CLINTON ADMINISTRATION PROPOSING HEALTH-PLAN ADMINISTRATION

Oct 12th The Clinton administration has indicated it will release a final rule, between now and November 7th, aimed at improving the benefit claims process for managed care patients. The prospects are growing increasingly unlikely that Congress will send to President Clinton a patients' bill of rights prior to adjournment. The administration has been working for approximately three years on a regulation that would accomplish some of the goals of managed care reform legislation through rules under the Employee Retirement Income Security Act (ERISA). The regulation, as proposed, would shorten time frames for employee benefit plans to render claims decisions and decide on claims appeals. The proposed rule would require that plans provide increased disclosure in instances when they deny claims. The claims rule provisions would require health plans to consult with a medical professional in reviewing adverse claim determinations and to provide individuals whose claims are denied with access to information regarding up to 50 similar claims that were decided over the past five years. The rule is listed on the department's most recent regulatory agenda as due in November 2000 and Labor Department officials have said they are waiting to see what happens legislatively before finalizing it.

Knox-Keene

The Knox-Keene Act regulates health care service plans - any entity that arranges or provides health care services in exchange for a prepaid or periodic charge. HMO's in California fall under Knox-Keene jurisdiction. Since July 1, 2000 the California Department of Managed Health Care (DMHC) has had administrative responsibility for the execution of California state laws relating to health plans and ensuring that these health plans provide enrollees with access to quality health care, while protecting and promoting the interests of enrollees.

REQUIREMENTS

Basic health care services - Knox-Keene plans must provide the following basic services: physician services, inpatient and outpatient hospital services, diagnostic and therapeutic lab and radiologic services, home health care, preventive health care, and emergency health care, including ambulance and out-of-area coverage. In addition, there are a number of statutory mandates to provide or offer specific benefits.

Quality assurance - Plans must have quality assurance programs to review quality of care, which includes as one component a utilization review system. Regulations require a program directed by health providers to review the quality of care being provided, and to identify, evaluate and remedy problems related to access, continuity and quality of care, utilization and monitoring of plan providers.

Accessibility of services - Department of Corporations must review and approve provider networks and contracts. Primary care services must be within 30 minutes or 15 miles of the enrollees' residence or workplace. Regulations require at least one primary care provider (PCP) for every 2,000 enrollees as a guideline. Department of Corporations may require more providers depending on the area, population density, and other factors. Different requirements may apply in rural or medically underserved areas. Department of Corporations assures reasonable access to ancillary services and tertiary care.

Consumer protection - Plans must maintain internal grievance procedures for plan enrollees and appeals may be made to the Department of Corporations if grievances are not resolved to the enrollees' satisfaction. Department of Corporations reviews and approves plan contracts, disclosure forms, marketing materials and advertising to be sure that consumers receive fair and accurate information.

Medical decision-making - The Knox-Keene Act requires medical services to be sufficiently separate from administrative and fiscal management so that medical decisions are not unduly influenced by fiscal concerns. The Department of Corporations conducts an on site medical survey at least every three years. Plans have physician medical directors responsible for medical decision making and directing quality assurance programs.

Financial viability - Plans must file quarterly and annual financial statements and other financial reports. Plans must meet "tangible net equity" requirements and a financial and administrative audit is conducted at least three years to monitor plan financial viability.

The Protections of the Knox-Keene Act

One of the goals of the Knox-Keene Act is to ensure the financial stability of HMOs in California so that consumers are protected. In order to achieve this goal, the Act and its underlying regulations mandate that HMOs file specific financial statements with the Department of Corporations, which has full jurisdiction over the plans.

When seeking licensure as a plan, or for any application to expand services into a new service area, plans must file a significant volume of documentation on the providers and services that will be available, along with extensive financial information. HMOs must file financial statements along with a certificate from an accountant. Plans must also file projected financial statements reflecting anticipated income and expenditures, projected balances, and actual and projected changes in financial status.

On an ongoing basis, the Knox-Keene Act requires HMOs to demonstrate that their operations maintain a positive cash flow and adequate reserves, and allow them to pay off debt. This includes documenting their provider compensation, utilization review systems and reinsurance coverage. HMOs must also maintain sufficient assets, called the tangible net equity, to protect the HMO and its enrollees from insolvencies. The tangible net equity requirements of the Knox-Keene Act require a minimum net equity of $1 million for each HMO. That amount is adjusted based on the total annual revenues as well as the expenditures of the HMO.

For more information, access www.calhealthplans.com or see http://www.hmohelp.ca.gov/library/statutes/knox%2Dkeene/knox%2Dkeene%5Fact.doc for full text of act.