HMO undergo a preoperational audit before being issued a certificate of authority.
The former DHSS commissioner put together a broad advisory panel that helped him develop comprehensive new HMO quality standards, which were adopted as regulations in 1997. The revised rules constitute an HMO consumer "bill of rights," including such provisions as having access to a primary care provider or back-up 24 hours a day; choice among specialists following a referral; referral to a specialist with appropriate experience for consumers with chronic disabilities; requiring that a physician makes any decisions on behalf of the HMO to deny or limit coverage; coverage for emergency screening without prior approval; prohibition on provider gag rules; access to information on how the HMO pays its doctors; and, finally, the right to appeal a decision to deny or limit covered health care services. In the case of coverage appeals, the recommendation of the outside independent utilization review panel is advisory only. Early evidence indicated, however, that HMOs are willing to abide by such recommendations. Moreover, the commissioner has the power to monitor an HMO's compliance with the recommendations and to take other action, short of compelling payment by the HMO, when inappropriate trends are noted.
The new regulations also require HMOs to undergo an external quality audit as part of a comprehensive assessment review and to submit data to DHSS to allow quality performance measurement. Using these data, as well as an independent survey of HMO consumer satisfaction, in November 1997 DHSS issued the first of its annual HMO performance report cards comparing health plans to each other on a number of key measures. The consumer satisfaction portion of the survey represented the first statewide use of the Consumer Assessment of Health Plans (CAHPS) survey instrument. The HMO report, available in both print and on the department's Web site (www.state.nj.us/health), has been the most popular department publication in recent years.
The HCQA, which went into effect in February 1998, extends the consumer protections found in the new HMO regulations to all forms of comprehensive managed care. It also created new protections for providers applying to be included in a managed care plan's network, and for providers being terminated by the HMO. In addition, the act contains an explicit prohibition against financial incentives to providers for withholding services. It extends coverage appeals requirements to all carriers employing utilization review and establishes the right of DHSS to sanction carriers exhibiting a pattern of noncompliance with the outside review panel's recommendations. HCQA requires every managed care plan to offer a point-of-service (POS) option to contract holders (typically employers). Finally, the law substantially increases penalties for violations of these provisions by managed care plans, to up to $10,000 per violation.
In January 1998, DHSS began a highly publicized investigation into the activities of an HMO that appeared to be redirecting subscribers scheduled for operations away from participating hospitals because of contract disputes with anesthesiologists at those hospitals. The department found this to be a violation of the HMO regulations concerning provider networks, and proposed significant penalties. DHSS intends to continue its vigorous enforcement of consumer quality protections.
DHS is rapidly expanding New Jersey's Medicaid managed care program. The director of Medical Assistance and Health Services states that the goals are to provide better access and save money through managed care; her office is convinced that prudent purchasing will help to promote better health outcomes. The director considers the current program successful; as of August 1999 there were 400,596 Medicaid and New Jersey KidCare enrollees in the mandatory plan. The Medicaid program contracts only with HMOs licensed by DHSS and DBI; handles on-site assessment and annual monitoring with its own staff; and has developed multiple quality assessments of each plan's network. The director feels that the plan's development and implementation has benefited from the discretionary freedom granted by the legislature to DHS.
The department conducts ongoing discussions on policies and procedures with its contractor HMO plans. "We hope that by talking with the industry early, it will prevent problems," explains the director of Medicaid services.
There is tight coordination among the New Jersey agencies involved in managed care oversight. DHSS and DBI worked closely together on the panel that developed the revised HMO regulations and are cooperating closely in the implementation of the HCQA. Both agencies have worked with DHS in its implementation of Medicaid managed care. DHSS and DHS have worked very closely in the design and development of NJ KidCare.
New Jersey will continue to pursue a managed care regulatory strategy that balances market competition with appropriate consumer protections, placing particular emphasis on providing purchasers and consumers with sound data on the performance of health care plans. If additional resources become available, DHSS would also like to expand the HMO performance report card to include information pertinent to particular subgroups, such as people with chronic conditions and the collection of performance data will be extended to PPOs and other forms of managed care.
The DHSS is particularly concerned that, as hospital merger and integration activity continues, the providers who give the most services to the poor be included in the evolving systems. To facilitate such relationships, the DHSS established regulatory requirements in mid-1998 for a cardiac surgery satellite demonstration program. This demonstration allows a suburban hospital that is part of a system including an urban hospital licensed to perform cardiac surgery also to perform such surgery with the urban hospital holding the license. The suburban hospital must share all of its surgery revenues exceeding expenses with its urban partner and the urban surgery program must not be adversely affected. One site was selected for the demonstration program.
The administration and the legislature will be addressing the issue of licensing managed care entities, both PSOs and limited purpose plans. Although it is too early to speculate what action will be taken, this is sure to be a major force of oversight effort in the coming years. Regardless of what actions the state takes with respect to licensing these entities, the state expects some integrated delivery systems to pursue federal waivers to offer Medicare-only managed care plans. DHSS and DBI are very interested in the impact this development will have on delivery systems and markets.
In working to meet these challenges, New Jersey can build on its successful history of expanding access and on its well-coordinated agency structure.
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.state.nj.us/health
www.state.nj.us/humanservices
www.naic.org/nj/life.htm
www.naic.org/nj/reform.htm
(Last updated October 4, 1999)
The number of persons receiving managed care through HMOs (including HMO-POS) in North Carolina was 1.3 million as of March 31, 1999. These clients were enrolled in 18 licensed HMOs, one of which has since left the market. Another 1.2 million are estimated to be covered under an insured PPO plan. For three years, from 1993 to 1995, North Carolina's Department of Insurance (DOI) attempted to overhaul the state's HMO laws, but was unsuccessful. In 1996 it issued new regulations that expanded oversight and mandated new HMO responsibilities within the existing statutory framework. In 1997, new legislation was passed; effective January 1, 1998, the law requires health plans to submit annual reports to the DOI; establishes requirements for health insurer and HMO provider networks, including special provisions addressing when insured persons must be allowed to use out-of-network providers at the in-network levels of coverage and prohibiting discrimination against high-risk populations through systematic exclusion of their health care providers from the network; rewrites current Preferred Provider Organization (PPO) laws to clarify the requirements for health insurers selling PPO benefit plans; and strengthens current requirements for systems that health insurers use to perform utilization review. In 1999, managed care "protections," including access to non-formulary prescription drugs and extended/standing referrals to specialists, were enacted, while others, such as continuity of care when a patient leaves a network, were not.
North Carolina operates a primary care case management program (PCCM), Carolina ACCESS, for its Medicaid population, in 99 counties. The Medicaid program has begun a mandatory capitated managed care program, under a 1915(b) waiver, in one county, which will cover 30,000 of the state's 800,000 recipients.
The North Carolina Department of Insurance (DOI) has an elected commissioner. As the single state agency responsible for licensing HMOs, DOI reviews provider form contracts, products, and rates; oversees plan solvency; tracks consumer complaints; reviews company operations; and performs market conduct exams, which include review of provider networks, credentialing processes, quality assurance, and utilization management in addition to scrutiny of advertising material and claims payment procedures. These same functions are performed for indemnity insurers' PPO plan operations. DOI also had responsibility for the Medical Database Commission until 1995.
The North Carolina Department of Environment, Health and Natural Resources (DEHNR) has no formal oversight role for managed care. The agency oversees environmental health issues; delivers public health services and care for the indigent; and maintains, via the State Center for Health Statistics, a statewide health information database.
The North Carolina Division of Medical Assistance (DMA) manages the state Medicaid program, including the PCCM component and the new mandatory capitated managed care program, which was implemented in June 1996. Under legislation passed in 1997, DMA, rather than DOI, was given authority to license and regulate PSOs engaged in Medicare only, although no such entities are yet in existence.
A part-time citizen legislature, the North Carolina State Legislature has expanded access to care through several initiatives, such as Medicaid eligibility expansion. In 1997, the legislature passed significant legislation to reform the state's HMO laws, including improved data reporting from HMOs to the DOI and provision of information to plan participants and increased enforcement authority over HMOs by the insurance commissioner.
Managed care has been slow to penetrate North Carolina, a state with a thinly spread population and few large areas of dense concentration. The number of licensed full-service HMOs remained unchanged at 10 from 1987 to 1994, but 14 new plans were licensed between 1995 and 1997. Since 1997, only one new HMO was licensed and several others were lost to consolidations. One HMO withdrew from North Carolina and another is in the process of selling its members to existing HMOs. As of August 1999, there were 21 licensed HMOs, 17 of which are active and have members. Enrollment trends show a similar pattern, with slow growth through the 1980s and early 1990s and very rapid growth in the mid-1990s, at a rate of 153 percent from the end of 1993 through June 1997. Between June 1997 and December 1998, HMO enrollment grew by 18 percent.
Solvency issues had not been a significant concern in North Carolina for much of the 1990s, but poor overall financial performance in 1997 and 1998 renewed the need for vigilant oversight to catch problems early and required an infusion of capital to protect plans and policyholders. DOI reviews HMO and indemnity premiums for all plans to ensure that collected revenues will cover projected liabilities and holds HMOs accountable for risk. Only since 1994 have state HMOs begun using capitation to control provider costs. DOI has the power to disallow payment to any provider who receives a bonus or other compensation for denial of care.
DOI first requested a major legislative overhaul of the HMO laws in 1993, in advance of the growth spurt. This legislation, and subsequent revisions, failed three times in 1993-1996, but legislation was passed in 1997, as described above. Some additional laws were created in 1999, but there were no further comprehensive changes.
HMO quality is also not considered a serious problem in North Carolina. DOI reports that the volume of consumer complaints is not high. Early on, a commission proposed health plan report cards, but this reform has not been enacted. The 1997 legislation required HMOs to provide information to the insurance commissioner regarding their provider networks, quality assurance programs, and utilization review programs and to report HEDIS data; it also improved the commissioner's enforcement authority over HMOs. DOI has produced consumer publications presenting this data, but not in the form of "report cards."
North Carolina's scattered population has slowed attempts to enroll Medicaid recipients in managed care. There are 800,000 eligible recipients in the state, but no one county has more than 41,000 persons eligible for enrollment. DMA first instituted a PCCM program in 1991, with an option for HMOs to participate, but only one plan applied. The division obtained a 1915(b) waiver from the Health Care Financing Administration (HCFA), hoping to increase HMO participation, and received several applications for a mandatory, fully capitated, managed care program for Medicaid clients in the state's largest county.
The new program began enrollment in June 1996. DMA has persuaded plans to include traditional Medicaid providers in health plan networks and resisted pressure for service carve-outs, except for pharmacies. In evaluating proposals, the Medicaid agency found it "hard to evaluate bidders," admits the assistant director for administrative and regulatory affairs. "The quality of proposals does not correlate well with [the plan's] reputation. We had one great proposal, but another state [which had experience with that HMO] said they were 'sleazy.'"
There is no connection between state oversight of public and commercial care in North Carolina (although DMA contracts only with HMOs that are commercially licensed). The governor is averse to undertaking the major state government reorganization to combine all such activities into one cabinet department. Although there has been little coordination between DEHNR and DOI on managed care oversight, the state health director reports active ongoing consultations between DMA and DEHNR on the development of the Medicaid HMO program.
DMA does not plan rapid expansion of the managed care Medicaid program. The major area of future concern for several officials is the impact of managed care on traditional services to the indigent. "We see everybody [for medical care]," says the state health director. "The reason we can is [that] we get reimbursed from Medicaid and cost shift." However, cost shifting is more difficult under the tighter managed care incentives. DMA's director of administrative and regulatory affairs agrees that there will be less cost shifting and reports preliminary talks within her office about what steps are required to address the problem.
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.ncdoi.com
www.dhhs.state.nc.us/dma
(Last updated August 23, 1999)
Ohio's licensed HMOs cover an estimated 20 percent of the insured population. The state's Medicaid program, OhioCare, is expanding its reliance on managed care and expected to implement mandatory HMO coverage for 60 percent of Ohio's population receiving benefits from Aid to Families with Dependent Children (AFDC) and Health Start Medicaid, in all of the state's 88 counties by the end of fiscal 1997. As of mid-1996, 18 counties had HMO Medicaid plans either in place or starting up. Ohio received an 1115 waiver from the Health Care Financing Administration (HCFA) to implement OhioCare but was phasing it in incrementally because of uncertainties about federal changes in Medicaid. The eventual goal is to expand eligibility to 500,000 people below the poverty line who are not covered by Medicaid and Medicare.
The Ohio Department of Insurance (DOI) shares HMO oversight responsibility with the Department of Health. DOI licenses plans, oversees solvency, tracks
consumer complaints, and sends complaints about quality and access to the Department of Health.
The Ohio Department of Health (DOH) oversees HMO access and quality of care. DOH reviews grievance procedures, evaluates quality assurance protocols, and investigates unresolved grievances referred by DOI. DOH cannot require HMO plans to change decisions, but it relies on discussion and persuasion.
The Ohio Department of Human Services (DHS) runs Ohio's Medicaid program and the OhioCare managed care component, which it plans to expand to 60 percent of its client population. DHS is also mounting a campaign to collect encounter data from HMOs and to evaluate medical care and outcomes for populations served by HMOs and by fee-for-service (FFS) care.
In 1992, the Ohio State Legislature (senate and house) enacted the Small Employer Health Care Plan. Designed to improve access to coverage by small businesses and groups, this package of insurance reforms included these measures: mandated whole group underwriting and limited rate variation for small groups; provided for limited portability of coverage; imposed uniform exclusionary periods for preexisting conditions on small-group and individual coverage; prohibited the use of small-group riders and amendments; and limited the latitude of employers to require waiting periods for coverage. Legislators also helped to design the 1115 Medicaid waiver. In 1995, they voted to phase out the Certificate of Need program for all facilities except long-term care by 1997, and in 1996 they passed a 48-hour postpartum bill. Legislation passed in 1997 included bills for uniform licensure in managed care, for the implementation of the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), and the Physician Health Plan Partnership Act. In 1999 the legislature passed a patient protection plan.
Ohio's HMO law, passed in 1976, cites risk assumption as one criterion for regulation but was unclear about state oversight authority over non-HMO plans. In July 1994, DOI issued an important ruling requiring two physician hospital organizations (PHOs) that accept capitation directly from employers to apply for HMO licenses. In 1997, the legislature passed Senate Bill 67, establishing uniform licensure for all provider entities that accept insurance risk and specifying that, like HMOs, they will be regulated as health insuring corporations.
DOH reviews each HMO every three years; evaluates quality assurance, grievance procedures, and access; and follows up on consumer complaints. DOH has not taken any legal action against plans for medical and treatment decisions. "Generally, they [the HMOs] listen to what we have to say rather than risk bad publicity," explains DOH's chief of managed care. The department conducts computer pattern analysis but lacks the capacity to track quality complaints by type; the staff plans to use the new Medicaid database to compare managed care service with FFS performance. Ohio's HMO law prevents plans from using payment systems that reward the denial of "medically necessary care," but infringements of this rule are not frequent and thus do not figure largely in DOH oversight of incentive plans.
The expansion of managed care has generated more complaints and grievances about HMO care. However, officials do not believe that these necessarily indicate serious quality problems, and they take a cautious approach to major reforms. DOH's chief of health policy says: "There is no way to tell what is really happening. . . . It is all pretty anecdotal. There are more complaints, but there are more people in [HMO] coverage . . . people tend to forget about fee-for-service complaints." The legislature approved 48-hour coverage for postpartum care; and in 1999 passed House Bill 4, the Patient Protection Act, which includes expanded utilization review criteria and the right to independent review of denials of payment based a decision that the procedure is not medically necessary when the charge is over $500.
Ohio has been contracting with HMOs to provide Medicaid services for about 20 years and planned to increase managed care enrollment from 300,000 to 500,000. As of mid-1996, mandatory HMO plans for Medicaid recipients were operating in two counties and were starting up in five; voluntary plans can be found in 11 counties. The legislature rejected a proposal for DHS to contract with Medicaid-only plans but has otherwise given DHS discretionary authority in designing the HMO program. The decision to enroll AFDC and Health Start recipients first, before extending coverage to additional populations, has probably reduced legislative anxiety, according to the DHS chief of managed care.
Medicaid is committed to the use of purchasing and contracting tools in a way that ensures the best value for its money. DHS has chosen not to set arbitrary limits on the number of eligible contractors but rather to rely on the market and on recipient choice. In the first round of contracts, DHS has accepted any plan that meets the basic standards of price, access, and benefits described in the contract; in the next round, however, only plans that capture at least 15 percent of the market will be allowed to participate. Medicaid officials feared that a limited contract policy might prompt either legislative pressures to reconsider or lawsuits from excluded health plans. Enrollment information centers (EICs) have been established in all mandatory counties, and DHS does not allow direct marketing by plans in EIC counties.
The department uses several quality oversight tools. Its strong consumer satisfaction survey program requires each plan to conduct a survey of its Medicaid enrollees and supplements these with its own surveys. DHS also has an aggressive health data outcomes component, which recently compared fee-for-service (FFS) and HMO health status indicators and demonstrated that HMO enrollees were healthier. Finally, the department has been compiling information on Medicaid FFS recipients who are enrolling in HMO plans in order to evaluate the impact of HMO membership on health status.
Ohio agencies work in several ways to coordinate managed care oversight. DOI and DOH are cooperating in oversight of commercial plans and have collaborated in drafting the new HMO law. In 1996, DOH was writing a white paper that explores policy options for coordinating public health initiatives under managed care. The governor's health-related cabinet agencies are jointly developing contracting strategies for special-needs groups. There is no plan to coordinate state employee and Medicaid purchasing; however, DOH's chief of managed care reports that some cooperative purchasing has occurred at the local level.
The data collection program conducted by Ohio's Medicaid program is expected to provide good comparative information on HMO and FFS health outcomes, which may lead to reassessment of quality oversight activities. Meanwhile, extension of OhioCare coverage to the indigent population remains on hold. Quality oversight and expansion of Medicaid managed care are shaping up as the dominant issues of future Ohio reform.
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.state.oh.us/ins
www.odh.state.oh.us
www.state.oh.us/odhs
(Last updated September 21, 1999)
Five HMO plans cover 55 percent of the insured population in Oregon. The state legislature passed an employer mandate in 1989 to assure universal coverage, but the federal government failed to grant an ERISA exemption, and the mandate was rescinded by a sunset provision on January 2, 1996.
The state's Medicaid program, the centerpiece of the Oregon Health Plan, which has attracted national attention, received an 1115 waiver from the Health Care Financing Administration (HCFA) in March 1993 and has been operating under this waiver since February 1994. The plan, which is available to almost everyone beneath the federal poverty level, lists 745 medical conditions and therapies according to their treatment priority; the 1997-1999 biennial budget funds coverage of the first 578 conditions.
Eighty-five percent of Oregon's Medicaid population has been enrolled in managed care programs; 97 percent of that group is in capitated plans. The state has also implemented managed mental health, chemical dependency, and dental care plans for its Medicaid clients. Medicare is moving its dually eligible recipients into the Oregon Health Plan, and the regional Medicare office (Region 10) is collaborating with Medicaid to develop joint standards.
The Insurance Division of the Department of Consumer and Business Services (DCBS) oversees solvency and market practice for Oregon's private HMO plans and is paying more attention to issues affecting the delivery and denial of care. While DCBS does not regulate providers, hospitals, or the Medicaid managed care program, it does regulate the solvency of insurers that contract with the Medicaid program.
The Oregon Health Division (OHD) has no responsibility for oversight of managed care. The department enforces antidumping regulations (which require hospitals to evaluate and stabilize emergency patients before discharging them) and licenses some medical services, such as hospitals, laboratories, radiology, and mammography.
The division has a number of projects in collaboration with managed care designed to improve delivery of preventative services. These include the building and operation of a computerized immunization registry, development of tobacco cessation focus, and adoption of statewide guidelines for diabetes care.
Oregon's Office of Medical Assistance Programs (OMAP) is responsible for the Oregon Health Plan Medicaid demonstration and reviews quality measures, solvency, and marketing practice for all managed care Medicaid plans. OMAP allows each contracting plan to develop a single marketing brochure, which must be approved by the agency; active marketing is prohibited.
The legislature created the Office of the Oregon Health Plan Administrator in 1993 to report on the implementation of the Oregon Health Plan and on alternatives to the employer mandate. Now called Oregon Health Plan Policy and Research (OHPPR), its responsibilities have expanded to include all aspects of Oregon health care policy. The office conducts policy research, facilitates the implementation of health policy initiatives, and is the central state health care policy agency.
The Oregon Legislature was active in health plan oversight in the late 1980s, but its involvement has diminished in recent years.
Because Oregon's managed care market is so well developed, it has been more stable than those in other parts of the nation, avoiding the rapid series of mergers and takeovers that have occurred elsewhere. "The nationwide takeover wars are more active in states with low managed care penetration because the near-term potential is greater," notes Oregon's insurance commissioner. The governor's health policy advisor thinks that the main stakeholders are "comfortable with the Oregon approach to managed care." The commissioner adds: "There has been wide acceptance of managed care plans in Oregon, and we believe those plans operate, by and large, in a responsible fashion. However, the financial incentives in managed care may create a potential to underserve some plan members, and we have increased our monitoring efforts in that regard."
The insurance commissioner identifies physician hospital organizations (PHOs) as a new area needing oversight: "Oregon is starting to see interest on the part of ERISA employers. They [employers] are saying, 'Look, we want you [PHOs] to help us manage our costs,' and capitation is a key component." The insurance division has advised both providers and employers that any capitation arrangement, whether with an HMO, PHO, or other entity, constitutes the transaction of insurance and requires a state license.
The increased use of capitation in Oregon has prompted policy changes that affect quality-of-care issues like scope of coverage and access to specialists. The insurance division's policy is to deal with these issues in an informal style that stresses cooperation. The insurance commissioner estimates that his office receives "dozens" of complaints each month about private sector managed care plans and that the number is increasing as more plans introduce capitation. The commissioner comments: "We are finding the issue is knowing where to draw the line when fundamental matters of medical judgment are involved." He offered the example of a case where a provider under contract with a managed care plan refused initially to authorize treatment for a plan member who was experiencing depression after the death of a spouse. While the division does not second guess medical judgments, it does act to ensure that treatment decisions are not compromised by the financial structure of managed care plans.
The commissioner reports that he does not have the resources to monitor HMO practices intensively. The insurance division employs 90 people, five of whom are available to respond to complaints regarding HMOs and other health insurers. A former Oregon Health Plan administrator suggests that consumers could do their own monitoring if they had more information about plans. She comments: "There are big differences between plans, and people need to make informed choices."
Managed care oversight in Oregon seems to have benefited from the absence of media sensationalism in that state. No stories or scandals surfaced regarding managed care disasters that created pressure for regulatory reform, as occurred in several other states. This tranquil history may reflect the fact that managed care is well established in Oregon.
OMAP has been very active in its oversight of the Medicaid demonstration project. The acting assistant administrator attributes the office's attitude to these factors: (1) an activist state government; (2) the national attention given the health plan, which helped to generate a commitment to meet challenges; (3) an active OMAP director who encouraged excellence; and (4) the amount of resources made available to the plan.
The chair of the Oregon Health Plan Contractor Committee explains that the Medicaid plan mandates certain requirements beyond those imposed by private benefit managers. For example, Medicaid providers must publish information in seven languages; provide interpreters for physician visits; resolve and document every complaint; and provide the state with a significant amount of cost-related information.
The chair credited OMAP for listening to the concerns of health plans before drafting the regulations. Although participation is voluntary, the state has been able to recruit most of its HMOs to participate in the Medicaid program. Although there initially were concerns about OMAP's ability to enforce its standards, contracts now allow the state to take any of the following actions when a plan is out of compliance: (1) initiate corrective action; (2) suspend new enrollment; (3) reduce current enrollment; (4) assess penalty equal to 1 percent of the last capitation payment; and/or (5) notify enrollees of noncompliance and allow them to change health plans.
OHPPR is the state agency that largely coordinates oversight of health care reform policy in Oregon. Originally created to report on the implementation of the Oregon Health Plan, OHPPR is now the focal point for health policy in state government. The office actively monitors and coordinates other agencies and health care entities, but it has no line programs or direct regulatory input. A former administrator describes the job of OHPPR as supplying the best information for policymakers. As of mid-1998, OHPPR had been studying these issues: Several OHPPR projects are directly linked to managed care. The office studies quality assessment of HMOs and other plans; it has developed a consumer score card, and it assesses medical technology. A more fundamental issue is the impact of managed care on the entire health care system. The former administrator sees managed care as "imperiling the ability of a number of Federally Qualified Health Centers to exist"; she thinks that the various players must work together to seek solutions for the indigent uninsured currently served by the FQHCs.
The state health care market is experiencing a second wave of changes, including more provider-health plan affiliations and growing competitive pressures on smaller local plans. Because dually eligible Medicare-Medicaid recipients are enrolling in managed care plans, advocates for senior citizens have been actively lobbying for new regulations.
The consumer scorecard that has been developed by OHPPR will systematically compare plan assessments. The former administrator explains: "We are asking people to give information that is proprietary. We are asking them to step back. We won't have a quick fix and a silver bullet. We can't threaten with legislation; there isn't the political will to do that. What you are trying to do is to get people to cooperate in a different way." She believes that government must convince business that there is not a regulatory agenda.
Many state officials foresee continued incremental progress in oversight, which will focus on negotiated policy initiatives with diverse stakeholders and on making more information available to consumers. These initiatives will probably take place at the agency level rather than through legislation. Oregon's success has been built on coordination and cooperation, both between agencies and with insurers and providers; this approach holds promise for the future.
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.cbs.state.or.us/insurance.htm
www.omap.hr.state.or.us
www.ohppr.state.or.us
(Last updated March 30, 1998)
In Rhode Island it is estimated that 30 percent of the insured population are enrolled in HMOs; an even higher percentage is enrolled in some form of managed care. RIte Care, the state's managed care Medicaid program, began in 1994 under an 1115 waiver and has now 87,000 enrollees. The mandatory plan covers all recipients in the Family Independence Program (previously called Aid to Families with Dependent Children) and all pregnant women and children up to age 18, whose family incomes are less than 250 percent of the federal poverty level (FPL). RIte Care has expanded eligibility for adults up to 185 percent of FPL in families with children eligible for RIte Care. Family child care providers and the eligible dependents were added to the program in 1996. RIte Care uses only licensed HMOs under fully capitated contracts.
In 1996 the Rhode Island legislature passed the Health Care Accessibility and Quality Assurance Act, which considerably broadens state oversight of managed care. The act outlines specific provider protections; mandates periodic recertification of plans; and provides for comparative information on health plans to be offered to consumers.
The 1996 legislature also enacted a major revision of Rhode Island's Certificate of Need (CON) program. The new CON law makes important changes in the oversight of state health care, but in its final form will not have a major impact on managed care organizations. However, the act establishes a minimum standard for hospital care of the indigent to assure that new hospital corporations in the state, particularly large intrastate for-profit entities, are held to the same standards as those now operating in Rhode Island. As a result of the Hospital Conversion Act, passed in 1997, the director of health was given the authority to promulgate regulations pertaining to new hospital acquisitions; the attorney general is now responsible for establishing the sale price for such acquisitions.
By 1998, there was growing interest in some form of public or public-private purchasing cooperatives. Discussions about this were beginning to be held within state government and organized labor.
The Rhode Island Department of Business Regulation (DBR) issues HMO licenses in coordination with the Department of Health (DOH). DBR oversees HMO solvency, handles consumer complaints related to market practices, conducts public hearings on changes in ownership, and has final authority over all health service matters not directly related to quality of care.
The Rhode Island Department of Health (DOH) oversees all quality of care. DOH assesses health plan networks, grievance procedures, and quality assurance practices during licensure and re-licensure; tracks and follows up on consumer complaints related to access and quality; oversees utilization review practices for HMOs and other entities; and oversees the external consumer appeals process that deals with denials of coverage and denials of specialist referral. DOH has been charged with implementing the 1996 Health Care Accessibility and Quality Assurance Act.
The Rhode Island Department of Human Services (DHS) manages RIte Care, the state's mandatory Medicaid managed care program. RIte Care recipients enroll in prepaid health plans that contract with the state. DHS conducts extensive monitoring, research, and evaluation to oversee health plan compliance with confidential requirements and to assess program results.
The Rhode Island Legislature (senate and house) meets on a part-time basis and has been very active in considering health care reform legislation. In 1992 lawmakers passed a package of small-group insurance reforms and, in 1993, a utilization review law for HMOs and other entities that determines the medical necessity of covered services requested for patients. During the 1996 legislative session, the legislature considered more than 30 bills related to managed care issues and passed both the Health Care Accessibility and Quality Assurance Act and the CON revision bill, as well as some statutory changes regarding health insurance purchasing for state employees. As a result of these statutory changes, health plan options for state employees were restructured and were increased from four to eight plans. Legislation passed in 1999 included a measure allowing providers to appeal an insurance company's decision not to pay for care that has already been rendered, a law establishing a health care advocate in the attorney general's office, and a requirement that health plans conduct member-satisfaction surveys; in addition, a law protecting mental health care coverage was strengthened.
HMOs represent a significant portion of Rhode Island's health care market, but the precise market share is difficult to determine. The deputy director for DOH estimates HMO enrollment to be between 30 and 35 percent of the state's population; but DBR considers it very difficult to gauge actual penetration because self-insured plans do not report membership data to the state and because the three markets in southern New England––Rhode Island, Massachusetts, and Connecticut––overlap.
DBR's oversight approach focuses on solvency and insurance regulation. The agency conducts a financial review of each HMO every five years and reviews rate requests to ensure adequacy of coverage for projected liabilities. The department oversees risk-bearing entities only and does not regulate contracting arrangements or provider groups.
Such regulation has seemed unnecessary to state officials, since there are few HMOs using provider, as opposed to plan, capitation and few integrated delivery systems in Rhode Island. The director of business regulation reports that there are only a couple of multi-specialty group practice entities in the state's area of greatest population concentration, and that the only capitated contracts in the state are for mental health care. The deputy director of health knew of only one plan using capitation with its providers.
However, the absence of capitation has not prevented Rhode Island legislators from introducing bills to require disclosure of financial arrangements and limit specific kinds of capitated arrangements. The director of DBR explains that the legislators are trying to "head off horror stories from other states," rather than reacting to problems within the state.
Quality oversight in Rhode Island is based on the state's HMO Act, which reflects the National Association of Insurance Commissioners (NAIC) recommendation of the early 1980s for network adequacy, grievance procedures, and quality assurance protocols. DOH tracks consumer complaints and conducts annual surveys of each HMO's operation, during which staff review the health plan's complaint records. If there is a pattern of poor quality, the department can require the HMO to file a corrective plan or petition the director of business regulation to shut down enrollment. In 1994 the legislature gave the DOH the additional authority to oversee utilization review practices. In 1996 the Rhode Island General Assembly passed legislation to protect practitioners who take action to protect patients from any retribution by HMOs or other vendors/insurers.
However, as of mid-1996, quality of HMO care has not been a major concern. The director of DBR reports no increase in complaints or difference between HMO patterns and those of other insurers. The deputy director of DOH sees HMOs on balance as a positive innovation in the health care arena. The General Assembly has initiated a Women's Health Review, which will look at outcomes of women's health. This review will lead to new legislative interventions designed to better protect the health status of women.
DHS has enrolled more than 87,000 Rhode Island residents in the RIte Care program, which provides an expanded package of benefits. DHS developed the program with input from the DOH. RIte Care contracts only with licensed HMOs, but the agency conducts its own quality assurance and collects a broad range of data and performance measures.
Program results have been highly positive. Physician participation has more than doubled since RIte Care was implemented. Prenatal care has improved dramatically and birth outcome and maternal health status have benefited significantly. Physician visits have more than doubled while hospital stays and emergency room visits have declined. Overall, 97 percent of RIte Care enrollees in the 1998 Member Satisfaction Survey indicated that they were very satisfied or satisfied with the program.
The three key Rhode Island oversight agencies maintain good working relationships. DOH and DHS worked closely together on the development of RIte Care, although DHS now has sole responsibility for the program. DOH and DBR also report that staff work well together.
As of the fall of 1997, there was little coordinated effort around cooperative health care purchasing; pooling of state employee and Medicaid purchasing has not been "popular" because of concern among employees. However, statutory changes in health insurance purchasing for state employees were enacted in the 1996 legislative session, and these may open new opportunities for coordinated purchasing.
Several factors will shape Rhode Island's future oversight. First, the Health Care Accessibility and Quality Assurance Act of 1996 extends DOH's purview to quality assurance for a broader array of managed care entities. Second, the revised CON program opens the way for increased service expansion on the one hand, while mandating provision for the indigent on the other. Third, the Administration is considering what DHS's director describes as a "statewide public restructuring of health care." State officials plan to focus on uncompensated care, welfare reform, and lowering health care costs to attract business to Rhode Island. The restructuring is in the discussion phase, but such a major reform would require new oversight strategies. Finally, as the state proceeds with its Title XXI planning process, consideration is being given to the possibility of expanding RIte Care to older siblings of currently covered uninsured children, parents of fee-for-service Medicaid children, foster parents, and other populations.
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.health.state.ri.us
(Last updated August 9, 1999)
HMO penetration in Virginia had reached 5 million enrollees by September 30, 1997. The state enacted a package of small group health reforms in 1992 and 1993 and a patient protection act in 1996. In 1997 legislation was passed to implement the Health Insurance Portability and Accountability Act (HIPAA) as well as to require the commonwealth's health commissioner to examine the quality of care provided by HMOs licensed in Virginia. The 1998 legislature passed a bill expanding the role of the health department to all managed care plans with regard to quality of health care provided.
Virginia has introduced three managed care programs for its Medicaid population. Medallion is a fee-for-service, primary care gatekeeper program that serves 200,000 Medicaid clients statewide. Virginia's Options program, a voluntary HMO plan, has enrolled more than 36,000 recipients. Medallion II, which operates under a 1915(b) waiver, is a mandatory HMO program for approximately 95,000 recipients in selected urban areas.
In 1995, the Virginia General Assembly directed the Department of Medical Assistance Services to seek an 1115(a) demonstration waiver to expand Medicaid eligibility and offer reinsurance for indigent care in selected areas across the state. The legislature also directed that, as part of the demonstration, funds donated to the Indigent Health Care Trust Fund be used to assist employers and employees in financing health insurance for families with incomes at or below 200 percent of poverty. Virginia planned to apply for the 1115(a) waiver before the end of 1996.
The Virginia State Corporation Commission (SCC) is responsible for licensing and oversight of commercial HMOs. The agency is run by three commissioners selected by the state legislature. SCC oversees solvency, monitors market practice issues, and oversees a wide range of corporate activities outside health care.
The Virginia Department of Health (DOH) shares oversight responsibility of HMOs with SCC. The department has statutory authority to examine the affairs of HMOs at least once every five years and to examine the quality of health care services of any plan or of any provider contracting with or participating in an HMO plan. DOH reviews HMO grievance procedures, investigates complaints, and has begun to implement a quality-of-care review process jointly with SCC. The 1998 general assembly introduced a law that expands DOH oversight of quality health care services for managed care health insurance plans, which includes preferred provider organizations and provider-sponsored organizations. DOH will promulgate regulations regarding quality and these plans must apply for a certificate of quality as a condition for licensure by the SCC.
The Virginia Department of Medical Assistance Services (DMAS) runs the Medicaid program. DMAS operates three managed care programs and collaborates with DOH to provide quality oversight of Medicaid HMO contractors.
The Virginia State Legislature enacted small group insurance reforms in 1992 and 1993, which mandated guarantee issue and renewal, ensured portability of coverage, and limited exclusions for preexisting conditions. In 1995 the general assembly limited the allowable time frame for exclusions of preexisting conditions in the individual health insurance market. In 1996 lawmakers approved a Patient Protection Act and a postpartum care bill. In 1997 the general assembly enacted legislation that implemented the Health insurance Portability and Accountability Act. In 1998 legislation providing authority for the health commissioner to become more active in regulating the quality of health care provided by all managed care plans was passed.
Virginia's solvency oversight focuses on risk and disclosure. SCC regulates any entity that assumes risk by accepting prepayment directly from employers or members. Providers that accept capitation from HMOs are not regulated by the state; however, the 1996 Patient Protection Act requires HMOs to disclose all financial agreements with provider groups.
The Virginia legislature has made quality a key focus for HMO oversight, according to the Health Commissioner. In 1996 the general assembly passed legislation establishing mandatory criteria for postpartum maternity coverage following both normal births and Caesarian sections. DOH investigates consumer complaints related to HMO quality of care. The majority of complaints are due to denial of payment for services, or medical necessity.
Virginia's Medicaid program has increased its reliance on managed care, but intends to move cautiously, particularly in contracting with HMOs. DMAS requires that all HMOs contracting with DMAS be accredited or seek accreditation from National Committee for Quality Assurance (NCQA), and considers the accreditation report in making contracting decisions. The department has successfully implemented Medallion II, its mandatory managed care program, in the populous eastern part of the state and planned to expand into Northern Virginia before the end of 1997. DMAS staff are especially concerned about developing an appropriate managed care system for the state's rural areas.
DMAS maintains an extensive quality review process for all of its managed care programs. The department assesses recipient satisfaction for each program; conducts clinical studies of quality of care for specific diagnoses (asthma, prenatal care, and hypertension were studied in 1996); and contracts with Key Pro of Pennsylvania, a Health Care Financing Administration (HCFA)-certified peer review organization (PRO), to assess the quality of services offered by HMO contractors, as required by federal mandate.
Key Pro reviews medical records of all cases where a "sentinel event"––a questionable outcome such as a death, an unscheduled return to the operating room, or a readmission to the hospital––might indicate inappropriate care. Center staff also survey recipients who voluntarily disenroll from a plan, assess the reliability and validity of the encounter data required from HMO contractors by DMAS, and perform other quality studies.
DMAS also sponsors an HMO Oversight Group, which includes physicians, pharmacists, HMO staff, consumer representatives, and staff from other state agencies, such as the Department of Mental Health, Mental Retardation, and Substance Abuse Services, the Department of Rehabilitative Services, the Department of Social Services, and the Department of Aging. This group meets quarterly and oversees all aspects of HMO Medicaid services, but focuses primarily on quality of care and access to care.
The Joint Commission on Health Care, created by the general assembly, studies a variety of health care related issues and makes recommendations to the legislature. In 1996 the commission was studying the appropriate role of various state agencies in oversight and regulation of managed care, and its recommendations may offer suggestions to improve interagency coordination. SCC and DOH are already collaborating on quality-of-care review, and DMAS seeks input from other departments through its HMO Oversight Group.
The major areas for future activity in managed care oversight in Virginia appear to be improvement of quality-of-care regulation, expansion of the mandatory Medicaid program, and development of workable plans for rural areas and for the indigent population. The Joint Commission on Health Care may also make recommendations to alter some responsibilities, regulations, and programs.
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.state.va.us/scc
www.vdh.state.va.us
www.cns.state.va.us/dmas
legis.state.va.us/jchc/jchchome.htm
(Last updated April 29, 1998)
West Virginia's managed care market is at a very early stage compared to that in other states, with HMO penetration growing slowly. There are seven active HMOs in the state, up from only two in 1993. The state legislature was attentive to this trend, passing HMO reform acts in 1995 and 1996. In 1997, the legislature directed the Health Care Authority to conduct a study of managed care in the state, including the need for specific regulatory programs.
Governor Caperton, who left office at the end of 1996, was committed to expanding managed care. In 1995 he directed the three major state programs that contract for health services––the Public Employees Insurance Agency (PEIA), Bureau for Medicaid Services, and Workers' Compensation––to examine strategies for joint purchasing. As of mid-1996, 28 percent of all state employees were enrolled in HMOs through PEIA, and the state government is a major purchaser of managed care.
In 1996, West Virginia received and began to implement a 1915(b) waiver to enroll approximately 30 percent of Medicaid recipients in mandatory managed care. The Medicaid program also operates a fee-for-service primary care case management program (PCCM). The Workers' Compensation Program plans to implement a preferred provider model for its population.
The West Virginia Department of Insurance (DOI) is the sole licensing entity for HMOs and the key state regulatory agency for managed care. The department reviews solvency and rate requests, sets quality standards, and tracks complaints. DOI's authority was greatly enhanced by the 1995 HMO Act.
The Bureau for Medical Services (BMS) operates West Virginia's Medicaid program, including the PCCM component, and the new 1915(b) waiver program for mandatory managed care, which may enroll recipients in 12 counties. BMS contracts only with DOI-licensed HMOs, and the two agencies will collaborate to oversee participating plans, particularly in regard to quality and access issues. BMS also develops its own capitation rates and oversees contract performance for Medicaid plans.
The Public Employees Insurance Agency (PEIA) negotiates HMO contracts to be offered as coverage options for state employees.
The Bureau for Public Health (BPH) is not involved in direct oversight of managed care activities. However, the bureau participates in several projects related to increased access to medical services in the changing market and consults with BMS on quality assurance for Medicaid plans.
Governor Caperton put together the Interagency Health Council to provide overall coordination of West Virginia's movement towards managed care. The Council consists of representatives from DOI, BPH, BMS, PEIA, the Division of Workers' Compensation, and the Health Care Cost Review Authority. It focuses on coordinating the purchasing efforts of state employees, Medicaid enrollees, and Workers' Compensation recipients; improving rural access to health care; and examining the state's role in the downsizing of rural hospitals. Governor Cecil Underwood, elected in 1996, has directed the council to continue these efforts.
The Health Care Cost Review Authority (HCCRA) is responsible for Certificate of Need (CON) and hospital rate reviews. The agency collects information from hospitals and nursing homes for systematic health status evaluation.
The West Virginia Legislature (house and senate) has been active in HMO reform. In 1995, West Virginia passed a statute that imposed new requirements on HMOs and significantly increased DOI's authority. The 1996 HMO reform act revised and added to these provisions.
West Virginia is the second most rural state in the country, and managed care companies have been slow to enter the private market, particularly after one HMO went bankrupt in the 1980s. Former Governor Caperton's decision to move state employees into managed care created a fresh demand for HMOs, bringing five new plans into the state. As managed care expansion began in 1995, the state reviewed its oversight law, in place since 1978, and passed a major revision. The insurance commissioner thinks that the state's late development has been an advantage. "By being a laggard, we could study problems with managed care in other states, so that we would not experience them in West Virginia," he explains.
The HMO statute requires plans to be domiciled in the state, increases the minimum capitalization requirements, and specifies allowable marketing practices. The insurance commissioner emphasizes the particular importance of the solvency regulations. Under the law, HMOs may shift risk downstream through capitation, but they must monitor and report on the financial status of all provider organizations with which they contract. The legislation also authorizes the state to pursue criminal sanctions against HMO executives; West Virginia is the only state so empowered.
DOI is responsible for monitoring the quality of West Virginia's HMOs. The department requires each HMO to be accredited by the National Committee for Quality Assurance (NCQA) or a similar entity and has increased its capacity to track the source and resolution of consumer complaints.
However, the state's most critical problem is lack of access to quality medical services in rural areas. Rural access is a long-standing issue in West Virginia. Unfortunately, market pressures have further eroded the capacity of rural hospitals to remain solvent. "HMOs are not buying rural hospitals; they have high costs and need to be linked with larger acute care facilities," reports the director of the Office of Community Rural Services for BPH. The bureau has worked to restore market equilibrium by helping several financially threatened hospitals to downsize to small primary care centers. The small centers operate with six-bed capacities and can stabilize patients before they are sent elsewhere for more comprehensive treatment. The legislature has considered authorizing state contracts with provider groups in rural areas. The bill failed to pass, primarily because of concerns about the solvency of such provider groups.
In response to West Virginia's continuing Medicaid fiscal crisis, the governor and the legislature approved submission of two 1915(b) waivers for managed care programs one for behavioral health services and the other for medical care. After receiving Health Care Financing Administration (HCFA) approval for the latter, BMS put together an advisory task force to help design the program and began enrollment in four counties. The bureau's plan was to expand managed care to nine counties by the end of 1996 and eventually to ten or twelve. HMO plans will receive capitation payments for services provided during the startup period.
BMS is also analyzing the possibility of converting the PCCM program to a partially capitated model. The waiver for behavioral health services has been placed on hold and payment for these services remains fee-for-service based.
In the fall of 1995, the governor convened a Medicaid Crisis Panel to study other methods of cost reduction. This group developed recommendations for cutting approximately $150 million dollars, more than 10 percent of the program's budget.
Governor Caperton's interest in managed care and the market power of state purchasing promoted interagency cooperation. The Interagency Health Council has representatives from the key health-related agencies in the state and focuses on issues of common interest, including rural access to care, access for high-need groups and the state's role in the changing health care market. There is particular interest in the Administration in developing joint purchasing standards for Medicaid, PEIA, and Workers' Compensation.
Despite the emphasis on coordination of health care policy, there are disagreements about priorities. BPH is most concerned with increased access to medical services and has favored state contracts with rural providers. Although DOI favors increased access, it argues that solvency cannot be ensured under direct contract. DOI has also expressed concern over the BMS proposal to make capitation payments to HMO contractors for their initial effort in launching the managed care program; the department plans to scrutinize proposed HMO rates for this initiative closely. The bureau meanwhile is preoccupied with balancing client needs and ongoing cost pressures within its fee-for-service component, while working to maximize the expected benefits (universal access, improved quality, lower costs) of the managed care initiative.
One of West Virginia's next challenges will be the problem of extending managed care to rural areas, while increasing access to service. "I think for the really remote areas managed care will not be integrated, and the state will have to help these communities make the transition," the insurance commissioner says. He adds, "I hope we can stay ahead of market development. It's rare, but at this point we are ahead of the market."
Who Is Overseeing?
How Are They Doing?
Solvency Oversight of the Private Market
Quality Oversight of the Private Market
Medicaid Oversight
Coordinating Oversight
What Is Next for Oversight?
Additional Resources
www.state.wv.us/insurance
www.wvdhhr.org/bms
www.hcawv.org
(Last updated April 21, 1998)