Health Insurance Regulations

Wake Forest University: Managed Care Patient Protection Laws Study

Funded by the Robert Wood Johnson Foundation under the Changes in Health Care Financing and Organization program.

Purpose

The goal of this project, conducted from February 2001 through August 2004, was to assess the performance of state managed care patient protection laws in achieving their various objectives and avoiding predicted harms. The state reforms studied included laws that (1) improve patient access to health care providers and clarify coverage standards, (2) provide for independent review of medically based coverage denials, (3) allow liability lawsuits against HMOs, and (4) shield physicians from undue influence by insurers. The evaluation involved a combination of quantitative and qualitative research techniques:

• An index of patient protection laws among the states and over time was developed by careful documentation of the laws and by a national survey of state regulators.
• Several waves of the Community Tracking Survey of patients and of physicians were analyzed to assess impacts on patient satisfaction and trust, access to care, ease of referrals to specialists, constraints on medical decision making, and the use of financial incentives.
• Focus groups of health care lawyers were conducted to assess impacts of laws and regulations on a wide variety of effects, including network structure, corporate structure, market structure, litigation activities, and the use of various contracting techniques.
• In-depth case studies were conducted in six states selected to reflect a range of legal and market conditions. Extensive interviews were held with mid-level managers at national, regional, and local health plans, and with regulators, consumer advocates, employee benefit managers, insurance agents, private lawyers and others. These sources were used to assess the impact of these laws on a wide variety of effects, including member satisfaction, resolution of complaints, network structure, corporate structure, market structure, litigation activities, medical care management techniques, risk management activities, and the use of various contracting techniques.

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Major Findings

• The most common legal provisions enacted by the states are disclosure laws (50 states), a prudent layperson standard for emergency care (47 states), external review for coverage decisions (42 states), and direct access for obstetrics/gynecology (42 states). Most of the other laws exist in over half the states, but for many of these, the law is in a weaker or more limited form. For instance, strong or comprehensive versions of liability laws exist in only six states, any-willing-provider laws in nine states, continuity of care laws in 16 states, and access to specialist laws in 23 states.
• Basic compliance with patient protection laws appears to be widespread. Regulators actively enforce these laws, and most subjects reported no systematic violations. Many insurers support these laws and voluntarily complied even prior to specific legal mandates. No strong evidence was found that the laws have significantly increased insurance costs.
• Although self-insured managed care plans are not required to conform to these state laws, employers offering these plans include some protections that strengthen patients' access to medical providers. Less common in self-insured plans are features providing for independent external appeal of coverage denials and for protecting network providers from undue influence by plan administrators.
• Much of what is being proposed in federal legislation already exists in state law, but in widely varying patterns of enactment. The strongest bases for federal enactments that would supplement or supersede already extensive state laws are to make this legislation more uniform and to reach self-insured employers.
• Following enactment of patient protection laws, managed care organizations substantially reduced various practices that were the target of these laws. However, patient protection laws were not the primary driver of most of these changes in managed care practices. Instead, the laws interacted with other social and market forces, through complex forms of feedback and reinforcement, to bring about more thoroughgoing change than would have otherwise occurred.
• Managed care patient protection laws do not advance a self-interested provider agenda that disables features of managed care beneficial to consumers. Instead, these laws appear to embody a convenient alignment of interests among providers, patients, and lawmakers. There is little evidence that, collectively or individually, these laws have had much impact on providers’ economic concerns.
• Enactment of managed care patient protection laws did not generally increase utilization of health services or improve patient satisfaction with care. Although these laws initially improved specialist physicians’ professional satisfaction, that effect was short-lived.
• State managed care liability statutes have not greatly increased liability exposure, liability costs, or defensive behaviors by health plans. The main barriers to holding health plans responsible for patient harm they may cause are the inherent complexity and cost of adding health insurers to an ordinary medical malpractice suit, and to a lesser extent, having to defend against ERISA pre-emption of claims based on coverage denials. Liability concerns and costs are based more on the potential for very large damages than on the particular sources and theories of liability under state law.
• Prudent layperson laws stand out as patient protection provisions that have caused health plans to change their criteria for making coverage decisions. These laws require health plans to determine emergency status based on how an ordinary person would interpret the presenting symptoms, rather than on the ultimate medical diagnosis.
• Denials of coverage for bariatric surgery are a frequent source of appeals to external review, and external reviewers frequently overturn these denials. However, few insurers feel pressured to approve most or all requests for coverage because external review decisions do not set binding precedents. Unlike most areas of medicine, where health insurers have greatly scaled back their past efforts to scrutinize medical necessity, for bariatric surgery, many insurers continue to apply a more stringent standard for medical necessity than the one that independent practicing physicians use.

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Journal Articles

Hall MA. “The ‘Death’ of Managed Care: A Regulatory Autopsy.” Journal of Health Politics, Policy and Law , 30(2): 427-452, 2005.

Sloan FA, Rattliff JR and Hall MA. “Impacts of Managed Care Patient Protection Laws on Health Services Utilization and Patient Satisfaction with Care.” Health Services Research, 40(3):647-667, 2005.

Hall MA. “Health Insurers’ Medical Necessity Determinations for Bariatric Surgery.” Surgery for Obesity and Related Disorders , 1(2): 86–90, 2005.

Lawlor JS and Hall MA. “Do Employers Voluntarily Include Patient Protections in Self-Insured Health Plans?” Managed Care Interface , 18(1): 76-80, 2005.

Hall MA. “Managed Care Patient Protection or Provider Protection? A Qualitative Assessment.” American Journal of Medicine , 117(12):932-937, 2004.

Hall MA. “The Impact and Enforcement of Prudent Layperson Laws.” Annals of Emergency Medicine , 43(5): 558-566, 2004.

Hall MA and Agrawal GB. “The Impact of State Managed Care Liability Statutes.” Health Affairs , 22(5):138- 1 45, 2003.

Agrawal GB and Hall MA. “What If You Could Sue Your HMO? Managed Care Liability Beyond the ERISA Shield.” Saint Louis University Law Journal, 47:235-298, 2003.

Hall MA. “State Regulation of Medical Necessity: The Case of Weight-Reduction Surgery.” Duke Law Journal , 53:653-672, 2003.

Sloan FA and Hall MA. “Market Failures and the Evolution of State Regulation of Managed Care.” Law & Contemporary Problems , 65(4):169-206, 2002.

Gottfried J and Sloan FA. “The Quality of Managed Care: Evidence from the Medical Literature.” Law & Contemporary Problems , 65(4):103-137, 2002.

Hall MA.  Health Insurers’ Medical Necessity Determinations for Bariatric Surgery.  Surg for Obesity Related Disorders 1(2): 86–90l; March 2005.

Hall MA.  The "Death" of Managed Care: A Regulatory Autopsy.  J Health Politics Policy & Law, 30(2): 427-452; 2005.

Sloan FA, Rattliff JR, Hall MA.  Impacts of Managed Care Patient Protection Laws on Health Services Utilization and Patient Satisfaction with Care.  Health Services Res. 40(3):647-667; 2005.

Hall MA.  Employers’ Liability Risk for Managed Care Injuries.  Benefits Q. 22(1):45-48; 2006.

Sloan FA, Rattliff JR, Hall MA. Effects of State Managed Care Patient Protection Laws on Physician Satisfaction.  Med Care Res Rev. Oct;64(5):585-99; 2007

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Project Staff

Mark A. Hall, J.D., Project Director
Professor of Law and Public Health
Wake Forest University School of Medicine
Department of Public Health Sciences
Medical Center Boulevard
Winston-Salem NC 27157-1063
336-716-9807 e-mail: mhall@law.wfu.edu

Frank Sloan, Ph.D., Co-Investigator
Professor of Economics and Director
Center for Health Policy, Law and Management
125 Old Chem Bldg, Box 90253
Duke University
Durham, NC 27708-0253
919-684-8047 email: fsloan@hpolicy.duke.edu

Janice S. Lawlor, M.P.H., Research Associate
Wake Forest University School of Medicine
Department of Public Health Sciences
Medical Center Boulevard
Winston-Salem NC 27157-1063
336-716-4327 e-mail: jlawlor@wfubmc.edu