Community Support

Regulating Managed Mental Health Care
A Policy Analysis and Discussion
of the Role of Evaluation

The varieties of regulatory response to managed care are, in part, a function of the different organizational forms managed care has come to assume. For this reason, it is necessary to make note of major health plan distinctions that are obscured by the catch-all designation of managed care.

Types of Managed Care
The principal managed care organizations (MCOs) populating the current U.S. health care scene are as follows (see Aspen Health Law Center, 1995; Brink and Rubin, 1995; Reagan, 1992; Sheils, Stapleton, and Haught, 1995):

• Health Maintenance Organization, staff and group models: These are the original managed care organizations in which the health plan owns, or designates use at, a specific group of hospital and office facilities. Physicians are either on salary (staff model) or contract (group model). Members must use plan hospitals and doctors to be covered for care.
• Health Maintenance Organization, network model: Another form of HMO in which a network of independent hospitals and doctors enters into a contract with the health plan to provide care to members for negotiated rates of payment. These arrangements are also known as Independent Practice Associations.
• Specialty Health Maintenance Organization: A particular type of HMO that confines its activity to a specialized practice area, such as mental health care.
• Preferred Provider Organization: An affiliated group of doctors and hospitals who take patients on referral from an insurer according to a lowered fee schedule. Members of the plan can use other providers by paying higher copayments.
• Point of Service Plan: HMOs giving members an option to use services outside the plan for higher premiums and higher copayments.
• Fee-For-Service with Benefits Management: A traditional health insurance arrangement which gives patients great freedom of choice in selecting providers but with substantial deductibles and copayments. The insurer manages use of benefits through such mechanisms as required pre-admission approvals, second-opinions, and ongoing review of treatment plans and service utilization.

Greater descriptive refinements are possible in terms of methods of provider payment, plan sponsorship, gatekeeping, and other MCO elements. In reality, there are also many hybrid health insurance plans combining different models. Overall, however, this breakdown conveys the diversity of the managed care field and the principal approaches taken to consumer choice, indemnity control, and managerial responsibility.

Regulatory Provisions
Managed care organizations are subject to laws and regulations concerning both the general functions of insurance and service provision. These controls emanate from federal, state, and local levels and apply to such areas as employment, business practices, health care delivery, minimum benefits, and taxes (Aspen Health Law Center, 1995). A wave of new lawmaking has also been directed specifically at MCOs, for example by focusing on the operations of HMOs. According to a recent national study of state HMO laws, "Some states, especially those in which HMOs are relatively new, have limited HMO legislation. Other states have extensive and very explicit HMO statutes and regulations." Yet the authors of that study also note that "Many states' HMO laws were enacted before the state had sufficient experience with HMOs to know the full range of issues that require oversight" (Dallek, Jimenez, and Schwartz, 1995, p. 2). There are some state laws that apply specifically to PPOs. And most states have now enacted legislation regulating utilization review companies and processes (Aspen Health Law Center, 1995).

The implications of this complicated regulatory picture are that MCOs must interact continually with a number of public agencies having different kinds of authority over them. Precise regulatory patterns vary around the nation, but main actors typically include the state departments of health, insurance, and business regulation, the attorney general's office, and the board of medical registration. In addition to these public controls, MCOs also face myriad requirements from private review bodies, as will be discussed in a later section.

Latest policymaking efforts to regulate managed care have crystallized around a few basic themes related to patient protection. Another thrust has been to respond to health care provider charges of unfair contracting practices. Again, the scope of enacted or proposed laws depends on the particular state or federal statute. Below is a summary of many of the most common new regulatory provisions under consideration, grouped according to their emphasis on disclosure requirements, consumer protections, mandated benefits, quality monitoring, licensing action, contracting restrictions, and data collection (Aspen Health Law Center, 1995; Dallek, Jimenez, and Schwartz, 1995; Freudenheim, May 19, 1996; Manderscheid and Henderson, 1995; Sakson, March 24, 1996; and Sheils, Stapleton, and Haught, 1995).

DISCLOSURE REQUIREMENTS

• General: MCOs must provide their enrollees with basic information on services and benefits, grievance procedures, participating providers, and financial status. Some states require additional information as well, such as an enrollee's right to complain to state authorities, arbitration/dispute resolution programs, utilization data, procedures for authorizing or denying care, participation in plan governance, the quality assurance plan, and other items.
• Gag Rules: MCOs are prohibited from banning participating doctors from discussing operations of the plan with patients, or from criticizing the plan with patients.
• Financial Incentives: MCOs must make information available to patients and/or regulators concerning the financial incentives used with plan providers.

CONSUMER PROTECTIONS

• Grievance Procedure: MCOs must have a grievance system in place allowing members to pursue complaints. Specific details may or may not specify the form in which complaints and responses are to be given, appeal procedures, and the time period for complaint review.
• Patient Confidentiality: MCOs are prohibited from disseminating patient information except as necessary for patient care, statistical record-keeping, and under limited other circumstances where reasonable need for the information need exists. Specific rules may be stated against the MCO sharing information with medical information bureaus.

MANDATED BENEFITS

• Access to Care: MCOs must demonstrate adequate facilities and personnel to serve enrollees for both general and specialty care. Additional rules may limit the conditions under which disenrollment of members by the HMO is allowed, if at all.
• Basic Services: MCOs must provide the full list of health services specified under law, which vary from basic to comprehensive. Some state laws also mandate particular kinds of procedures or coverage of particular conditions, thereby limiting what the plan may exclude as experimental treatments.
• Post-Partum Hospital Stay: MCOs must allow mothers and newborns a minimum hospital stay of 48 hours after delivery.
• Emergency Services: MCOs must follow certain guidelines when deciding reimbursement for members' use of out-of-plan emergency services.
• Direct Physician Access: MCOs must allow members to access certain specialist providers—e.g., OB-GYN specialists—without prior approval by a primary care gatekeeper.

QUALITY MONITORING

• State Agency Supervision: MCOs must be monitored for their quality of care by a state or independent agency.
• Internal Quality Assurance: MCOs are required to have an internal quality assurance plan including certain elements and procedures covering delivery of care, administration, and member services.
• LICENSING ACTION: Utilization review entities must be licensed by the state, dependent on fulfilling state requirements for content and process of reviews and for personnel qualifications.

SELECTIVE CONTRACTING RESTRICTIONS

• Essential Community Provider: MCOs must contract with providers or facilities who are defined as giving essential community services, such as public hospitals and teaching hospitals.
• Any Willing Provider: MCO networks must agree to include any provider who has appropriate credentials and meets other terms and conditions of the plan.
• Freedom of Choice: MCO subscribers have the right to seek care from nonparticipating providers. Some statutes prohibit or limit financial incentives favoring use of in-plan providers.
• Due Process: MCOs must follow set rules and guidelines in choosing participating providers.

DATA COLLECTION

• MCOs are required to collect and report data of specified types pertaining to such items as patient outcomes, utilization, grievances, patient satisfaction, enrollments and disenrollments, and physician turnover.

These regulatory measures have engendered equally strong praise and criticism from different quarters, as might be expected. Consumer advocates, some of them opposed in principle to the concept of managed care, see them as necessary restraints on a private medical marketplace increasingly fixated on the financial bottom line. Providers back the laws as means of preserving professional autonomy and ensuring access to third-party reimbursement. And the managed care industry has mounted a vigorous lobbying campaign against many of the legal changes, which it defines as unwarranted and costly intrusions aimed at blocking needed reforms of American medicine. For example, Karen Ignani, president of the American Association of Health Plans, has linked such proposals to "individuals who have a vested interested in maintaining the old style of health care" (Freudenheim, May 19, 1996, p. 22). Whatever the case may be, with more than 400 bills regulating managed care practices already introduced in state legislatures this year, the managed care industry clearly stands on the defensive at this point.

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