Group Chap 16: State Regulation in the United States

Question 1

State Regulation

1. Organization of State Insurance Department
2. Organization and Licensing of Insurance Companies
3. Policy/Certificate form and Rate Filing
4. Licensing Producers
5. Advertising Regulations
6. Regulation of business practice
7. Prompt Pay Legislation
8. Regulation of Insurer Solvency
9. Group Life and Health Definitions
10. Standard Contract Provision
11. Standard Provision: Group Life Plans
12. Standard Provisions: Health Plans
13. Mandated Benefits
14. Coordination of Benefits
15. Discontinuation and Replacement of Coverage
16. Small Group Reform
17. Regulation of Medigap Insurance

Answer 1

1. Every state has laws regulating all aspects of insurance
2. Few businesses as heavily regulated as insurance

3. State Regulation of Group Insurance Generally
a. Organization of State Insurance Departments
i. All state laws provide Insurance Department or Bureau to regulate insurance

ii. Commissioner or Superintendent head of Insurance Department, a few states have Insurance Board

iii. Commissioner interprets the insurance laws, makes regulations implementing insurance laws, license insurance companies, authorized reinsurers, TPAs, insurance agents, brokers, and consultants

iv. Conduct examinations of insurers, assess penalties for violations

b. Organization and Licensing of Insurance Companies
i. To engage insurance in a state, company must obtain insurance license from commissioner

ii. License pertains to specific lines of business

iii. License must be renewed annually

iv. Requirements depend on whether a domestic insurer (domiciled in that state), a foreign insurer (a US company domiciled in another state) or an alien insurer (domiciled outside US)

v. A few states offer more lenient capital, licensing or operational requirements to attract insurers to domicile in their state

vii. An insurer has flexibility on its domicile state, which can change over time

c. Policy/Certificate Form and Rate Filing Regulations
i. States require filing of group life and health forms used in the state

ii. Some require that Commissioner approve policy and certificate forms prior to use (“prior approval” state)

iii. “File and use” states, require forms filed prior to use, with states reserving the right to disapprove the forms

iv. Require filing of group insurance premium rates or rating methods

v. ACA established a federal review process to supplement state rate regulation
* Requires insurers submit justifications for unreasonable rate increases to states and HHS, and post them on public websites

d. Licensing Producers
i. Most require producers, including agents, brokers, and intermediaries, be licensed

ii. Many require agents pass tests

iii. Require agents to take continuing education classes to maintain licenses

iv. Commissioner may revoke or suspend a license or impose penalties for violations

v. Many states require disclosure to clients the compensations producers may receive from companies whose products they recommended

vi. To reduce risk of paying MLR rebates under ACA loss ratio requirements, some group insurers are either:
(1) Reducing or eliminating commissions
(2) Carving compensation out of premium and billing it separately to group plan sponsors

e. Advertising Regulation
i. Most states adopted NAIC model regulations on advertisements for life and accident and health insurance

ii. Protect consumers from unfair, inaccurate, deceptive, and misleading advertisements, prevent disparaging, unfair or incomplete comparisons with other insurance

iii. “Advertising” material may include an insurer’s web site

f. Regulation of Business Practices
i. States adopted NAIC Unfair Trade Practices and Unfair Claim Settlement Practices Model Acts

ii. Prohibiting specified unfair issuance, renewal and termination or underwriting, advertising, rebating, and claim practices

iii. Repeated violations can subject the insurer to cease and desist order as well as fines or license revocation

g. Prompt Pay Legislation
i. Requiring insurers and HMOs pay “clean” claims within specified time (typically 30-45 days)

ii. Interest charges required for claims not paid within timeframe

iii. In some instances, imposed seven figure fines for violation

h. Regulation of Insurer Solvency
i. One of most important duties of Commissioner

ii. Financial soundness assessed initially during licensing process

iii. Insurers must maintain adequate reserves, minimum capital and/or surplus, in some cases, deposits for protection of policyholders

iv. Financial reports required annually filed with Commissioner
- Financial statements designed by NAIC
- Referred to as “NAIC Blank”

v. Investments
- Types of investments an insurer may make are regulated
- Capital may be invested in secure investments, such as government bonds and mortgages
* Required for funds equal to minimum surplus for line of insurance
- Reserve investments made with all other funds available to insurers
- Restrictions to investments vary by state, some states require more conservative investment strategies than others
* Require investments approved by board of directors or another committee
* Persons charged with approval permitted no interest in the investments or their sale
- Commissioner sets asset valuation standards consistent with NAIC rules

vi. Reserves - Must be established to deal with prospective claim liabilities
- Must establish minimum life insurance reserve following NAIC model requirements
- Determination of adequacy left to the insurer
- Require reserve levels be certified as adequate each year by actuary member of American Academy of Actuaries, considered the appointed actuary for the insurer

vii. Surplus and Dividends
- Mutual insurers limited as to how much surplus can be accumulated
* Limits amount available for use as excess funds
* Allows payment of reasonable dividends
- State laws require dividends be paid annually and not deferred
- Some not-for-profit have their surplus (called “free reserves”) limited by state regulation

viii. Liquidation and Rehabilitation
- If insurer in jeopardy of becoming insolvent, Commissioner may assume insurer’s assets
* Impending insolvency confirmed by on-site financial examination
* Must be evidence of financial insufficiency or wrong-doing
* Grounds for assuming the assets include
(1) Non-cooperation with examiners
(2) Refusing to remove questionable officers
(3) Charter violations
(4) State law violations
(5) Endangered capital or surplus or technical insolvency
* Insurer may appeal take-over

• NAIC Model Insurers Supervision, Rehabilitation and Liquidation Act
• Commissioner may seek reorganization of insurer to preserve tangible assets
• Name usually changed and returned to private management
• If rehabilitation impossible, then liquidation is proposed of insurer’s assets
• Same grounds as used to assume the assets used to obtain court order for liquidation
• Commissioner named as liquidator, collects assets and pays obligations due
• Reinsurer may assume obligations of company
• Notices of liquidation sent to other commissioners, guarantee funds, insurance agents, providers, and others with claims against insurer

ix. Guaranty Associations
- Protect insured when insurers fail their obligations due to financial impairment
* Association of insurers is created to pay claims and continue coverages
* To fund these obligations insurers licensed in the particular line pay a periodic assessment
* HMOs are generally not subject to guaranty fund
* States are gradually changing the HMO guarantee fund laws and regulations to include this assessment and protection

x. Insurance Regulatory Information System (IRIS)
- Testing system to reveal indications of financial problems
- Insurers voluntarily submit annual statements for tests and pay required fee, also test insurers with history of problems
- IRIS ratios are developed:
* To indicate future problems that could result in insolvency
* Results combined with other factors, so insurance department and insurer able to assess company’s future

i. Group Life and Health Definitions
i. Permit an insurer to issue group policy to the following groups
- Single-employer groups covering employees and dependents
- Labor union groups covering their members
- Association group covering their members (individuals or companies)
- Multiple-employer trust (METs) of employers, unions or a combination, covering employees of employer or members of union
- Creditors of financial institutions

ii. Often a “catch-all” category referred to as discretionary groups
- Insurance company may issue a group policy at the discretion of the Commissioner

j. Standard Contract Provisions
i. State insurance laws require group policies to contain specified provisions
- Grace Period
* 31-day period for payment of premium during which benefits remain in force
- Incontestability
* Validity of policy shall not be contested after in force for two years, except for nonpayment of premium
* No statement made by insured shall be used to contest validity of insurance after in force two years
- Application and Statements
* Application a part of the policy and insured’s statements are considered representations and not warranties
- Evidence of Insurability
* Indicating when evidence of insurability would be required
- Misstatement of Age Provision
* Premiums or benefits vary by age, must have provision stating how premiums or benefits adjusted due to a misstatement of age
- Certificates
* Provision stating insurer will issue certificates to policyholder for delivery to insured
- Benefits/Eligibility
* Provisions set forth the benefits, to whom they are payable and terms of eligibility

k. Standard Provisions: Group Life Plans
i. Beneficiaries
- Provision identifying designated beneficiary

ii. Conversion Rights
- Right to convert group life insurance to individual policy, if group coverage ceases due to termination of employment or termination of membership in insured class

• Amount converted cannot exceed amount in effect
• Must be offered without evidence of insurability at insurer’s customary rate for person’s class of risk and attained age
• Person must make application and pay first premium within a specified time
• Also available to insured dependents whose insurance ceases due to employee’s death or because they no longer qualify as a dependent
• If termination due to termination of the group policy or person’s class, person may also convert if he was covered at least five years prior to termination
• Amount converted limited to lesser of amount in effect or $10,000
• Include a provision that if person dies within 31-day conversion period, amount which could have been converted will be paid as a claim, regardless of whether he applied to convert

vii. Disability Continuance
- If employee becomes disabled while insured, may continue coverage by payment of premium for up to six months
- Coverage ceases, when
* Approved for coverage under premium waiver provision
* Or the policy terminates

l. Standard Provisions: Health Plans
i. Notice and Proof of Claims
- Periods of time following occurrence in which notice of claim and proof of loss must be provided to insurance company
- Waived if not reasonably possible to give it
- Insurer must furnish claim forms

ii. Conversion Rights
- Right to convert group policy to individual health policy
- ACA banned pre-existing condition limitations that often prevented individuals from obtaining individual health insurance and it required that all individual health insurers offer coverage on a “guaranteed issue” basis
- Federal subsidies for low-income individuals for individual insurance purchased through state or federal health insurance exchanges
- Individuals losing their group health insurance coverage could readily obtain individual health insurance coverage

iii. Legal Actions
- Provision specifying periods of time when legal action may not be brought on a claim
- For example, not earlier than 60 days nor later than 2-3 years following submission of a claim

m. Mandated Benefits
i. States mandate benefits to meet needs of citizens or to satisfy interest groups such as health care providers

ii. Allow legislators to demonstrate a benefit at no direct cost to the state

iii. There is little consistency between states

iv. More common mandated benefits include
- Mental disorders
- Alcoholism and drug dependency
- Well-child care
- Handicapped children beyond their normal termination age
- Mammography
- Recognition of a variety of health care practitioners (such as chiropractors, and podiatrists)
- Coverage of children under policies covering non-custodial parents
- Recently, state legislatures ensure affordable cost sharing for insulin and diabetic supplies

v. Some mandates apply only to policies issued in state
- Others apply to the citizens of a state even if under a group policy issued in another state
- Insurers must include mandated benefits of state where contract is issued and offer people in other states extra-territorial benefits
- Employees under same employer health plan may have different benefits depending on where they live

n. Coordination of Benefits
i. For example, person covered under his employer’s plan and covered under spouse’s plan as a dependent

ii. Overinsurance is contrary to public policy and has the effect of unnecessarily increasing the cost of group insurance coverage

iii. Rules for coordinating coverages to avoid duplication of claim payments

iv. NAIC Group Coordination of Benefits Model rules for determining which insurer would primary and which would be secondary

v. Rules apply to group and group-type plans only

vi. COB rules establish precise order of benefit payment determination
- COB rules included in group insurance policy or HMO service agreement
- Some group health plans include a modified form of coordination of benefits referred to as maintenance of benefits (MOB)
- Under a MOB provision, when the plan is the secondary payor, it only pays the difference between what the primary plan pays and what it would have paid had it been the primary payor

o. Discontinuance and Replacement of Coverage
i. Employers discontinue coverage under one policy and replace it with another policy issued by another company

ii. Many policies exclude persons with pre-existing conditions

iii. Under NAIC Group Coverage Discontinuance and Replacement Model Regulation, prior carrier must provide an extension of benefits

iv. Life Insurance, if disability extension is included, it will not be terminated by policy’s discontinuance

v. Long- and short-term disability, termination during existing disability will not affect benefit payments

vi. Prior carrier only responsible for its contractual extension of benefits provisions and accrued liabilities

vii. Succeeding carrier’s responsibilities to persons (covered under prior plan on termination) is also specified

p. Small Group Reform
i. To promote availability of health insurance to small employer groups, and prevent abusive underwriting practices

ii. Small employer group defined as 50 or fewer employees, state laws vary in their definitions

iii. Laws require insurers and HMOs to issue coverage to small employers on guaranteed issue basis

iv. Carriers required to renew small group except (non-payment of premium, fraud)

v. ACA standardized and expanded small groups
- Pooling risk at state level through risk adjustment mechanism
- Limiting rating factors
- Extending guarantee issue through a one month open window

q. Regulation of Medigap Insurance
i. Supplement to reimbursement under Medicare
- Fills deductible and co-insurance amounts, and increases benefits as Medicare’s deductible and co-payment rise

ii. NAIC Medicare Supplement Insurance Minimum Standards Model Act outlines uniform standards for benefits, advertising, marketing and disclosure
- May be issued on individual or group basis
- Virtually all states have enacted some form of NAIC Model Act

Question 2

State Regulation of PPO

1. Definition of PPO
2. Providers Protection
3. Consumer Protection
4. Other Insurance Laws
5. Utilization Review Regulation
6. Corporate Practice of Medicine
7. Pharmacy Laws
8. Antitrust laws

Answer 2

1. Preferred provider arrangement is a group of providers contracted with an insurer
a. Insurer provides financial incentive for participants to use the providers in network by means of lower member co-insurance

2. Preferred provider arrangement should have carefully selected network and negotiated compensation arrangements

3. An HMO gatekeeper feature can easily be added
4. EPA or EPO coverage limited panel of preferred providers (except in emergencies)
   a. Feature that distinguishes from an HMO is insurers reimburse insured for covered expenses
   b. HMOs provide or arrange for covered services
5. Insurer can contract with providers directly or third party vendors with networks
   a. Insurer may contract directly with HMO
6. PPOs combine indemnity insurance and managed care associated with HMOs
   a. Insurers switched from passive to active management of health care
7. Many state laws applicable to PPOs predate them by decades
   a. State regulatory environment lacks uniformity
   b. PPOs acceptable in one state may not be permissible in another
   c. Insurers developing PPOs do whatever works
   d. Regulation quickly changing

8. Insurance Laws and Regulations Affecting PPOs

a. 30 states have enacted PPO laws
- In states with no PPO law, regulators developed informal policies regarding PPO activities
- Laws based on NAIC Preferred Provider Arrangements Model Act

b. PPO laws referred to as “enabling laws”, but this is a misnomer
- PPO laws affirm insurers’ rights to engage in particular activities, rather than create rights
- PPO restrictions are intended to protect providers and consumers

c. Provider Protections
- Statutes preventing insurers from excluding providers meeting insurer’s terms for participation are called any-willing-provider laws
i. Restrictions on insurer’s ability to limit provider panel can threaten effective operation of a PPO undermine insurer’s ability to:
(1) Negotiate volume-based discounts
(2) Control utilization
(3) Assure quality
ii. Larger panel can increase administrative costs
iii. Most states have some form of any-willing-provider law, many limited to pharmacies

• Another feature in PPO laws is restriction on differences in benefit levels of preferred and non-preferred providers
  i. Usually in terms of coinsurance percentages
  ii. Limitations in the range of twenty to thirty percent
  iii. Some states require that preferred provider plans reimburse non-preferred providers
  iv. By requiring coverage of non-preferred providers, provisions preclude insurer from offering an exclusive provider arrangement
  v. Restrictions on benefit differentials impair insurer’s from creating incentives for insureds to seek preferred providers
• Other provider protection provisions require that allied medical practitioners (chiropractors, dentists, optometrists) be included

d. Consumer Protections
- Reflected in NAIC Preferred Provider Arrangement Model Act and state regulations, assure availability and access to all appropriate care
i. Freedom of insureds to go to any provider is preserved by restrictions on benefit differentials, and assures accessibility and availability

• ACA requires emergency care to be covered at same benefit, regardless of provider participation
• EPAs are different
  i. An EPA severely limits participant’s provider choice
  ii. States have extensive requirements to assure adequacy and accessibility of health care through the EPA
• Health Benefit Plan Network Access and Adequacy Model Act
  i. 2014/2015 – NAIC overhaul of network considerations – encourages states to revisit network statutes
• Provider quality difficult to deal with
  i. ACA requires many individual or small group carriers to obtain accreditation and to create improvement plans when low quality score is earned

e. Other Insurance Laws
- Existing anti-discrimination and freedom-of-choice laws rarely have impeded PPO development

• Two-thirds of states prohibit insurance provisions requiring that medical service be rendered by a particular doctor or hospital
• Freedom-of-choice and anti-discrimination laws inapplicable in states with specific PPO laws

f. Utilization Review Regulation
- Until recently, regulation sought to promote UR

• Several states required insurers to include UR provisions in policies
• Numerous independent companies began providing UR
• Today, most states have enacted comprehensive UR laws and/or regulations
• Regulation requires licensure of UR firms, other requirements include
  i. Restrictions on use of UR and criteria used
  ii. Restrictions on qualifications for licensure to carry out UR
  iii. Payments to providers for cost of requests for information
  iv. Mandates on the hours of operation
  v. Restrictions on access to medical information
  vi. Restrictions on location at which UR performed
  vii. Burdensome regulatory filings of UR data
  viii. Requirements that denials be made by physician in similar specialty as attending physician
  x. Requirements that physician making UR determination be licensed in state where member resides

g. Pharmacy Laws
- Example of provider backlash to managed care. Typically one of these forms
i. Any-willing-provider laws require inclusion of any pharmacy willing to meet the terms in the HMO or PPA provider network
ii. Half of all states enacted laws limiting use of mail order drug firms
iii. Some states require out-of-state pharmaceutical vendors be licensed
iv. Laws requiring coverage of certain classes of drugs at favorable coinsurance levels

• ACA requires insurers and HMOs account for pharmacy rebates in their medical loss ratio calculation as a reduction to claim costs
• In view of rising costs of drugs, many states passed licensing and operational laws applicable to pharmacy benefit manufacturers (PBMs)
• Many states have also enacted transparency laws applicable to PBMs, insurers, HMOs and plan sponsors

h. Corporate Practice of Medicine
- Corporations precluded from engaging in the practice of medicine

• Public policy concern corporations may influence medical care professionals in their employ
• To date, the prohibition against corporate practice of medicine has not been an important consideration in developing PPO
  i. Public policy concern that corporations may influence decisions of medical professionals they employ
  ii. Regulator might invoke the doctrine where utilization review or incentive compensation in PPO seen to influence decision of health professionals
  iii. No state PPO laws contain an exemption

i. Antitrust Laws
- Whenever arrangements exist involving competitors and payers, and contracts deal with price, the ingredients for anti-competitive behavior exist

• Antitrust laws have not been impediment to PPO development
  i. Regulators have indicated that PPOs have beneficial procompetitive effect and should not be discouraged
• Agreements guaranteeing that the provider will not afford more favorable terms to any other payer
  i. Called “most favored nation” clauses
  ii. Regulators successfully challenged “most favored nation” clauses by Blue Cross plans with high market shares, because of their anti-competitive effect

Question 3

State Regulation of Health Maintenance Organizations (HMOs)

1. Definition of HMO
2. Regulatory Oversights of HMOs
3. Requirements for Certificate of Authority
4. HMO Rate Regulation
5. Financial Regulation
6. Powers
7. Regulation of Producers
8. POS Restriction
9. Corporate Practice of Medicine
10. Any-willing Provider
11. State Regulatory Focus
12. Recent Changes

Answer 3

1. HMOs provide coverage to groups and are heavily regulated
2. Nearly 30 states base HMO laws on NAIC Model Health Maintenance Organization Act

3. Definitions
a. Health Maintenance Organization
- Only entities meeting definition of HMO are subject HMO regulation and can derive the benefits

• State laws define HMO along lines of NAIC Model
• Three basic principles
  i. Provides provision of health care services; Insurers simply reimburse, HMOs combine delivery and financing of health care; relationships with providers may either be direct (employing providers) or indirect (independent contractor arrangements)

ii. Make available all health services enrollee might reasonably require; entity providing less than all “basic health care services” not an HMO; HMO promotes health and the prevention of illness

iii. Payments only on a prepayment basis whether by enrollees, employer groups, Medicare or Medicaid

b. Basic Health Care Services
- State laws include preventive care, emergency care, in-patient and out- patient hospital, physician care, diagnostic lab, diagnostic and therapeutic radiological services
i. State laws exclude dental, vision, and long-term rehabilitation
ii. HMOs are free to supplement their coverage with these additional services

• Most HMO laws do not include many state mandated benefits applied to insured plans

4. Regulatory Oversight of HMOs
a. State departments more capable of overseeing provider aspects, insurance departments more capable of overseeing insurer aspects of HMO
- Most states assign responsibility to insurance regulator, some cases it is shared by insurance and health regulators

5. Requirements for Certificate of Authority
**a. State HMO laws require entity to secure a certificate of authority **
- Must submit detailed filing including the following
i. Description of HMOs organization, governance, and management

ii. Contracts with Providers
Copies of contracts between providers, third-party administrators, and third-party vendors

iii. Coverage Agreements
Copies of the HMOs standard group services agreement

iv. Financial Information
Financial statements and feasibility plan are required

v. Provider Network Information
(1) Essential that the network be adequate both in terms of
geographic scope and composition
(2) Regulators require evidence of network adequacy
* Description of geographic service area and list, with addresses, of providers
* Required to give this information to enrollees

vi. Grievance Procedure

vii. Quality Assurance Program

viii. Insolvency Protection Measures
(1) Minimum net worth requirements
(2) Deposit of cash or securities required
(3) Deposit is made with regulator, or a trustee and is required as a reserve against unfunded claims
(4) State laws require HMOs to cover enrollees of other HMOs that become insolvent

6. HMO Rate Regulation
- No rate may be used until premium rates or methodology for determining has been filed and approved

• State laws require that premium rates be actuarially sound and not “excessive, inadequate or unfairly discriminatory”
• Majority of state HMO regulators allow HMOs to prospectively experience rate specific groups
  i. Many permit retrospective experience rating
  ii. New York Requires that HMOs community rate

7. Financial Regulation
- State laws require filing of financial statements annually
i. Require that annual reports include material modifications since original application for certificate of authority as well as enrollee population
ii. Some states require information regarding grievances, utilization patterns

• States require that HMOs be examined at least every three years
• One-third of states subject HMOs to premium taxes

8. Powers
- State HMO laws enumerate the powers of HMOs
i. Purchase, lease, construction or operation of hospitals, medical facilities and property to conduct business
ii. Transactions with affiliates such as loans or transfer of responsibility o Health services through providers, provider associations, or agents under contract or employed by the HMO
iii. Contracting with third parties for marketing, enrollment, and administration
iv. Contracting with insurance companies or hospital or medical corporations for insurance, indemnity, or reimbursement against the cost services provided HMO
v. Health services in addition to basic services on a prepaid basis, alone or as a supplement to basic
vi. Joint marketing of products with insurer or hospital or medical corporation

• HMO powers not limited to those specifically enumerated.
  i. Can engage in preferred provider arrangements with insurers, third party administrators, or plan sponsors
  ii. HMO if incorporated will have power to engage in business transaction that any other business can
  iii. Powers may be limited in HMOs organizational documents (articles of incorporation, charter, partnerships agreement or articles of association)

9. Regulation of Producers
- HMO producers subject to similar licensing requirements as insurance agents

10. Point-of-Service Product Restrictions
- When HMOs offer reimbursement for care outside the HMOs network called “point-of-service” or “open-HMO”
- States question whether offering non-emergency care outside HMO network to indemnity subscribers constitutes business of insurance
* Would require licensure of HMO as an insurance company
- Number of states have authorized HMOs to offer open-HMO products which allow members to select covered services from an in-network or out- of-network provider at the point of service
- Typically, the member cost-sharing for out-of-network non-emergency services is greater than if the member uses an in-network provider

11. Corporate Practice of Medicine
- As a provider of medical care services, HMO free of common law prohibitions against corporate practice of medicine
- Exemption applies to entity authorized as an HMO even when engages in non-HMO activities
* Important when HMO provider network used in PPA

12. Any-Willing-Provider Laws
- Impair ability of HMOs to selectively contract with providers
- Supreme Court indicated such laws not pre-empted by ERISA

13. State Regulatory Focus
- HMO regulators chief roles
i. Protecting consumers
ii. Establishing ground rules for competition among rival entities
iii. Assuring solvency of HMOs
iv. Quality assurance and accessibility of care

14. Recent State Law Changes
- Managed Care “Backlash”
i. Legislatures broadened scope of oversight over managed care plans
ii. Trend at the state level to depart from NAIC HMO Model Act reforms assuring consumer rights and protections
* Patient protection laws create process for appealing benefit
and medical necessity decisions to an independent third party
* Laws require HMOs to offer point-of-service plans to ensure access to non-network providers
* Stripped away malpractice protection of corporate practice of medicine laws enjoyed by HMO

• Risk Shifting
  i. Arrangements that shift risk from regulated entities toward unregulated provider entities concern regulators
• Sufficiency of capitalization, reserve adequacy, adequate information systems, and sufficiency of administrative capacity
• Can disrupt medical care for patients

ii. If provider group, hospital, or vendor enters capitated arrangement with HMO or insurer should be regulated as insurer

iii. Or provider organization providing health services on capitated basis may fall within HMO definition where HMO defined as providing less than all basic services

iv. Arrangements that shift financial risk to entities that contract with insurers and HMOs for a particular health care service on a prepaid basis are not embraced by insurance regulation in most states
* They arrange for the provision of services and supplies rather than indemnifying individuals for the expenses they incur for covered services

Question 4

Differences between HMO and PPO

Fall 2022 Q7

Answer 4

1. HMO
a. Definition: Any person that undertake to provide or arrange for delivery of basic health services to enrollees on a prepaid basis except for enrolee responsibility for copayments and/or deductibles