ERISA Plans

All employers offering health benefits to their employees through managed care organizations or traditional indemnity insurers must comply with requirements of the Employee Retirement Income Security Act (ERISA). ERISA requires private employer-provided health benefit plans to disclose certain information to plan participants, to report information to the federal government, and to pay benefits that are promised under the plans. ERISA regulations generally require employer health plans to approve or deny claims within 90 days and to approve or deny an appeal of claims denials within 60 days. Although ERISA health plans are required to establish and disclose complaint and appeals procedures to participants, and to notify participants of claims denials, the plans are not required to provide a particular complaint procedure.

State-Licensed Insurance Products

Some state insurance regulations require health insurers doing business in the state to provide certain complaint procedures to enrollees. In addition, all 50 states have laws licensing or governing HMOs doing business in the state, which are separate from their laws regulating indemnity insurance products. Many states' laws are based on the model HMO law drafted by the National Association of Insurance Commissioners, which requires HMOs to establish complaint procedures approved by the state's insurance commissioner.

An estimated 30 states have some specified complaint procedures that HMOs must follow, and at least seven states now require an expedited appeal for denials of urgently needed care.

SOURCE: President's Advisory Commission, 1998.

Changes in the way physicians are paid have altered the financial incentives of clinical practice. Whereas providers under fee-for-service generally have financial incentives to provide more care, managed care plans have attempted to shift the incentive system toward the use of performance indicators. Common measures used by half or more HMOs with such physician incentive systems include utilization and cost, quality of care (e.g., adherence to practice guidelines), patient complaints, and the results of consumer surveys. Usually, these performance-based bonuses or "withholds" represent a small share of a physician's total income. Managed care organizations still tend to pay individual specialists on a fee-for-service basis, but elements of risk are being introduced. Some plans are capitating (i.e., paying a flat fee per patient covered) or competitively bidding for specific specialty services such as mental health, radiology, podiatry, and cardiology (InterStudy, 1997). Some managed care organizations offer cancer care as a "carve-out" through a network of cancer care providers (e.g., Value Oncology Services) (Bell, 1997). In these arrangements, an employer removes coverage for cancer care from the regular health benefits plans and arranges for coverage through a contract with a separate set of specialized providers.

Cancer care is often resource intensive, and some managed care companies are hiring disease management specialists to track costs and manage patient care (Bennett, 1997; Piro and Doctor, 1998). Disease management systems can reduce costs and improve care if they coordinate care



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