Idaho Pulling The Plug On Managed Care Hmos Say Legislature Went Too Far In Reforming Care Options

On July 1, Idaho will become the first state to outlaw standard health-maintenance organizations.

The sweeping Managed Care Reform Act passed by the Legislature this year has drawn praise for requiring more disclosure to patients, banning incentives to withhold care and setting up grievance procedures.

But managed-care providers say a clause requiring all plans to allow patients to seek care from doctors or other providers who aren’t part of the managed-care network goes too far.

“It outlaws HMOs in Idaho, absolutely it does,” said Tracy Andrus, vice president of Blue Cross of Idaho.

“No one’s done that before,” said Vernon Rowen, deputy director for state advocacy of the American Association of Health Plans. “Essentially what this Idaho law does is turn every HMO plan back into a fee-for-service plan.”

“We’re real concerned with it,” said Angela Matson, health policy analyst for Group Health Northwest. “An employer can no longer choose to offer a traditional HMO product.”

Matson, whose non-profit group has about 11,000 members enrolled in North Idaho, said the law will force changes in the main plan Group Health offers, possibly endangering the group’s contracts with providers and forcing increases in premiums.

“It flies into the face of managed care,” she said.

Bob Seehusen, executive director of the Idaho Medical Association, calls those concerns “baloney.”

“We’re setting up a gold standard in Idaho,” he said. “If you want to set up an HMO in Idaho, you’re going to have to meet this gold standard. The good organizations like Group Health and Blue Cross and Blue Shield and some others are going to be able to meet that standard.

“The bad ones that want to cut all the corners and skim from the top are going to have a tough time.”

Seehusen, whose association represents doctors, said people like to be able to choose which doctor they see.

“We just wanted that option, to allow folks to have choice,” he said. “It seems reasonable.”

But the whole idea of managed care rests on setting up a designated group of providers. Then, within that network, the organization can negotiate volume discounts. The organization also can require certain quality standards of the providers, and audit them to make sure they comply.

“In return for doing that, what HMOs have been able to provide to enrollees is comprehensive health care coverage, at a lower cost and higher quality of care than what they used to receive,” said Rowen, whose association represents both managed-care and traditional fee-for-service health plans.

Because of their structure, HMOs generally are able to offer more comprehensive benefits, particularly by covering preventive care that’s not covered by many fee-for-service plans.

Said Matson, “Part of the reason managed care came into existence was because fee-for-service was getting out of control. The incentives in feefor-service are perverse - the more you do, the more tests you order, the more money you make. Managed care tried to turn that around, and say the incentive is to keep your patients healthy.”

But Seehusen said the HMO model also could create “an incentive to not provide care, in order to profit by it.” That’s because doctors may be paid a set fee, regardless of how many patients they see or how many procedures they perform.

“There are problems with both sides of the delivery systems. There can be extremes,” he said. “We don’t want to experience the nightmares of other managed care markets as Idaho’s managed-care movement is expanding.”

Managed care has been slow to take hold in much of the state, but it’s been a fact of life since 1985 in North Idaho. That’s when Group Health began serving the area.

Now, Blue Cross, the state’s largest health insurer, has 33,000 people statewide in its HMO Blue managed-care plan. About 8,500 of those members live in North Idaho, where the plan is offered through the North Idaho Health Network, an association of doctors and hospitals. Several other managed-care plans also have members in North Idaho.

“Our growth in managed care last year was 60 percent, after two consecutive years of growth exceeding 30 percent,” said Andrus. Blue Cross ensures a total of 302,000 Idahoans.

Managed-care horror stories like gag clauses preventing doctors from telling patients about treatments, extra payments to doctors who refuse needed care and medical decisions made by cost-cutting bureaucrats rather than medical professionals have been the stuff of national news.

“We didn’t just make these things up,” said Seehusen. “These are problems being experienced in other more mature managed care markets.”

Said Andrus, “What has happened is the ‘horror stories’ from other areas of the country have made everyone nervous. So they run in and say we’ve got to put all these things in place so that that doesn’t happen in Idaho. Well, that’s fine with us. But we don’t want anyone to think that those things were occurring in Idaho before, because they weren’t.”

John B. O’Brien of Coeur d’Alene was happy enough with his Group Health coverage that he wrote a letter to a legislative committee last summer praising its quality of care, competitive rates and lack of paperwork.

“Group Health is not all roses,” O’Brien said this week. “Sometimes there’s trouble. But they have a way of letting you tell them what your objections are and what your problems are, and trying to deal with it.”

As a retired federal employee, he’s covered by Group Health’s standard HMO plan.

“In Idaho, if we can’t use an HMO system to control costs, costs are going to start going back up again - maybe way up,” he said.

Some health insurers say the law seems to codify a troubling level of government interference in the marketplace.

“To have the government tell us what products we offer sets an unusual standard, I think,” said Matson, “particularly in Idaho, which tends to like small government.”

It also raises a fairness question, Group Health Vice President Sharon Fairchild wrote in a letter to the Legislature. Insurers who sell fee-for-service plans aren’t required to offer a managed-care option, but the new law requires managed-care providers to offer a fee-for-service option.

“This mandate simply isn’t equitable.”

Seehusen said organizations like Group Health can get around the mandate by simply making it more expensive for patients to go outside the network.

“We left it totally open,” he said. “The plan should pay something. That’s how the bill was written. In one of the early drafts we said they have to pay at least 70 percent,” but the IMA decided to back off that requirement.

Group Health is concerned about another clause in the law that requires plans to designate obstetrician-gynecologists as primary care providers. At Group Health, primary care providers are general practitioners whom patients must see first, before seeing specialists.

Another section of the bill requires plans to allow women to see Ob-Gyns without first getting a referral, and Matson said that’s already Group Health’s rule. But designating the specialists as primary care providers means they’d be required to treat their patients’ broken arms, colds and the like.

“We have serious concerns about that from a quality standpoint,” Matson said.

Seehusen said the clause just provides an option for those Ob-Gyns who want to serve as general doctors for their patients.

“There may be one or two that will want to take on that responsibility,” he said. “Most will not.”

Matson said Group Health enthusiastically supports everything in the law except the out-of-network requirement and the Ob-Gyns-as-primary-doctor rule, which doesn’t work with the way Group Health is set up.

Group Health hired a Boise attorney to present those concerns to the Legislature midway through the session this year.

But, Matson said, “Not being a big player in the state of Idaho … we don’t have a full-time lobbyist down there. And frankly, I don’t think we can compete with the medical association with four full-time lobbyists there, and they clearly want to see the status quo preserved.”

Group Health actually offers an alternative plan, called Options, that includes an out-of-network option. But it’s more expensive than the regular HMO.

Said Rowen, “Idaho has said your health premiums are going to be more expensive, and we’ve mandated it by state law.”

More than 80 percent of HMO plans nationwide offer a fee-for-service option in addition to the regular HMO plan, Rowen said. “Idaho has effectively taken a choice away from people. They will no longer be able to choose a traditional HMO product.”

The Idaho law also will keep the big HMOs from coming to the state, he said.

But Seehusen said, “It sets a standard that may be one of the highest in the country now, and that’s not bad.”

, DataTimes MEMO: These sidebars appeared with the story: INFORMATION To see the full text of the legislation, anyone with a computer, modem and Internet access may go to http://www.idwr.state.id.us/oasis/S1150.html.

IDAHO’S MANAGED CARE REFORM ACT All managed-care plans will have to cover care given by doctors or other providers who aren’t part of their network, though the cost to the patient could be higher. Managed-care organizations will be subject to the same premium tax as other insurers. They previously were taxed at a lower, per-member rate. Requirements for their financial solvency are increased and updated. Members must have some say in how the organizations’ affairs are run. Grievance procedures must be offered for patients who contest coverage decisions. Incentives to withhold needed care are banned, as are “gag clauses” preventing doctors from telling patients about treatments. Extensive disclosure of policies to patients is required, including which prescription drugs are covered, lists of participating doctors and whether or not they’re accepting new patients, participating providers’ qualifications, and information about benefits and rates. The law also incorporates existing requirements that apply to all health insurers in Idaho, such as payment for mammograms for women of certain ages; coverage of newly adopted children; and the “any willing provider” rule that requires the plan to contract with any doctor or other provider who meets the plan’s qualifications and wants to participate.