Understanding the Alphabet Soup of Managed Care Integrated Delivery Systems

State Regulation of Integrated Delivery Systems (IDS)

Issues and Strategies

In this session, representatives from three States discussed the approaches that their States were taking with respect to the regulation of integrated delivery systems.

Barbara Yondorf from the Colorado Division of Insurance began the session by describing some of the "nightmare" scenarios that regulation seeks to avoid and the challenges that regulators face in crafting appropriate strategies. She then described the tenets underpinning Colorado's approach to regulation:

• The type and degree of regulation should be a function of the nature and level of risk assumed by an entity.
• All entities directly assuming risk for health care payments/services from an individual, group, or employer are considered to be in the business of insurance.
• The job of the Insurance Department is to facilitate, not frustrate. The Commissioner should use his discretionary authority, when necessary, to help new entities get off the ground, as long as it is done in an even-handed manner.

Consistent with this philosophy, Ms. Yondorf described the key elements of Colorado's approach to regulating the financial aspects of integrated delivery systems and other managed care entities:

• All entities assuming risk for health care coverage are subject to insurance regulation.
• The State is implementing uniform risk-based capital requirements for all health insurers, establishing higher solvency requirements for entities that, among other things: Assume risk for comprehensive (vs. limited) services, experience excessive growth, or don't have good controls over downstream risk or service utilization.
• Entities taking direct capitated risk may be licensed either as an health maintenance organization (HMO) or a Limited Service Licensed Provider Network (LSLPN).

Molly Raphael of Pennsylvania then described that State's regulatory approach with respect to IDSs, which has the following principle components:

• Provider contracting standards to ensure that contracts between HMOs and IDSs and between IDSs and participating providers include specific consumer protection and accountability protections.
• Delegation standards to ensure that HMOs remain accountable for any activities, such as quality assurance and utilization management, that may be delegated to IDSs.

Under Pennsylvania's approach, IDSs can accept "downstream" risk without being licensed, although if they accept direct financial risk from purchasers, they must be licensed as an HMO or a risk-assuming preferred provider organization (PPO).

Finally, Phillip Bisesi of the Ohio Department of Insurance described that State's recently enacted Uniform Licensure Act. That statute seeks to rationalize the State's regulatory strategy by moving to an approach that classifies entities on a functional basis and that establishes standards and requirements based upon the degree of risk assumption.

Reference

Pennsylvania Bulletin 26:14, Part II; Saturday, April 6, 1996, Harrisburg, PA.

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