Health Care Risk Sharing, Integration & Accountable Care – Part 1

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STATE REGULATION OF RISK SHARING, INTEGRATIONAND ACCOUNTABLE CARE:  TRADITIONAL APPROACHES TO THE REGULATION OF HEALTH INSURANCE RISK

Delivery innovation has outpaced traditional forms of regulation in the area of insurance.  State regulatory issues generally focus on the issue of insurance regulation.  Accordingly, a mastery of state statutes and interpretive case-law regulating the business of insurance is required when establishing risk-sharing arrangements. Traditionally, whether an entity was engaged in the business of insurance was a prima facie analysis.  However, payer-provider risk sharing arrangements transcend traditional face-value review.  Fundamentally, where a provider-network [1] contracts with payer for the delivery of services to a defined body of consumers, and does so in a manner which allocates the risk of outlaying costs to the provider-network, the provider-network necessarily assumes this risk.  This assumption of risk potentially subjects the provider-network to a state’s insurance regulators by the provider’s “insurance” of this risk.  With increased dynamism in the health care sector, it has become common for providers to adopt the role of risk-bearer.  If state regulators determine such providers to be in the business of insurance, the provider-network may have to:

  • Seek state licensure and certification which may require review of the provider-network’s business structure, the imposition of capital reserve floors, premium-rate review, distribution and marketing review, and continued verification of same;
  • The provider-network may subject themselves to ongoing regulation of their managed care strategy; and
  • The provider network may have to establish preferred panels and qualified utilization management techniques.

As provided for below, a variety of techniques, depending upon the applicable state’s law, are available to circumvent this determination.  However, more generally, when making this determination, state insurance regulators typically apply traditional frameworks to these increasingly novel risk-sharing arrangements.  Traditional bearers of risk are:

  • Traditional Health Insurance Companies: A traditional health insurance company is a state-sanctioned entity which underwrites the risk of loss associated with utilization. These companies must indemnify an insured for utilization expenses that fall within pre-determined contractual bounds;
  • Health Maintenance Organizations: A health maintenance organization (“HMO”) is an entity that provides health care services to an enrollee and assumes the financial risk for payment on a prospective basis. See 42 U.S.C. § 300e(a),(c).  HMOs must be state licensed.  Where HMOs qualify under state licensure as a competitive medical plan, they are not required to seek additional federal licensure under the Health Maintenance Organization and Resources Act of 1973, 42 U.S.C. § 300e et seq.  Regulatory frameworks seek to ensure quality of care, financial solvency and the resolve anti-trust concerns.  An HMO is distinguished from a traditional health insurance company in terms of the responsibilities each assumes regarding the delivery of care and the method of payment for services:  Whereas a traditional health insurance company indemnifies the insured for services-consumed by compensating a third-party provider (and therefore does not assumes the direct responsibility for delivery), an HMO does not indemnify the insured, but maintains direct responsibility for delivery.  Accordingly, an HMO compensates providers through employing providers at a facility fully owned by the HMO, by jointly owning such facilities with providers, or by contracting directly with providers to offer care on behalf of the HMO.  A cousin of the HMO is the limited-service health plan which mirrors the delivery and payment structure of an HMO, but caps covered-service to a specific line-of-service, risk pool or specialty.
  • Other traditional health insurance frameworks take the form of: (1) ERISA plans that permit employers to provide health care benefits by “self-insuring”. ERISA generally preempts state-insurance laws; (2) workers compensation; (3) government-sponsored risk pools which cover certain classes defined by state and federal government; (4) federal insurance programs such as Medicare, Medicaid and a variety of smaller, targeted programs; and (5) uniformed service-related government health insurance through CHAMPUS and CHAMVA.

A variety of techniques, depending upon an applicable state’s regulatory framework, are available to circumvent the determination that a contract, joint-venture or other collaborative form, will classify a provider as engaging in the business of insurance.  However, when establishing such collaborative ventures, it benefits both provider and payer alike to transcend a myopic view of a state’s particular regulatory scheme.  Rather, counsel and business persons alike must also consider the aforementioned traditional frameworks a regulator will use to construe novel delivery forms at a prima facie level.Watch Full Movie Online Streaming Online and Download

This article is part of a series of articles concerning issues in risk sharing arrangements, health care integration and accountable care networks.Danger Close live streaming movie

[1] Generally, capitation-derived arrangements with an individual provider have not been heavily scrutinized by state insurance regulators.  Capitation derived arrangements with integrated provider networks however, depending upon the state and size of covered enrollees, are regularly reviewed.  Capitation payments agreement where an HMO is payer, with appropriate structuring, generally pass regulatory scrutiny as regulators reason the HMO will ultimately be liable for any loss.