What Is Arkansas Overseeing?

Arkansas has nine HMOs that enroll 3.8 percent or more of the insured population. The state Medicaid program does not contract with HMOs for managed care; instead, it uses a primary care case management system (PCCM) under a 1915(b) waiver.

In 1995, the Arkansas legislature passed a broad any-willing-provider law, which requires plans to give any physician or clinic on a list of 21 "protected specialties" the opportunity to participate, if the provider meets the HMO's published standards. The statute prohibits the use of financial incentives or penalties that would influence an enrollee's choice of providers, such as higher co-payments or reduced reimbursement. However, the law's constitutionality was successfully challenged in the state courts and appeals courts and enforcement was enjoined in 1997-1998. In 1999 the legislature passed Act 1469; effective January 1, 2000, the act offers further freedom-of-choice protections for both network and non-network services.

The state enacted small group insurance reforms requiring guaranteed renewal and rating restrictions in 1991. In 1995, it created a high-risk pool that began operation July 1, 1996. Both laws were amended in 1997 to conform to the federal Health Insurance Portability and Accountability Act (HIPAA). Other amendments to the Arkansas HIPAA laws were enacted in Act 881 of 1999, with technical amendments to related laws provided in Act 1356 of that year.

Who Is Overseeing?

The Arkansas Department of Insurance (DOI) shares licensing and oversight responsibility with the Department of Health. DOI regulates plan solvency, monitors market practice, and tracks complaints.

The Arkansas Department of Health (DOH) oversees HMO quality; reviews HMOs during licensure by evaluating their provider networks, quality assurance plans, and grievance procedures; and responds to complaints about quality of care. In 1999, Act 1200 was passed; it requires all health carriers to establish a program of quality assessment and grievance procedures, and authorizes DOH to work with DOI to adopt rules and regulations to improve the quality of health care services.

The Arkansas Division of Medical Services (DMS) oversees the state Medicaid program. DMS runs a primary care case management program that uses fee-for-service providers as gatekeepers and employs sophisticated computer claim monitoring.

How Are They Doing?

Solvency Oversight of the Private Market

With an estimated less than 4 percent penetration of its 2.4 million population, Arkansas has one of the lowest HMO enrollments in the country. However, DOH's director of Health Facilities, Services and Systems estimates that, if self-insured plans are included, "half of the state is in some form of managed care." Self-insured plans are exempt from state regulation, but DOH is trying to introduce oversight by convincing third-party utilization review firms to register with the state. There is no DOI regulation of preferred provider organizations (PPOs) or licensure of provider networks.

Arkansas's 1995 any-willing-provider act has been embroiled in controversy. The act was successfully challenged as unconstitutional and as being in violation of ERISA and federal HMO laws. The court later issued a permanent injunction to prohibit enforcement.

Quality Oversight of the Private Market

Quality-of-care issues have not been a serious problem in Arkansas. "Up to this point the managed care industry . . . is young enough that people have not complained about quality of care," says the director of Health Facilities, Services and Systems. As necessary, complaints are referred to DOH through DOI's Consumer Services Division, and the insurance commissioner reports that few reach his department: "Most are resolved at the HMO level, and usually involve a misunderstanding." DOH intends to increase its staffing so that HMO sites can be visited more frequently. One issue that DOI reviewed and then prohibited in Directive 1-98 is balance-billing of HMO subscribers, where providers bill enrollees for services covered under managed care plans; this can lead to unnecessary payment by enrollees without subsequent reimbursement when their health plan makes its payment.

Medicaid Oversight

Arkansas has chosen to rely on a gatekeeper PCCM approach for its Medicaid program. "We considered a nine-county pilot [for managed care coverage], but the more we talked about it the more we realized we could [get good performance from a PCCM approach]," explains DMS's director. A University of Arkansas study estimated that the program has saved $30 million in health care costs.

The key to Arkansas's program is its sophisticated electronic utilization review system. Participating doctors receive monthly printouts, which describe their utilization patterns, and quarterly report cards, which compare them with other physicians on several measures, including cost and emergency room use. DMS may withhold the three dollars per month case management fee for poorly performing doctors, but the division is "trying to lead with the carrot and not the stick." The director reports that doctors are cooperative, in part because "they desperately want to avoid Medicaid HMOs."

Another feature of Arkansas's PCCM program is electronic claims processing. "We have the best claims processing in the nation, public or private," according to the director. Every billed transaction is electronically recorded and transmitted to DMS; reimbursement is then paid into the physician's account.

In 1996, the division began a health education project in three counties to identify and resolve problems.

Coordinating Oversight

Organized coordination of oversight in Arkansas is minimal. DOI and DOH officials say that they work well together, and DMS reports regularly to the appropriate legislative oversight committees. There is no joint purchasing initiative for managed care coverage.

What Is Next for Oversight?

The immature Arkansas HMO market is soon expected to grow substantially. DMS's director cites funding for broader medical coverage as another critical issue. "Nineteen to twenty percent of the state is uninsured, and there is no talk or money to do anything about it," he explains. DOI and DOH are developing legislative proposals to expand the state's authority to regulate providers that enter into capitated contracts with insurers. Arkansas officials are working to anticipate and forestall problems as managed care develops in the state. The PCP program, ConnectCare, was one of ten winners (from a field of 1,600 entries) in October 1997 of the Ford Foundation's Innovations in American Government competition.

Additional Resources

(Last updated September 13, 1999)


What Is Arizona Overseeing?

Arizona has one of the highest HMO penetrations in the country in both the private and Medicaid insurance markets, enrolling an estimated 40 percent of the insured population.

Managed care became the cornerstone of Arizona's Medicaid program in 1982, when the state implemented the Arizona Health Care Cost Containment System (AHCCCS). This Medicaid managed care demonstration is the oldest statewide, capitated program in the country, and it is a model for other states. Pregnant women and children, disabled, elderly, and long-term-care patients are covered in separate managed care components. Residents whose annual income does not exceed $3,200, but who are not eligible for Medicaid, may enroll in the MNMI (Medically Needy, Medically Indigent) arm of the program, as can people with serious illness and injuries who have spent down their savings and assets to the $3,200 income level. Small employers, with from one to 50 employees, can also use some AHCCCS plans to obtain guaranteed issue coverage. This plan, known as Health Care Group, became operational in 1986 and has grown significantly.

A relatively large fraction of the state's population, estimated at between 17 and 23 percent in 1996, remains uninsured. In 1995, the legislature failed to pass a measure that would include 150,000 additional enrollees under AHCCCS. However, in the fall of 1996, Arizona voters approved, by 71 percent, a ballot initiative to expand Medicaid coverage to 100 percent of poverty, which will bring about 180,000 working poor under the Medicaid umbrella. In June 1997, Arizona submitted an amendment to their 1115 waiver and is awaiting approval from the Health Care Financing Administration (HCFA).

Who Is Overseeing?

The Arizona Department of Insurance (DOI) is one of two state agencies responsible for licensing HMOs for the commercial market: it oversees solvency and monitors market practices. When commercial HMOs are also AHCCCS providers, AHCCCS oversees the Medicaid arm of the HMO.

The Arizona Department of Health Services (DHS) oversees network evaluation and has responsibility for continuing oversight of commercial HMOs. When an HMO applies for a license, DHS evaluates the HMO's statement of its plan, facilities, personnel, and geographic area, and notifies DOI of its approval of this statement. DHS also works with AHCCCS to operate programs for special needs groups. The department administers a capitated behavioral health care program through Regional Behavioral Health Agencies (RBHAs), which oversee the contracts with providers and offer case management services to local recipients. Acute-care clients of AHCCCS, except long-term-care recipients, receive behavioral health services through the RBHAs, rather than through their AHCCCS HMO plans.

Arizona's Arizona Health Care Cost Containment System (AHCCCS) is the single state agency responsible for all aspects of the Medicaid and state-funded MNMI program. AHCCCS works with Medicaid-only and commercial health plans; oversees all parts of the delivery system, including provider network solvency, quality assurance, and grievance procedures; provides hearings if a plan fails to address a recipient's grievance adequately; and may intervene if a provider claims to have been denied payment inappropriately or has another grievance. For long-term-care services to elderly and disabled clients, AHCCCS has contracts with eight program contractors, which are private or county-run managed care companies that receive capitation funds to negotiate contracts with long-term care, acute care, and behavioral health providers.

The Department of Economic Security performs eligibility determinations for AHCCCS for the Temporary Assistance to Needy Families (TANF) population and is the health plan for the developmentally disabled population. The department coordinates medical services with the acute-care provider, a managed care company.

The Arizona Legislature (senate and house) has enacted a number of small-group insurance reforms. Although some managed care bills have been presented in the past few years, most have not been adopted. One new law, which went into effect in January 1996, requires HMOs to disclose their plan's incentive features to employers, who in turn must share that information with their employees. In the 1995 session, the legislature created a Joint Legislative Oversight Committee on Tobacco Tax and Health Care to decide how the state would spend the money generated by a new tobacco tax that was created by ballot initiative.

Several health care initiatives were proposed in 1997. Most notably, the legislature passed the Health Care Appeals Process Bill, which requires all health care insurers to provide a uniform appeals process for all enrollees. The process has four steps, including an expedited review and review by external, independent reviewers. The bill was the product of a yearlong Governor's Task Force that included legislators, health care insurers, managed care companies, and consumers. The resulting product is a guaranteed, uniform appeal process for all Arizona enrollees.

How Are They Doing?

Solvency Oversight of the Private Market

Since HMO penetration has been high for a number of years in Arizona, the assistant director of DOI reports that people within the state are knowledgeable about managed care. DOI's regulatory approach focuses on solvency. The agency requires each commercial HMO to have $1 million in capital reserves and an additional $500,000 on deposit with the state treasurer. The legislature removed the premium tax on small-group plans for all insurers in order to lower premium costs. Recent legislation mandates that commercial HMOs disclose incentive features to employer clients. DOI does not review rates, require plans to file rate schedules, or provide oversight of integrated delivery systems, but the agency does review market practices and collects key information on the number of people served.

Quality Oversight of the Private Market

Quality oversight of commercial HMOs in Arizona consists primarily of the DHS's review of quality procedures during licensure, ensuring that there are quality assurance protocols and grievance procedures in place. Apart from DOI's market review and the AHCCCS program, there is no continuous oversight of quality issues. The 1997 Health Care Appeals Process Bill passed both the Arizona Senate and House of Representatives and was signed into law by the governor in July 1997. This law is significant for several reasons. First, it ensures that all Arizona enrollees in health plans are guaranteed the same appeal process. Second, it provides for expedited review of denials of care when medical necessity demands an immediate response. Third, it provides enrollees with an external, independent review by utilization review agents chosen by the insurer.

It is important to note, however, that the assistant director of DOI does not think increased regulation would necessarily resolve every kind of complaint: "Some complaints boil down to differences in medical opinions. The kind of things we read about all the time where someone is denied treatment could be for a number of reasons. It could be that the treatment was not medically indicated for the person." She has not seen an increasing number of complaints from Arizona consumers: "These things have always been part of managed care." She attributes the heightened concern over quality to increased media attention and the fact that more and more people are being covered by managed care plans.

Medicaid Oversight

AHCCCS is the sole agency responsible for all oversight and regulation of the Arizona Medicaid program. The Arizona legislature authorized the state to join the federal Medicaid program in 1972, but implementation did not occur until 1982, when AHCCCS was inaugurated statewide as a Medicaid demonstration. Other services, like behavioral health, long-term care, and family planning, were added after 1982.

AHCCCS contracts with commercially licensed HMOs only if they have a separate arm that operates under the auspices of the Medicaid program and if they agree to abide by the regulations that apply to Medicaid plans. Many of these regulations are more restrictive than licensure laws for the private market. The plan must also agree to disclose specific information on its Medicaid clients, which is not required for private sector enrollees. AHCCCS has compared its oversight procedures with those used by DOI and DHS. AHCCCS's approach is more stringent than either. For example, AHCCCS requires its plans to post the same $1.5 million in capital reserves that is required of commercial HMOs but, rather than paying a tax on premiums, Medicaid plans must post a performance bond equal to one month's projected liabilities.

Both commercial and AHCCCS plans contract with the same provider groups, so AHCCCS enrollees receive mainstream service. The program has been very innovative in putting special needs populations, like the elderly and disabled, into managed care programs under separate contracts. AHCCCS officials are convinced that "keeping it all under one agency" is the best strategy.

Quality of care is an extremely important component of the AHCCCS program. In more than 15 years of operation, AHCCCS has developed a mature quality management system that focuses on the performance of health plans and program contractors. Although this approach is effective, AHCCCS, in partnership with HCFA and the AHCCCS health plans and program contractors, continually seeks ways to introduce other innovations that are tailored for a managed care environment. A proposal to implement a Quality Management Initiative was approved by HCFA in December 1994 as a multiyear project that will (1) develop clinical and long-term care quality management indicators to measure health outcomes and quality of care; (2) use financial indicators for financial performance and solvency standards; (3) conduct member satisfaction surveys that assess access to care, availability of care, and overall member satisfaction; and (4) assess provider satisfaction.

AHCCCS's quality oversight is built on two procedures. First, the agency conducts on-site inspections to assess each plan's quality assurance procedures; these visits are intended to establish a baseline. Plans must have in place complaint tracking, resolution systems, and approved procedures for utilization review. AHCCCS then relies on recipient complaints and satisfaction surveys to determine when more intensive review is required. Overall, however, member complaints have not been a significant problem. AHCCCS health plans have a separate grievance and appeals process, and a special Division of Grievance and Appeals within the administration to review the plans and serve as a secondary appeal to health plan decisions.

Coordinating Oversight

The structure of Arizona's health care regulation requires little coordination between oversight of the commercial market and of Medicaid. DOI and DHS coordinate review of commercial HMO license applications. AHCCCS has sole responsibility for all aspects of Medicaid oversight with its contractors and other state agencies (DHS and DES). The agency also coordinates efforts for some special needs populations and for small-group insurance coverage. For example, the Division of Behavioral Health Services operates via a capitated contract with AHCCCS for all aspects of behavioral health to Medicaid members. DHS and AHCCCS also work together on the Health Start program, which has increased the number of pregnant women receiving prenatal care, and on a program that has raised the immunization rate from 50 percent to more than 75 percent.

AHCCCS funds the Department of Economic Security for its Medicaid eligibility activities and the coordination of acute- and long-term-care services for the developmentally disabled. Counties are responsible for most of the state match for long-term care and a portion of the state match for the acute-care program. There is no mandate to integrate both types of service in a single contract; however, in some cases, the same contractor serves the acute- and long-term-care population. In 1996, the program for long-term-care services expanded the type of setting that is eligible for reimbursement to include supportive residential living, which is expected to increase consumer satisfaction and is estimated to cost 38 percent less.

What Is Next for Oversight?

Arizona's AHCCCS program has been confronting the challenge of implementing the ballot initiative to expand eligibility to 100 percent of the federal poverty level. In addition, the 1998 session addressed several managed care issues, including mandated chiropractic care, the implementation of the 1997 Premium Sharing Demonstration Program, and mandated diabetes coverage. Implementation of a children's health insurance program (CHIP) as a part of AHCCCS, was passed by the legislature in 1998. The state legislature will also continue to confront the effects of the new federal welfare law and of medical coverage for legal immigrants, issues that will have enormous impact on counties.

Arizona is in the process of implementing many of the provisions of the Balanced Budget Act that affect managed care programs. Because of the sophistication of the oversight functions of the AHCCCS program, the BBA impact should be minimal.

On February 1, 1998, the Premium Sharing Demonstration Project began enrolling persons in the program. This is an innovative program that enables uninsured Arizonans to purchase health insurance through the state. Enrollees pay a premium based on their income level and the state subsidizes the rest, creating a joint partnership that enables the state to offer insurance to those who would otherwise be unable to afford it.

A key member of the House Health Care Committee believes that AHCCCS has resulted in cost savings and in high-quality care, and that satisfaction among enrollees is high. The changes introduced by the private sector, and the enactment of the new federal standards for Medicaid and Medicare quality of care, will continue to add to the foundation for managed care oversight that Arizona has established through AHCCCS.

Additional Resources

(Last updated August 30, 1999)


What Is Connecticut Overseeing?

There are 15 licensed HMOs in Connecticut as well as a Blue Cross plan that operates an HMO as a line of business; these have enrolled 27 percent of the insured population. The state has been a pioneer in insurance reform. In 1990 the legislature enacted guaranteed issue, mandatory reissue, and portability of coverage, and limited exclusions for preexisting conditions for all groups of fewer than 25 members. In 1994 the Joint Standing Public Health Committee outlined a general road map for expanding access to coverage and established the Office of Health Care Access to develop a plan in cooperation with the Department of Public Health (DPH). The plan aimed to ensure coverage of all state residents in a certified health plan by January 1997. However, this mandate was repealed in 1995.

Also in 1994, at the recommendation of the Human Services Committee and then-Governor Weicker, the legislature extended Medicaid coverage to all children between the ages of one and eleven whose family incomes were less than 185 percent of the federal poverty level (FPL); coverage was to have been expanded progressively to include all income-eligible children under the age of 19 by October 2002. However, in October 1997, the state enacted its HUSKY (Health insurance for UninSured Kids and Youth); under Part A (Medicaid) of HUSKY, coverage was extended to that group effective January 1, 1998.

Under an approved 1915(b) waiver, Connecticut's Department of Social Services (DSS) enrolled 250,000 clients in a managed care program by January 1997. The legislature has appointed the Medicaid Managed Care Advisory Council to advise the department on the implementation of the 1915 waiver.

Who Is Overseeing?

The Connecticut Insurance Department (ID) is the sole licensing and oversight agency for HMOs serving the commercial market. The department oversees solvency; monitors market practices and network adequacy; reviews grievance and quality assurance procedures; and tracks consumer complaints. ID is not empowered to override health plan decisions about treatment choices or grievance resolutions.

The Connecticut Department of Public Health (DPH) has no oversight responsibilities for managed care.

The Connecticut Department of Social Services (DSS) manages the state's Medicaid program. It is implementing a prepaid managed care program for the state's Aid to Families with Dependent Children (AFDC) recipients and related groups, under a 1915(b) waiver. DSS contracts, through provider agreements, with all kinds of health care providers for the purpose of delivering services to its clients under fee for service. For managed care, DSS contracts with licensed HMOs and managed care organizations (MCOs) sponsored by federally qualified health centers and hospitals (FQHCs). In August 1999, the department had contracts with four HMOs and one MCO that is sponsored by FQHCs.

The Office of Health Care Access (OHCA) was established in 1994 to develop a plan for universal coverage, since tabled; OHCA is now responsible for health data collection.

Although the Connecticut State Legislature (senate and house) is part-time, it has been very active in health care reform in the 1990s. The first small-group insurance reforms were passed in 1990 and expanded in 1993 and 1995. Lawmakers have also established a series of health care commissions and task forces and have acted on several of the recommendations submitted by these bodies. During the 1997 legislative session, a managed care reform act was promulgated. It requires the ID to issue a consumer report; to file quality assurance statistics, provider contracts, and financial arrangements; creates an external review procedure for denial of services; and establishes parity in insurance coverage for biologically based mental health disorders.

How Are They Doing?

Solvency Oversight of the Private Market

Solvency oversight has not been a major issue in Connecticut. Two HMOs went bankrupt in the late 1970s and early 1980s, but none have become insolvent in the last 10 years. ID oversight focuses on the assumption of risk. Any entity that accepts capitated payments directly from employers or enrollees is treated and regulated as an HMO and must maintain $1 million in capital and reserves. As a result of legislation passed in 1997, $3 million is required for point-of-service products; most filing requirements began as of May 1, 1998. ID is under strong contracting disclosure legislation, which requires HMOs to provide information about their contracting relationships and incentive systems with providers. However, a key legislator notes that ID has yet to do anything about implementing their legislative mandate. "They are said to be in the process of doing it soon," she notes.

Quality Oversight of the Private Market

In 1996, the Connecticut legislature considered and rejected a major managed care reform proposal that would have granted responsibility for quality oversight to DPH, eliminated contract "gag" rules, and required HMOs to obtain accreditation from the National Committee for Quality Assurance (NCQA) or a like organization. The bill was an "attempt to reach some consensus about the level of concern" surrounding managed care, explains the vice chair of Connecticut's Senate Public Health Committee, who thinks that "the market is not mature enough to reach consensus." The majority of complaints behind the proposed bill were from "providers who are being frozen out of networks," according to a principal examiner for ID. The chief for DPH's office of policy planning and evaluation, which would have the authority for quality oversight under the proposed legislation, agreed that provider complaints were the major impetus, but added: "We need some protection for providers to make sure they can help patients."

The 1997 managed care reform act prohibits "gag" clauses and requires provider input before materially changing medical protocols; in addition, provider profit development must make allowance for patient mix and severity of illness under the Insurance Commission's control.

Apart from provider complaints, the bill's supporters offered little evidence to substantiate their concerns over HMO quality, and opponents, particularly employers, objected that increased regulation would raise costs. "Affordability is a big issue here. The more regulation the higher the premiums will go," says ID's examiner, while "capitation is more of a perception problem than a reality." The examiner reports that the department has received no capitation-related complaints. Opponents were also concerned that, given Connecticut's reputation as an insurance industry state, the bill would send the rest of the nation a strong negative message about managed care. In the end, explains the vice chair: "I didn't feel that those who want increased regulation had demonstrated concrete problems that would justify the level of regulation."

Medicaid Oversight

Connecticut's capitation program for Medicaid clients is built around the use of purchasing strategies rather than regulation to improve managed care performance. "The regulatory process is very lengthy. One thing we don't want to do is tie up managed care plans so they can't have any creativity," states the medical policy director for DSS. To ensure performance, he adds: "It is essential to think out what you want in advance and have a contract enforcement system."

The legislature has raised several concerns about the Medicaid managed care program, including questions about health plan marketing and practices payment rates. "There wasn't sufficient baseline data to set rates to cover costs. The rates for behavioral health have been phenomenally low," says the Public Health Committee's vice chair. Another problem arose as managed care plans contracted with hospitals and fewer Medicaid patients used FQHCs, causing anxiety over the future of the health centers. The director acknowledged the problems but responded that DSS has taken steps to deal with them. The department has imposed temporary enrollment freezes on some plans with inadequate provider networks and has contracted directly with those hospitals and FQHCs that meet DSS solvency and network standards. The department also contracts with licensed HMOs and an MCO that meet the network adequacy standards required of all Medicaid health plans and the department's solvency standards. The MCO is sponsored by the state's FQHCs.

The vice chair agrees that "problems are working themselves out" as DSS gains more experience with managed care. Legislators realize the difficulty of attempting to manage the details of implementation. "It is very hard . . . to dictate by statute," admits the vice chair. Asking the Health Care Financing Administration (HCFA) to review the capitation rates is not feasible, for example, because HCFA will meet formally only with the executive branch. The legislature has dealt with oversight by appointing advisory commissions to monitor implementation.

Coordinating Oversight

The Medicaid Managed Care Advisory Council includes representatives of the Department of Public Health; the Department of Children and Families (the child welfare agency); the Department of Mental Health and Addiction Services (the mental health and substance abuse agency); the Office of the State Comptroller, an independently elected official who contracts with health plans on behalf of state employees and retirees; the Department of Insurance; the Department of Social Services; and the Office of Policy and Management, which is the governor's statewide planning and budgeting agency. There have been no joint purchasing efforts to date. But in the 1996 legislative session, the legislature voted to allow any municipality to use the state's purchasing clout and be part of the state's HMO health plans. The ID has sole responsibility for the private market, and Connecticut's insurance industry is opposed to any sharing or diminution of that authority, according to PHD's chief of policy planning and evaluation. Medicaid conducts solvency oversight for its own contractors. PHD has been interested in participating in data collection for HMO performance evaluation, but the Health Care Access Commission retains sole responsibility.

In 1997 the Connecticut General Assembly adopted legislation for "quality" oversight of managed care organizations. Public Act (PA) 97-99 placed this oversight with the Insurance Department, but there are several areas where input from the Department of Public Health is required, including the development of regulations governing utilization review companies; regulations governing external appeals to the commissioner of insurance (after an adverse determination by managed care companies and utilization review companies concerning admissions or lengths of stay); and a report card comparing managed care organizations. Additionally, the Department of Public Health is allowed to request and receive HEDIS data collected by the Insurance Department from managed care organizations.

What Is Next for Oversight?

All the respondents agree that Connecticut's debate about HMO quality oversight is not over. Many consumer groups are anxious about the increased market penetration of HMOs. DPH's chief reports complaints from elderly residents, who are worried about "bait and switch" tactics by HMOs. Legislative discussions about mandating NCQA or similar accreditation and granting increased oversight authority to DPH will continue. In 1998 the legislature planned to debate solvency and quality oversight of Provider Service Organizations (PSOs). These entities do not currently fall under the authority of PA 97-99. Additionally, the viability of safety-net providers is also of issue and is being investigated by the Legislature's Medicaid Managed Care Council.

DSS's medical policy director describes the Medicaid program agenda as "ambitious." The state had hoped to have approval of its 1115 waiver and to move dual eligibles, elderly, and disabled clients, into managed care by July 1997, but this project is on indefinite hold. The policy director believes that the federal government should give states more discretion in designing their Medicaid managed care models. "There is a need in this country to get away from the Medicaid model," he argues. "How many waivers are necessary to prove the point that there is a better way than fee-for-service to serve this population? It is better for the states to learn more about how to build a program [than to apply for multiple waivers]." Connecticut officials are committed to find ways to address issues of quality and access within the constraints of their state.

Additional Resources

(Last updated August 23, 1999)


What Is Hawaii Overseeing?

Hawaii has been a leader in health care reform, particularly in its efforts to achieve universal access for its citizens. In 1974, with passage of the Prepaid Health Care Act, Hawaii became the first state to attempt universal coverage. This act, passed before the federal ERISA law was enacted, requires all employers to offer either indemnity health insurance or managed care plans to full-time employees (working at least 20 hours per week) and covers a large percentage of the state's population. These same plans also provide coverage to Medicaid, Medicare, and Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) recipients. Some estimates of the population covered in the early 1990s were as high as 95 percent. The state economy is currently stagnant, however, and more recent estimates of the uninsured population are between 6 and 7 percent.

In 1991 Hawaii added a limited benefit plan, the State Health Insurance Program (SHIP), to cover the 5 to 10 percent "gap" population left unprotected by the earlier legislation, but this program proved to be inadequate. On August 1, 1994, SHIP was superseded by Med-QUEST, which was designed to cover all individuals with incomes below 300 percent of the federal poverty level in a single seamless purchasing-pool system.

In July 1993, the Health Care Financing Administration (HCFA) granted the state an 1115 waiver to combine the Medicaid, SHIP, and general assistance programs under Med-QUEST, a capitated managed care system using HMOs. Almost immediately, Med-QUEST enrollment increased and within one month exceeded the expected figure of 110,000, eventually peaking at 160,000. Because of a class action lawsuit for the aged, blind, and disabled, who were still subject to the old eligibility requirements (100 percent of federal poverty level and an assets test), eligibility for QUEST reverted to pre-QUEST requirements. QUEST and fee-for-service clients are therefore now subject to the same eligibility standards. The state also received a legal challenge that the program violated the equal accommodation provision of the Americans with Disabilities Act and most recently, reduced income thresholds to the Medicaid mandatory coverage group standards for QUEST. By August 1999, enrollment had dropped to 124,000 and a new gap group program, QUEST-NET, had been developed to offer some minimal benefits (enrollment stood at 5,000 in August 1999).

Hawaii was one of the last states to require commercial HMO certification; this mandate was enacted in the Health Maintenance Organization Act of 1995.

Who Is Overseeing?

Beginning on January 1, 1996, the Insurance Division of the Department of Commerce and Consumer Affairs was given statutory authority to license and monitor the financial practices of HMOs, including commercial HMOs providing QUEST-contracted services. The division was not assigned to any of the Med-QUEST program.

The Med-QUEST Division, within the Department of Human Services, runs the Med-QUEST program, which covers some of the state's citizens not protected by the employer mandate. Med-QUEST requires quarterly financial reports from its HMOs and has its own staff to implement a comprehensive program of quality assurance that involves gathering data and tracking complaints. The Department of Health (DOH) has no role in the oversight of managed care.

The Hawaii State Legislature (senate and house) has been active in health care reform, including creation of the 1974 Prepaid Health Care Act, SHIP, and the Med-QUEST legislation. Lawmakers conduct hearings and continuously monitor the progress of Med-QUEST.

How Are They Doing?

Solvency Oversight of the Private Market

The state's move toward managed care under Medicaid accelerated the trend in the private sector to move toward managed care. Although he has no formal oversight responsibility for HMOs, the director of DOH has observed that more large hospital-based providers have established managed care health plans, and others who had a wait-and-see attitude have formed alliances and started up health insurance managed care plans.

The insurance commissioner was authorized to oversee commercial HMO solvency in Hawaii on January 1, 1996. The division "is committed to monitoring risk-bearing entities to ensure their financial solvency," according to the insurance rate and policy analysis manager. State officials agree that Hawaii's size facilitates oversight.

Quality Oversight of the Private Market

Hawaii has strengthened the protection of consumer rights of patients receiving health care under managed care plans and from HMOs. In 1998, the legislature passed the Hawaii Patient Bill of Rights and Responsibilities Act to afford patients of managed care systems certain rights and protections. That same year, the insurance commissioner was required to convene a task force to review various laws providing protection of patient rights and responsibilities with regard to health care, especially managed care. The task force continues to meet and recommend statutory revisions to ensure the protection of consumer rights.

Medicaid Oversight

Hawaii embarked on the Med-QUEST managed care program to achieve cost control. "Under fee-for-service, the providers liked it, the patients liked it, but there was unintentional over-utilization and the costs were out of control," explains the Med-QUEST division administrator. The transition has been difficult. Initially the managed care program was "being beaten up all over the place. We had opposition from everywhere and especially the doctors," reports the administrator. Clients complained about lack of access to preferred specialists for routine care. There were problems with continuity of care as well, as some plans reached capacity and asked patients to choose new physicians. For the most part, however, implementation problems have been addressed.

There were a number of media reports about the early Med-QUEST problems. The legislature chose not to impose any legislative rules or mandates, but it met frequently with division staff. The agency agreed to regular legislative briefings and annual reports, and it recruited key legislators to join a technical advisory committee. The committee continues to discuss QUEST issues affecting providers.

Over time both Med-QUEST and the contractor HMOs have improved their responses to problems. For example, the plans have become "pretty good at negotiating patient swaps in order to maintain continuity of care," says the Med-QUEST administrator. Med-QUEST tracks patient complaints "very, very religiously"; each plan must track and log every complaint and document resolution. Division staff conduct random reviews of complaints and resolutions. The protocol calls for member grievances to be addressed by the plan first; if the resolution is unacceptable to the patient, he or she may appeal to the Med-QUEST office and, finally, to the state courts.

Med-QUEST employs a quality-control staff, with a liaison position for each HMO, three staff physicians, and six nurses. The division also regulates marketing and reviews each plan's literature. A consumer advisory board has been formed, but has met infrequently as a result of budgetary constraints. Budget and fiscal issues have considerably slowed Hawaii's efforts to expand coverage for the indigent. The state economy experienced a downturn in the early 1990s, and the fiscal situation has worsened. As employers closed businesses or laid off workers, the number of uninsured has steadily increased. Even with QUEST, which provides coverage to low-income workers and persons losing employment, the number of uninsured has grown each year. "Money will drive the process until the state is more solvent," reports one state legislator. "Anything that requires more government and more bodies is not considered. What is considered is what we need less of." He thinks that the budget crunch has also limited the state's willingness to fund community health centers; because of their patient mix and outreach activities, center costs tend to be higher than those incurred by other providers. However, some community health centers have done very well under managed care capitation.

Coordinating Oversight

State oversight of managed care is coordinated primarily by the Hawaii Patient Bill of Rights and Responsibilities Task Force. However, oversight of health plan coverage is the responsibility of the Department of Labor and Industrial Relations, the Department of Human Services, or the Hawaii Public Employees Health Fund, depending upon the population served. Legislative responsibility has been concentrated in the committees that deal with insurance and budget issues rather than being assigned to committees that deal with health care.

What Is Next for Oversight?

State finances and health care costs are pressing issues for Hawaii's health care system. The cost of the Med-QUEST program and continuing state fiscal problems may force more changes in benefits, eligibility, or co-payments. The chair of the House Health Committee reports that the legislature has been briefed about options for cutting benefits to state employees and retirees.

The Insurance Division's exercise of its responsibilities for HMO licensing and oversight and legislative proposals for patient protection are also major issues. Furthermore, the state is moving toward the concept of parity and nondiscrimination in health care for mental illnesses, and is closely monitoring the functions of the Hawaii Health Systems Corporation, the state's public hospital system, to ensure quality health care for all, including those served by small, rural hospitals. The state must seek creative solutions to the problem of achieving quality and expanded access while struggling with the problem of costs.

Additional Resources

(Last updated August 24, 1999)


What Is Idaho Overseeing?

HMOs cover 7.1 percent of Idaho's privately insured population; most of the enrollment came about through the extension of managed care plans operating in and around Spokane, Washington. The state enacted small-group health insurance reforms in 1993 that provided for guaranteed issue and renewal, portability of coverage, and rating restrictions; these reforms were extended to individual policies in 1994. An any-willing-provider law covering a broad array of providers was also enacted in 1994.

Idaho's Medicaid program is a fee-for-service system. A gatekeeper program operates in 28 out of its 44 counties. The state has received a 1915(b) waiver for a new program that requires certain recipients to choose a primary care physician.

Who Is Overseeing?

The Idaho Department of Insurance (DOI) is the only state agency that actively oversees managed care. It regulates risk assumption and monitors application of the any-willing-provider law.

The Idaho Division of Health (DOH) has no role in managed care. According to the director, the department has absolutely no data to oversee different systems. Idaho repealed its Certificate of Need program in 1983.

The Idaho Division of Medicaid (DOM) does not monitor managed care except as it applies to the 1915(b) waiver. Medicaid supervises health facilities through the Bureau of Facility Standards (BFS), which licenses and certifies 15 Idaho hospitals that are not accredited by the Joint Commission on the Accreditation of Healthcare Organizations (JCAHO). The Division accepts JCAHO accreditation for other hospitals in the state.

The Idaho State Legislature was not concerned with managed care issues until passage of the any-willing-provider law. A Patient Protection Act introduced in 1996 was passed in 1997.

How Are They Doing?

Solvency Oversight of the Private Market

Managed care expansion has been slow in Idaho; according to state officials, HMOs have been deterred from entering the state because it is largely rural and health care costs have traditionally been low. Two HMOs went bankrupt in the early 1980s, and, until 1995, there was little new activity. However, four new HMOs began to operate in Idaho between 1994 and 1996, and others applied for licenses during that time.

As the sole oversight agency, DOI reviews all HMOs, networks, insurance companies, and other risk-bearing entities. DOI does not have a firm policy on physician hospital organizations (PHOs) that may enter the state market, but the presumption is that, if such plans assume risk, they will be regulated.

Quality Oversight of the Private Market

DOI regulations require an "adequate quality" of care in Idaho managed care plans, but they do not specify the meaning of "adequate." No consumer complaints have been documented; however, state legislators report that advocacy groups are becoming more interested in managed care issues. The Patient Protection Act generated increased media coverage of managed care, both positive and negative.

DOI initially handles complaints that fall under the state's any-willing-provider law. The law requires HMOs to accept any provider who meets the insurer's standards and to establish a grievance procedure for terminations. The statute fails to define "insurer's standards," resulting in possible loopholes. As of mid-1996 the law had not been tested, but DOI plans to forward all unresolved complaints to the Attorney General's Office.

Medicaid Oversight

Idaho is committed to a fee-for-service Medicaid program. DOM has not had a management information system that could handle capitation. However, by December 1996, the division expected to install a new system for compiling the necessary data and enabling the introduction of capitated care for Medicaid recipients. The Medicaid administrator has no immediate plans to extend managed care beyond the existing gatekeeper model.

Medicaid's quality oversight focuses on facility certification, based on either JCAHO accreditation or BFS certification. BFS monitors the facilities and sends a "red flag" warning to DOM if it identifies a problem.

Coordinating Oversight

DOI is the most active Idaho oversight agency. The director plans to convene a group to consider changes to the insurance code as it applies to managed care. The group will consist of local attorneys, insurance carriers, HMO plans, DOH, and DOM.

The state legislature approves all new regulations and conducts a periodic review of each agency; lawmakers are thus in a position to exercise oversight and promote coordination among the agencies.

What Is Next for Oversight?

Most state officials think that Idaho's rural environment will limit the immediate expansion of managed care. Affordability of services is the most pressing health care issue for state residents. However, managed care is still viewed as a "reduced access" alternative, according to the director of DOH. However, the ranking minority member of the House Health and Welfare Committee noted that the expansion of managed care in Utah demonstrates that a rural state can support this health care delivery system. Other legislators do not agree that Utah's experience is replicable in Idaho because 85 percent of Utah's population is concentrated in four adjacent counties and is therefore much more geographically able to support managed care organizations.

DOH's director predicts that physicians and hospitals will attempt to control market changes. He notes that physicians continue to migrate to Idaho, many fleeing managed care in other states. These physicians recommend that their colleagues organize preemptively rather than waiting for insurers to enter the market. The minority member of the House Health and Welfare Committee describes the physicians as skillful lobbyists. They have set up meetings between doctors and legislators before each session and set priorities effectively. On the other hand, many large and small businesses are committed to pursuing managed care in Idaho. Despite the slow entrance of managed care into Idaho, state officials and legislators are preparing themselves to face the problems and conflicting interests that may present themselves as it gathers momentum.

Additional Resources

(Last updated March 16, 1998)


What Is Louisiana Overseeing?

Louisiana has 22 HMOs, which control 12 percent of the health care market. The state has enacted small-group insurance reforms requiring guaranteed issue and renewal and portability of coverage; it has also created a high-risk pool.

Louisiana's Medicaid program began implementing a 1902(b) waiver in the southern part of Louisiana in 1998. The program is also implementing a number of pilot service-delivery programs to control costs and maintain benefit levels. The program currently covers approximately 600,000 people.

Who Is Overseeing?

The Louisiana Department of Insurance (DOI), led by an elected commissioner, is the sole licensing agency for HMOs in the state. DOI oversees plan solvency, grievance procedures, and quality assurance plans; responds to consumer complaints; and monitors market practices. The commissioner has established an Office of Health Insurance within the department; Louisiana is one of six states that has established such an office.

The Louisiana Department of Health and Hospitals houses many state health agencies, including the Office of Public Health (OPH) and the Bureau of Health Services Financing (BHSF), which is within the Office of Management and Finance. BHSF oversees the state's fee-for-service Medicaid program. OPH does not have an oversight role for managed care.

The Louisiana State Legislature created the Louisiana Health Care Commission in 1992 to study and report on a variety of health care reform topics, including uniform licensing standards, practice liability, and consumer protection issues, and extended the commission's charge until 1999. The 1997 report of the Louisiana Health Care Commission made recommendations on regulations for utilization review, on provider credentialling, and on consumer protection issues; these proposals were debated during the 1999 regular session of the legislature, which adopted health care reform legislation that protects patients' access to covered medical care under their health benefit plan. This legislation was supported by consumer organizations, health care provider organizations, insurance companies, HMOs, and business organizations representing employers.

How Are They Doing?

Solvency Oversight of the Private Market

DOI oversight focuses on the assumption of risk: any Louisiana entity that contracts directly with employers or enrollees to provide health care services must be licensed as an HMO. Physician hospital organizations (PHOs) that contract with HMOs have not been required to apply for licensure. Many PHOs have been formed in all areas of the state; however, according to the director for the Louisiana Health Care Commission, the commission has decided to consider whether and how these entities should be regulated.

Quality Oversight of the Private Market

Quality assurance oversight of HMOs is under review at DOI and by the Louisiana Health Care Commission. Although the department requires HMOs to have grievance procedures and quality assurance plans in place, it will regulate how these procedures will operate.

Medicaid Oversight

Louisiana's Medicaid program attempted to implement a 1915(b) waiver for a managed care pilot project in Region 3, one of the state's nine regions, a seven-parish area located in southeastern Louisiana. Participation was to have been mandatory for all families receiving benefits from Aid to Families with Dependent Children (AFDC). Only state and federally qualified HMOs were able to bid to enroll members, and DHH was able to negotiate rates with only one qualified HMO rather than the required two. As a result, the program was suspended. New legislation in 1999 permits DHH to pursue implementation of the pilot program in other regions.

Coordinating Oversight

Coordination is a prominent feature of Louisiana's health care oversight. The department's health care advisory board, LHCC, maintains six subcommittees, which work on health care costs, insurance reform, regulation for provider-sponsored networks, HMO regulation, federal initiatives, and coordination of Medicaid operations.

What Is Next for Oversight?

The 1999 report of the Louisiana Health Care Commission makes recommendations to examine the rising cost of health care in the state, including, but not limited to, the cost of administrative duplication, the cost associated with excess capacity and duplication of medical services, and the cost of medical malpractice and liability. It also plans to examine the adequacy of consumer protection as well as the formation and implementation of insurance pools that better assure citizens the ability to obtain health insurance at affordable cost and that encourage employers to obtain health care benefits for their employees. Another key development has been the implementation of the Children's Health Insurance Program through DHH; DOI, with DHH, still has the option to further expand this program in the private market.

Additional Resources

(Last updated September, 9 1999)


What Is Pennsylvania Overseeing?

Thirty-three HMOs cover approximately 40 percent of Pennsylvania's insured population.

The state's Medical Assistance (MA) managed care program, in which approximately 30 percent of the 1.6 million recipients are voluntarily enrolled, is expanding. In February 1997, the Office of Medical Assistance Programs (OMAP) began a mandatory HMO program to cover most of the 600,000 Medicaid clients of the five counties of the greater Philadelphia region; authorized by a 1915(b) waiver, this initiative will increase MA managed care enrollment by 35 percent. OMAP plans to expand managed care statewide and is also examining its potential for serving special needs clients. OMAP will also continue to operate its existing primary care case management (PCCM) program, the Family Care Network, which serves approximately 225,000 children in 59 counties, using a noncapitated, primary care provider/case-management-driven model. The Family Care Network was designed to improve quality and control costs by encouraging clients to use the health care system more appropriately and efficiently.

Who Is Overseeing?

The Pennsylvania Department of Insurance (DOI) is one of two state agencies that issue HMO licenses. DOI approves premium rates; oversees HMO solvency; and monitors marketing practices. In the spring of 1996, the department, in conjunction with the Department of Health, issued new Statements of Policy, clarifying the respective responsibilities of HMOs and providers that contract with the plans.

The Pennsylvania Department of Health (DOH) works with DOI on HMO oversight. DOH sets standards for HMO adequacy; reviews and approves provider contracts, member grievance and complaint procedures, and quality assurance practices; tracks quality-of-care complaints; and hears appeals from HMO members who are dissatisfied with the way plans have resolved their complaints about claim denial, quality of care or services, or other HMO operations. In October 1998, DOH and DOI issued joint policy statements on implementation of the Quality Health Care Accountability and Protection Act (Act 68), a managed care consumer protection law. The two departments are working on implementing regulations.

The Pennsylvania Department of Public Welfare (DPW) oversees the Office of Medical Assistance Programs (OMAP), which administers Pennsylvania's Medicaid program, including a voluntary HMO program, a primary care case management program, and the "HealthChoices" mandatory HMO program. DPW contracts with 13 licensed HMOs to cover the voluntary program, and an additional three contracts are pending. Although OMAP is expanding its reliance on HMO managed care, the agency continues to operate a large fee-for-service program, which still covers more than one million recipients.

The Pennsylvania State Legislature passed Act 68, the Quality Health Care Accountability and Protection Act, in June 1998. This act, which became effective January 1, 1999, contains a range of provisions for continuity of care, creates new requirements for disclosure, and increases provider rights.

How Are They Doing?

Solvency Oversight of the Private Market

Two factors have been pushing DOI to undertake new initiatives in oversight of HMO solvency and contracting: the expansion of the market and the specter of financial failure. Two HMOs have become insolvent since 1986; since then DOI has strengthened its solvency inspection process by requiring all licensed HMOs to file quarterly financial statements. The department meets with each plan's executive staff to discuss the steps they must take to assure solvency. "We are trying to do what we can at the front door. I've been through insolvency. It's a horrible situation for everybody," explains the agency's former director of licensing and financial analysis.

Pennsylvania's health care market is changing rapidly, prompting further changes in oversight. Insurance staff observe that the market's reliance on integrated delivery systems (IDSs) is increasing. DOH's deputy secretary for quality assurance estimates that there may be more than 200 IDSs in the state, mostly centered around hospital medical staff plan development. Since June 1996, IDS contracts have been filed by HMOs and approved by the Department of Health.

Prior to 1996, Pennsylvania's HMO regulations did not directly address the issue of HMOs contracting with IDS plans and thereby shifting the risk downstream. The uncertainties acted as barriers to IDS development and HMO-IDS negotiation, so HMOs and provider groups asked the state for clarification and guidance. DOH and DOI considered regulating and licensing risk-assuming IDS plans, but they decided instead to hold HMOs accountable for the finances and the care and services provided by IDS subcontractors and their participating providers. IDS plans may now enter into capitation contracts or other risk-transfer agreements without themselves having to be licensed as HMOs or preferred provider organizations (PPOs).

The two agencies issued companion Statements of Policy in 1996, stipulating that, when HMOs enter into capitated or risk contracts with providers, the HMO, as the licensed entity, retains the ultimate responsibility for the subscribers. Under these guidelines, HMOs must file IDS contracts for DOH review and approval, and DOI monitors the delegation of responsibilities by HMOs to IDSs in order to safeguard the HMO's financial health. DOH monitors the delegation of quality oversight and consumer grievance activities.

Act 68 had further regulatory impact on such risk transfer arrangements. The act calls for entities conducting utilization review on behalf of a managed care plan to be certified by DOH. The act establishes specific operational standards for utilization review that are the basis for such certification. Each IDS that conducts utilization review on behalf of a managed care plan will have to be certified by DOH.

Quality Oversight of the Private Market

A former DOH deputy secretary states that "regulation is by definition for minimum standards" and that DOH has sought to avoid government "micromanagement" of the health care industry in Pennsylvania. Based on that philosophy, he describes the department's approach to quality assurance as aggressive. The department evaluates network adequacy, grievance procedures, and quality assurance protocols. Pennsylvania was one of the first states in the country to require periodic external HMO quality reviews by approved review organizations like the National Committee for Quality Assurance (NCQA) with the participation of DOH personnel.

DOH's Statement of Policy addresses quality assurance issues for HMO-IDS contracts, and the agency plans to review HMO oversight of IDS activities in this area periodically. HMOs are required to incorporate essential consumer protection provisions in their IDS contracts, which must then be included in the IDS's provider contracts; to oversee the delegation of quality assurance and utilization review to IDS plans and to retain the right to rescind such delegated responsibilities; and to file a delegation oversight plan with DOH or to certify use of NCQA delegation standards. Resolution of member grievances may not be delegated.

A critical component of ongoing oversight is DOH's complaint tracking system. Any HMO member dissatisfied with the plan's final decision concerning treatment or reimbursement may appeal to the state for review. DOH receives between 1,200 and 1,800 informal grievance calls a year, but estimates that only 600 appeals for review have been made since 1991. In addition, any consumer who is dissatisfied with an HMO's decision regarding acceptance into the plan or cancellation of membership may contact DOI.

A new component of both consumer and provider protection is the creation under Act 68 of an external appeal process when a managed care plan makes a denial based on necessity or appropriateness. DOH now assigns appeals that have been through the mandated two-step internal process at the plan itself to an independent entity to make a final decision in the appeal. Consumers also have the right to file complaints to either DOH or DOI, depending on the nature of the issue.

Medicaid Oversight

The deputy secretary for Pennsylvania's Medical Assistance Program notes that the department remains committed to the expansion of mandatory managed care. However, with three large urban areas and an otherwise rural population, the department needs to adjust its program to very different conditions. In Phase 1 of its planned managed care expansion, OMAP introduced capitated managed care into new areas of the state. Beginning with the implementation of the five-county mandatory HMO program in February 1997, the state plans to expand managed care across the state by the year 2002. Pennsylvania's rural areas will present different challenges in creating accessible and available, health care delivery sites. DPW's commitment to developing service networks that meet the needs of each region may lengthen the time required to complete delivery of managed care to these areas.

OMAP has developed managed care options for special groups like the disabled. Special-needs groups are represented, and assisted by a Special Needs Unit (SNU). The SNU will assist those with a special need in choosing a primary care provider (PCP) who can best meet the recipient's needs.

DPW has altered its HMO contracting procedures and its data collection as a result of experience with its voluntary HMO program. Because the voluntary program has been criticized for allowing plans to conduct direct marketing campaigns, the state will contract with a benefits consultant who will advise enrollees about their options. To improve its information base, OMAP plans to adapt HEDIS as its reporting standard, to collect encounter data, and to compare HMO performance against that offered by fee-for-service providers.

Criticism has been voiced as well of HMOs that subcontract components of their MA programs to make a profit. A legislator on the Public Health and Welfare Committee identified plans that were paid a capitated rate for drug and alcohol rehabilitation and then subcontracted these services to providers at a much lower rate. A previous administration considered capping subcontract profits at 5 percent, but the legislator has not heard such a proposal from the current administration. The behavioral health component has been carved out and may be either managed by the county or subcontracted out to a private company (or a combination).

Coordinating Oversight

Pennsylvania's cabinet-level officers are organized into functional "clusters" to address cross-cutting issues more effectively. The state agencies responsible for health have established good working relations and work together to coordinate activities, exchange information, and analyze outcomes. DOI and DOH collaborated on the Statements of Policy on IDS oversight and implementation of Act 68; and OMAP and DOH are coordinating data collection for quality improvement. Another possibility yet to be explored is coordinated purchasing by health care services.

What Is Next for Oversight?

Medical Assistance is likely to be the health care area that will be most drastically changed in Pennsylvania. The governor and his administration want to expand capitation statewide including special needs groups. Budget pressures are likely to keep the focus on managed care. The deputy secretary of OMAP notes that the state needs to recognize that special needs and chronic care populations require additional resources, while controlling the growth of Medicaid costs and balancing spending priorities.

DOH has set standards for how HMO-IDS contracts may transfer the HMO's risk and delegate its authority for quality assurance to IDS plans. According to the office of the deputy secretary for quality assurance, the agency plans to develop similar standards to be applied to contracts between IDS plans and Blue Cross/Blue Shield or commercial insurers.

A former DOI official thinks that the health care market will continue to develop, and he anticipates mergers and shakeouts but does not foresee major legislative or regulatory changes. The legislator on the Public Health and Welfare Committee cited earlier favors a consumer bill of rights for managed care. Moreover, she points out that with the lapsing of the state's Certificate of Need law, questions will arise about the possibility for unregulated growth and expansion in the health care delivery system. However, state officials appear satisfied with the oversight situation at present.

Additional Resources

(Last updated August 13, 1999)

South Carolina

What Is South Carolina Overseeing?

Managed care is a small, but rapidly growing, component of the health care market in South Carolina. HMO membership increased from 262,000 in 1995 to an estimated 440,000 in 1998 (approximately 11 percent of the total population). South Carolina's health care system is being transformed as hospitals, physicians, and other medical care providers negotiate agreements and stake out positions to prepare for the expansion of managed care and for possible Medicare and Medicaid initiatives. Integrated networks are being introduced into the state's well-served areas.

In 1994 the state passed two health care reform bills: one was enacted to facilitate cooperative agreements between health care purchasers and providers; the second, the Small Employer Health Insurance Availability Act, was designed to promote the formation of purchasing cooperatives and to encourage the development of appropriate plans for small businesses. The state has also enacted an any-willing-provider law for pharmacies and a freedom-of-choice clause for psychologists.

In 1996, South Carolina passed legislation regarding maternity lengths of stay and coverage of drugs used to treat cancer. In 1997, South Carolina passed legislation to conform its laws to the requirements of the federal Health Insurance Portability and Affordability Act (HIPAA).

In November 1994, the Health Care Financing Administration (HCFA) granted conditional approval to an 1115 waiver, known as the Palmetto Health Initiative, which offered Medicaid recipients in South Carolina the choice to enroll either in fully capitated HMOs or in partially capitated managed care plans; it also extended eligibility to all residents whose incomes are below the federal poverty level. South Carolina decided to postpone action on the Palmetto Initiative, however, because of financial concerns, limited managed care capacity, and anticipated federal changes to Medicaid. Instead, the state introduced a pilot project, which would allow recipients in selected areas to choose among a contractor HMO, a primary care case management (PCCM) program called the Physician Enhanced Plan (PEP), and a fee-for-service system. By 1998, there were three HMOs serving 13 counties; PEP was available in seven counties and expanding statewide; and the Healthy Options Program (an enhanced fee schedule for primary care providers) was available in 30 counties.

Who Is Overseeing?

The South Carolina Department of Insurance (DOI) regulates the solvency of all insurers in the state, including managed care plans; monitors market conduct; and tracks and responds to consumer and provider complaints. DOI does not oversee provider groups that assume downstream risk if these groups are contracting with single employer self-insured health plans.

The South Carolina Department of Health and Environmental Control (DHEC) houses the Division of Health Regulations (DHR), which is within the office of the Deputy for Health Services. The deputy performs limited monitoring of long-term-care facilities and hospitals regarding Medicaid and Medicare; oversees the state's health facility plan; inspects facilities; and supervises the Certificate of Need (CON) program. Under the 1994 statute, Health Services also monitors cooperative agreements between health care providers and purchasers and is empowered to grant antitrust exemptions for agreements (certificates of public advantage) that are determined to be in the public interest. One exemption was issued in 1997.

The South Carolina Department of Health and Human Services (DHHS) manages both the Medicaid program, including the voluntary Medicaid managed care program, which uses state-licensed HMOs, and PEP.

The South Carolina Department of Labor, Licensing, and Regulation regulates professional practice through licensing of physicians and other health care occupations.

The South Carolina State Legislature has enacted health care reforms and is the driving force behind most state policy initiatives. Lawmakers enacted legislation that mandates that employers who offer a closed panel plan such as an HMO must also offer a point-of-service option. In addition, in 1998, lawmakers considered consumer protection standards related to "gag" clauses, selection of OB-GYNs, emergency care services, and mastectomies.

How Are They Doing?

Solvency Oversight of the Private Market

Guaranteeing the solvency of HMOs and other insurers in South Carolina is the responsibility of DOI, which licenses all HMOs and conducts quarterly financial status reviews. The state does not have authority to license provider networks unless they are engaged in the business of insurance or acting as an HMO. The 1994 statute assigned to DHEC some authority to oversee provider agreements.

Quality Oversight of the Private Market

All HMOs must undergo review by a qualified external organization, based on criteria set forth in guidelines established by the National Committee for Quality Assurance (NCQA). The deadline for the first review was December 31, 1996, with a requirement to submit to further reviews at least once every three years. The DOI's Consumer Services Division responds to complaints from consumers and physicians; reviews complaint reports submitted by HMOs; and tracks the number, type, and pattern of problems reported.

Medicaid Oversight

South Carolina's withdrawal of its 1115 waiver request reflects changing managed care priorities. The governor began a major administrative restructuring in 1993 by creating a cabinet in the executive branch and merging several state agencies; the administration has committed its energies to welfare reform and to small business development rather than to health care reform, in part because it is awaiting changes in federal policy.

The Medicaid program has been evolving at the state level, including expanded eligibility for children up to 150 percent of poverty. This was done in response to the Children's Health Insurance Program (CHIP) in the Balanced Budget Act of 1997. Expansion to 200 percent of poverty is being considered. Enrollment in HMOs is conducted in-house at DHHS. In addition, DHHS has an outside peer review organization evaluating the performance of the HMOs, with an emphasis on quality.

Coordinating Oversight

Coordinating the oversight of its small degree of managed care is not an issue in South Carolina, except when it comes to the Medicaid program, which maintains a close liaison with DOI and consults DHHS.

What Is Next for Oversight?

It is difficult to forecast the direction of managed care oversight in South Carolina until market penetration has increased. The legislature has appointed a committee to study and plan for changes in regulatory oversight and health care reform. In the interim, and until the future course of Medicaid, Medicare, and other federal health programs are determined, market forces will probably dominate the new shape of health care systems in South Carolina. Mergers and alliances among hospitals, physician groups, and other medical care providers are already under way, while employers and insurers are exploring many ways to control costs, including managed care.

Additional Resources

(Last updated August 30, 1999)


What Is Tennessee Overseeing?

Tennessee's 17 HMOs enroll over 20 percent of the insured population. The state has enacted several insurance reforms, including guaranteed issue, guaranteed renewal, portability of coverage, and basic benefit plans for small groups and the prohibition on "gag" rules for managed care plans.

However, the dominant factor in the state health care market is TennCare. Implemented in January 1994, TennCare enrolls 800,000 Medicaid recipients, as well as 400,000 previously uninsured and uninsurable residents, through a prepaid managed care delivery system that emphasizes prevention and covers high-risk enrollees. All categorically eligible individuals and all those below the poverty line participate in TennCare free of charge; state residents whose incomes are above 100 percent of poverty have cost-sharing responsibilities that are based on a sliding scale. However, enrollment for the uninsured has been closed since January 1, 1995, and has yet to be reopened. Qualified individuals whose income exceeds 400 percent of poverty purchase TennCare coverage at full price. Because of the TennCare program, Tennessee has one of the lowest uninsured rates in the country.

Who Is Overseeing?

The Tennessee Department of Commerce and Insurance (DCI) oversees solvency and financial issues, monitors market practices, and tracks complaints for all commercial HMOs. The TennCare Division within DCI is responsible for financial and solvency oversight of managed care organizations (MCOs) that contract with the state to serve TennCare members.

The Tennessee Division of Public Health (DPH) evaluates commercial HMO networks, oversees quality assurance and grievance procedures, and coordinates with TennCare on public health issues.

The Tennessee Department of Health (DOH) houses the TennCare Bureau (TCB), which is responsible for the day-to-day management of the TennCare program. TCB executes and monitors MCO contracts, coordinates with DOH on broader health issues, and contracts with DCI for solvency oversight. The bureau also contracts with DCI to perform financial and compliance audits of TennCare MCOs and with the Comptroller of the Treasury for nursing homes housing Medicaid clients.

The Tennessee State Legislature (senate and house) has enacted several insurance reforms; it has also actively monitored the TennCare program through its Select Committee on TennCare Oversight. All legislative proposals that might impact on TennCare come before the Select Committee, but only the Health Care Financing Administration (HCFA) can amend the TennCare waiver.

How Are They Doing?

Solvency Oversight of the Private Market

Although the number of Tennesseans enrolled in commercial managed care plans is small compared to TennCare's enrollment, DCI's deputy commissioner with responsibility for commercial HMOs reports that the number of licensed plans has been rapidly increasing. DCI follows National Association of Insurance Commissioners (NAIC) guidelines for overseeing solvency, focusing on risk assumption; any entity that contracts directly with employers or enrollees on a prepaid basis is regulated as an insurer. Tennessee's Physician Hospital Organization (PHO) statute allows PHOs to contract with HMOs as providers, but requires the HMO to carry additional capital reserves to cover the risk of PHO insolvency. "Our goal," says the deputy commissioner, "is to get a handle on what is out there in the marketplace."

Quality Oversight of the Private Market

Quality oversight in Tennessee is the responsibility of the Department of Health. DOH reviews provider licenses to determine if they are qualified to provide contract services and investigates complaints about inappropriate behavior, inadequate coverage, and other quality issues. Neither DOH nor DCI officials report a great number of complaints or concern over managed care quality in the private market.

When there is public concern over quality, the issue usually comes to the legislature's attention. One example in the 1996 session was the bill to guarantee 48-hour postpartum hospital stays. When the bill was introduced, the TennCare Bureau convened its own work group to develop an alternative approach to mandated hospital length-of-stay. The group drafted new emergency regulations that encompassed accepted standards for obstetric and neonatal care; that language was adopted by the Tennessee legislature. Although health providers are wary of making health care policy by statute, they use the legislative route if they see little hope for change otherwise.

Medicaid Oversight

"TennCare was created in response to a financial nightmare," explains the assistant director for research in the Tennessee State Comptroller's Office. "Nothing had been successful in controlling costs. It was either cut services or throw some people off." The state had applied for the waiver in 1993 and began to implement it even before receiving formal approval to do so from HCFA; only 45 days after that formal approval came in, the state had begun to carry out the program. To many, it seemed that TennCare brought its Medicaid recipients, and much of the uninsured population, into managed care overnight.

TennCare's first 12 months of operation were extremely rocky. The Tennessee Medical Association filed suit against the state, charging "an unconstitutional delegation of authority to the executive branch," and argued that TennCare was in fact not managed care but heavily discounted fee-for-service care. Later the suit was withdrawn. In the early months, there were reports of unethical marketing practices, confusion about enrollment, and problems in processing claims; complaints persisted that the state was not adequately supervising the MCOs.

Despite the many initial problems and a change in administrations, Tennessee's state government has remained committed to TennCare. "We had a Democratic administration that created TennCare and a [new] Republican administration committed to making it work," says DCI's deputy commissioner for TennCare. "There is a realization by both parties that Tennessee can't afford to go back to the old Medicaid program."

Governor Sundquist, the Republican incumbent, has overseen a number of changes in TennCare. The governor's first executive order transferred TennCare from DOH to the Department of Finance and Administration, to strengthen financial oversight of the program, and created a TennCare Division within DCI. Recently, the TennCare Bureau was moved back to DOH, which oversees the solvency of any MCO whose TennCare enrollment exceeds 80 percent.

Governor Sundquist also created the TennCare Roundtable, which was made up of providers, consumers, and representatives of MCOs. In June 1995 the Roundtable issued a report that prompted significant modification of all TennCare contracts. In tandem with the Select Committee on Oversight, the Governor's Roundtable pushed for significant changes: imposing a 60-day limit for processing claims, for example, and also mandating arbitration between providers and MCOs in the event of a claims dispute.

TCB has also increased the capitation rate and tied it to contract amendments and to any legislative mandates. There are eight different rates, which vary with an enrollee's age, gender, medical condition, and the like. On July 1, 1996, TennCare carved out a capitated mental health program served by two behavioral health organizations (BHOs). Long-term-care services remain under the old Medicaid system but are delivered through TennCare MCOs.

TCB uses a partial withholding tactic to ensure compliance with predetermined quality assurance standards, retaining 10 percent of an MCO's monthly payments until standards are met. If a plan does not comply within six months, it forfeits the withheld moneys to the state. But the bureau has employed partial withholding with mixed results: one MCO forfeited $21 million in accumulated withholds and still failed to meet standards. "[The tactic] has not been as effective with some plans as others. It is hard to say it's been effective with the company that I got $21 million of their money," says TCB's former chief.

Almost all of Tennessee's local health departments contract with MCOs as TennCare Providers; these departments are also responsible for health outreach under the program. The local departments contract to provide immunizations, family planning, tuberculosis management, and treatment for sexually transmitted diseases, as well as other primary care services; few have the resources to be fully capitated providers. In areas with inadequate network coverage, health departments are reimbursed directly, using a negotiated fee-for-service rate. Health outreach efforts are reimbursed at cost.

TennCare officials are aware that there is still room for improvement of the program. DOH staff would like to make greater use of encounter data to track outcomes. The assistant director of the Comptroller's Office of Research comments that TennCare has an "overreliance on the system" and that the bureau has not itself been sufficiently active in MCO oversight. The program's grievance procedures also came under fire when a Federal Circuit Court ruled that they were inadequate.

"We are not over the hump," says DCI's deputy commissioner for TennCare. "We don't see the negative articles we saw at one time. There is more work to do, but providers have more confidence. If everything is flowing along, then there is no press, and that is good."

Coordinating Oversight

Coordination for managed care oversight in Tennessee centers around the TennCare program. Most of TennCare's oversight operates through the executive branch, and there is a great deal of coordinated activity among relevant agencies. The legislature's Select Committee on TennCare Oversight meets weekly during legislative session and "has been very active in giving input," according to DCI's deputy commissioner.

What Is Next for Oversight?

TennCare officials plan to continue improvement of the program and to move toward a true actively managed care system. TCB has begun to phase out preferred provider organizations (PPOs) and, beginning January 1, 1997, required all MCOs to be licensed as HMOs. The bureau also required its contractors to install gatekeepers on that date. All MCOs will continue to be under capitated contracts.

Presently, nine MCOs serve TennCare in various parts of Tennessee, with enrollments ranging from almost half a million to a little more than 11,000 enrollees. DCI's deputy commissioner for TennCare worries: "We may have too many MCOs, and there are risk problems with the smaller ones."

TennCare officials have discussed with each other the ramifications of moving long-term-care patients into the managed care system. They are also engaged in linking the DOH and TennCare Bureau databases.

Since enrollment of the non-Medicaid-eligible uninsured was closed on January 1, 1995, the percentage of the population with health care insurance has dropped, which deeply concerns many legislators. According to the chairman of the Select Committee of TennCare Oversight, reopening enrollment is a priority. He wants to open TennCare enrollment so that working Tennesseans and their families can afford health care insurance, which will also prevent cost shifting and lessen the free-care liability of hospitals and other providers.

On the whole, state officials support TennCare and are committed to its continuing improvement. The state's experience with the program may also be useful if and when Tennessee's commercial managed care market starts to expand.

Additional Resources

(Last updated March 26, 1999)


What Is Wisconsin Overseeing?

HMOs have been integrated into Wisconsin's health care system for many years; the state commissioner of insurance calls the market "very mature." The state has a history of large, physician-owned group practice HMOs; 18 of Wisconsin's 26 HMOs fit into this category. Other HMOs developed from local independent practice associations (IPAs). The decision reached in 1983 to offer state employees incentives to join HMO plans spurred market penetration; by 1996, HMOs had enrolled almost 90 percent of state employees and represented about 25 percent of the state's health care market.

Wisconsin's HMO-based Medicaid managed care program was also launched in 1983. By 1998, managed care covered about 178,000 residents, approximately 80 percent of all welfare recipients, or virtually all of the population receiving benefits from Aid to Families with Dependent Children (AFDC). Starting in the fall of 1997, however, the majority of these clients were shifted to the Wisconsin Works (W2) program, a welfare reform initiative that eliminates AFDC and requires all recipients to work.

On July 1, 1999, Wisconsin implemented BadgerCare, the state's Children's Health Insurance Program (CHIP) that provides Medicaid benefits to low-income uninsured families, children, and adults, with income at or below 185 percent of the federal poverty level (FPL). Once eligible, families can remain eligible for BadgerCare with income at or below 200 percent of FPL. At full implementation, 67,500 persons will be covered in BadgerCare. BadgerCare recipients will be enrolled in the HMO-based Medicaid managed care program.

Who Is Overseeing?

The Wisconsin Office of the Commissioner of Insurance (OCI) is responsible for licensing and regulating all HMOs in the state. The office regulates solvency and market conduct, tracks consumer complaints, reviews grievance processes, and maintains information on HMO contracting relations, finances, and operations. OCI provides a wide range of information to the public and disseminates it through the Internet and other formats.

The Wisconsin Department of Health and Family Services (DHFS) oversees Medicaid and will manage the W2 program. As the state's largest purchaser of HMO services, DHFS relies on an aggressive contracting strategy to maintain quality while containing costs. Because of the performance data it generates from the Medicaid HMO program, DHFS is also the state's largest disseminator of information on managed care access and quality.

The Wisconsin Bureau of Health Information (BHI) compiles patient-level information and financial data from hospitals and freestanding rehabilitation, psychiatric, and substance abuse facilities, as well as physicians' offices. BHI distributes the information to hospitals, health care providers, insurers, business coalitions, and consumers.

The Wisconsin Department of Employee Trust Funds (ETF) enters into and oversees contracts with HMOs as part of its responsibility for administering the state employee health plan.

The Wisconsin State Legislature (senate and assembly) has cooperated effectively with the governor in reforming the health insurance markets in the 1990s. Wisconsin Act 289, passed during the 1995-96 session, which overhauled the state welfare system, also mandated portability of coverage and eliminated exclusions on coverage of certain preexisting conditions; both provisions had earlier been extended only to small employee groups. Measures approved in the 1993-94 session required all health insurance policies and self-insured government plans to cover blood lead tests for children under six and outlined new information requirements for insurers that deny coverage of chiropractic treatment. Lawmakers also conduct oversight through various committees and are considering the need to increase state oversight of Medicaid managed care for special needs populations.

How Are They Doing?

Solvency Oversight of the Private Market

Wisconsin law first recognized HMOs as insurers in the early 1980s and has maintained strong financial requirements ever since. Most HMOs are on solid financial ground, at least partially because of effective state oversight; there have been few instances of actual or threatened insolvency. This strong financial health and the dominance of physician-owned HMOs in Wisconsin led the commissioner of insurance to voice her skepticism about physician complaints that capitalization requirements are a significant barrier to the HMO market: "I wonder what barriers doctors are finding. I don't believe they need to be 'jump started' or have lower capital requirements."

Although many of Wisconsin's HMOs grew from local roots, ownership patterns have changed as the plans have grown. Some of the largest HMOs have been acquired by national companies, while others, once entirely owned by a single physician group, now are partially owned by other insurers or health systems. These links and mergers are viewed as "strategic alliances" for the parties involved. However, the increase in consolidation and joint venturing of managed care organizations and provider networks has provoked charges of unfair competitive practices. In 1994, Blue Cross/Blue Shield of Wisconsin sued Marshfield Clinic in federal district court, alleging geographic monopolization of health care providers and price-fixing that was detrimental to the Blues' HMO. The district court ruled in favor of Blue Cross/Blue Shield, but the verdict was partially reversed on appeal, and a final decision is still pending.

Quality Oversight of the Private Market

HMO regulation and oversight are well developed in Wisconsin's mature market. Since the 1980s, OCI has required HMOs to report consumer complaints, to comply with standards for grievance resolution, and to report the nature and type of provider contracting practices.

However, in the 1990s, concerns about plan accountability for quality of care have arisen statewide. The commissioner is working with the National Association of Insurance Commissioners (NAIC) to develop a series of health plan accountability models for use by all states; and the legislature is expected to consider several bills for improved HMO quality and outcome evaluation in 1997.

Medicaid Oversight

Enrollment of AFDC/Medicaid recipients in managed care began in Milwaukee and Dane Counties, Wisconsin's two largest metropolitan areas, in 1984, and has since been expanded to all but two of the state's 72 counties. According to the DHFS administrator for health and the former health financing director, Medicaid did not do a good job in assuring quality of care during the early years of managed care.

In 1991, as voluntary HMO Medicaid enrollment remained stagnant at 30 percent of eligible recipients and the state faced rising costs, DHFS launched an initiative to increase the program's quality and to expand participation. Medicaid officials brought together recipient advocacy groups, health care providers, and public health representatives to discuss program shortcomings and proposals for improvement. These meetings helped promote a series of important changes that dramatically expanded the program by 1996.

DHFS has increasingly emphasized quality and has worked to change the program's image among AFDC recipients and the public at large. Research in the Milwaukee managed care program recently demonstrated that AFDC clients consistently received better care than comparable fee-for-service recipients. For example, children in the Medicaid HMOs received more comprehensive physical exams, hearing and vision screens, and immunizations.

Medicaid contracts only with licensed HMOs, but DHFS uses its purchasing power to go well beyond the licensing requirements set by OCI. Medicaid collects a wide range of information and builds measures based on these data into its contracting standards, focusing on contractor performance rather than on financial regulations. DHFS experimented with a primary care case management (PCCM) program for Medicaid and found that it received better administrative accountability and quality from this kind of contracted, capitated program.

In assessing the Medicaid program's accomplishments, the administrator identifies two factors that were critical in shaping the program. First, bringing providers, state administrators, and advocacy groups together to discuss the program's problems and potential helped to create a consensus for change. Second, DHFS has built an effective team that focuses on program improvement.

Wisconsin has continued to contract with HMOs for the years 1998 and 1999 for AFDC-related and low-income women and children. Significant improvements and initiatives in oversight were made in the contract for this period:

  • Requirements of the Balanced Budget Act were incorporated into the new contract. For example, adjustments were made for marketing prohibitions, the elimination of the 75/25 rule, and the prudent layperson definition of emergency services.
  • A requirement was included that managed care organizations (MCOs) provide complete encounter data to the state by the end of the contract period. Encounter data will significantly improve the state's capacity to monitor MCO performance and to develop effective performance standards.
  • New performance standards and provider access standards were required of MCOs in the areas of mental health and substance abuse services. Good performance in this area is crucial for successful family reunification and welfare reform.

As previously mentioned, BadgerCare recipients will be enrolled in the HMO-based Medicaid managed care program. The standard Medicaid HMO oversight activities will also apply to BadgerCare recipients enrolled in HMOs. In addition, Medicaid HMOs will be required to produce separate statistical reporting for BadgerCare recipients.

Finally, existing quality performance indicators have been reviewed by the Bureau of Managed Health Care Programs in terms of relevance and clinical importance to enrollees under BadgerCare. Several of the existing indicators were found to be of high value in these terms for use in BadgerCare. A clinical indicator on the care of diabetes has been recommended for addition as a targeted performance improvement area, and a family health improvement initiative on smoking cessation has been recommended for addition as an optional clinical priority area.

Coordinating Oversight

Regulatory oversight in Wisconsin is concentrated in OCI and DHFS; the two agencies work together as needed to coordinate policy and gather data. Both agencies actively generate information that can be used to evaluate health care programs and policies. DHFS disseminates extensive information on managed care access and quality, based on the performance data generated by the Medicaid HMO program. BHI also compiles information on a large and diverse set of measures and distributes it widely in various formats.

What Is Next for Oversight?

Wisconsin is exploring several important changes. The insurance commissioner has drafted for legislative review a new rule requiring HMOs to use "report cards," or certification announcements in marketing materials that must be certified by an independent, OCI-approved vendor. The commissioner is also seeking ways to deal with the potential impact on the state's health care market of proposed federal changes to exempt provider sponsored networks (PSNs) from state regulation.

DHFS is considering expanding the capitation program into long-term care and care for the disabled. The administrator thinks the good will that the Medicaid program has developed through its work with AFDC recipients will ease the transition to managed care for these two highly vulnerable groups. The Division of Health Care Financing has been working with consumer groups, providers, insurers, and HMOs to develop a consensus plan to implement managed care of these populations incrementally.

Enabling legislation for managed care for long-term care was introduced in the legislature in 1998. Some of the key issues discussed with providers, advocacy groups, community-based organizations, and local county and other state agencies are:

  • Contracting Protocol. What priority or preference should local county agencies have in receiving contracts for managed care organizations (MCOs) for long-term care, given the fact that counties have been administering many of the long-term-care programs and have developed considerable expertise and experience in this area?
  • Rates. What are fair rates for MCOs serving populations requiring long-term care services?
  • Recipient Choice. What are the best methods and organization arrangements for providing effective and flexible choices of recipients of long-term-care services within a managed care environment?

The legislature will also consider revision of Wisconsin's high-risk health insurance program, the Health Insurance Risk Sharing Program (HIRSP). Enrollees have paid 60 percent of the costs for high-risk coverage; the remaining 40 percent is derived from an assessment on insurers. Rising costs have made enrollee premiums unaffordable for many people. In 1996, lawmakers authorized $1.5 million to mitigate the impact of a 27 percent HIRSP rate increase set for July 1 and directed DHFS and OCI to study and recommend changes in the program.

Effective January 1, 1998, HIRSP was transferred from the Office of the Commissioner of Insurance to the Department of Health and Family Services. The premium cost to enrollees was reduced by the following actions: (1) the fund for HIRSP was supplemented by the addition of $6 million per 6 months from state cigarette taxes; (2) the 40 percent share of costs based on insurance assessments was split between 20 percent assessed on insurers and 20 percent assessed on Medicaid providers; (3) $1.8 million for the 1997-99 budget was added to subsidize premium costs for enrollees with income less than $20,000 per year; and (4) an absolute premium cap of 200 percent of the standard individual market rate was established.

Although managed care appears certain to be the mechanism for future service delivery to high-risk patients, the senate chair of the Joint Legislative Audit Committee noted that there is disagreement about funding options. Insurers are resistant to subsidizing a higher portion of costs while self-funded plans are exempted from paying by ERISA. They favor a broad-based assessment on health services provided by HMOs, indemnity plans, and self-funded plans to finance high-risk care. The chairman of the Assembly Health Committee predicts that the state will shift costs either to the Medicaid program or to the general revenue fund; however, other legislators do not foresee the state budget absorbing these costs.

It appears likely that Wisconsin will continue its pattern of managed care reform and expansion over the next few years. Several legislators see managed care as the best service option for citizens with developmental disabilities or terminal illness. The chair of the Joint Legislative Audit Committee considers that implementing managed care for high-cost, high-utilization clients, while maintaining quality assurance and cost effectiveness, is the state's next great challenge. Well-defined agency oversight and management, active interest-group involvement, and incremental implementation will contribute to the success of Wisconsin's managed care program.

Additional Resources

(Last updated September 13, 1999)