State and Federal Regulations
Several recent surveys, including an AFSCME survey, have found that the majority of Americans favor health care patient protections. Consumer groups, unions and health care providers are joining together in support of federally enforceable regulations. Many insurance and business interests have launched a major campaign to defeat managed care legislation, claiming that enforceable quality standards will increase health care costs dramatically. However, the Congressional Budget Office, whose responsibilities include costing out proposed legislation, estimates that the Consumer Bill of Rights would increase premiums by only 0.3 percent. Some states and the federal government have already passed numerous consumer protection laws, and many more proposals are being debated.
What types of laws have been passed or are being considered at the state level?
- A majority of states have specified minimum hospital stays for new mothers and for mastectomy patients.
- An equal number have mandated that HMOs allow women direct access to obstetrician/gynecologists, while other states have passed bills allowing direct access to specialists for any reason.
- At least one state (New York) requires HMOs to allow specialists to serve as primary care doctors for patients with life-threatening, degenerative or disabling conditions.
- About a dozen states require plans to include a point-of-service option that allows patients to go out-of-network for a higher fee.
- At least half of the states have passed laws banning “gag clauses.”
- A number of states have passed laws which require plans to pay for emergency room services if a “prudent layperson” would have considered the condition an emergency.
- Still other states have passed laws or are looking at guarantees of continuity of care when a provider leaves a plan and/or requiring due process before terminating a provider from the plan.
- States are also considering requirements that plans provide members with easily understandable literature about plan operations and coverage.
- Several states mandate coverage for certain diabetes treatment and supplies, reconstructive breast surgery following a mastectomy, cervical and prostate cancer screenings, and prescription drugs for certain cancers, HIV and AIDS.
- At least a dozen states already mandate some level of coverage for experimental treatment and others are considering laws which would require coverage of clinical trials for specified illnesses.
- States are also considering requirements that certain mental health parity and quality standards be met by plans.
- A few states have enacted confidentiality of medical record safeguards.
- Movement towards laws guaranteeing independent external grievance reviews is underway in many states. Texas has already approved a bill that makes health plans liable for medical malpractice and many other states are debating similar bills.
Many of the consumer protections already passed at the state level are now being debated at the federal level. Congress has shown its willingness to intervene in the area of quality health care by passing the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and two related new laws, the Mental Health Parity Act (MHPA) and the Newborns’ and Mothers’ Health Protection Act (NMHPA). These laws include a number of provisions that significantly affect health care plans. However, self-insured state and local governmental plans can elect to be excluded from some major portions of these laws. Several hundred local governments have chosen to apply for the exemption but no states have applied to be exempted from the provisions of the laws thus far.
Q. What is HIPAA?
A. While HIPAA includes some rules affecting individual health insurance coverage, the law primarily focuses on employer-sponsored group health plans. In general, HIPAA prevents discrimination against employees and dependents based on their health status, requires special enrollment periods for individuals who originally declined health coverage for certain specified reasons, and limits exclusions for pre-existing conditions.
Q. What is MHPA?
A. MHPA requires plans that offer mental health coverage to apply the same annual and lifetime maximum coverage limitations for treatment of mental and nervous disorders as are applied to medical/surgical benefits.
Q. What is NMHPA?
A. NMHPA requires that plans covering maternity hospital stays provide such coverage for at least 48 hours following a normal delivery and 96 hours following a cesarean section.
Q. Which governmental plans may be exempted from complying with the provisions of these laws?
A. Only self-insured state and local government plans can opt out of HIPAA. Governments with fully insured plans must comply with the law. Most HMOs are fully insured, so governments with those plans must comply. However, a large number of state and local government PPO and indemnity plans are self insured.
Q. What steps must a plan take to opt out?
A. Governmental plans are not automatically exempt from these laws. Plans electing to be excluded from HIPAA must notify the federal Health Care Financing Administration (HCFA) on an annual basis and must also notify plan participants at the time of enrollment and on an annual basis. If a plan does not opt out on a timely basis, or fails to provide the appropriate notifications, it is subject to the requirements of the law for the entire plan year or, for plans that are collectively bargained, for the term of the bargaining agreement. When a plan opts out of HIPAA, it is also exempt from the requirements of MHPA and NMHPA.
Q. Are there any provisions of the laws to which employers are not required to adhere, even if they do not elect to opt out?
A. Employers are not required to meet the mental health parity requirements if inclusion of those benefits would increase plan costs by 1 percent or more. Those that wish to be exempted will be required to comply with the provisions of the MHPA for at least six months. Beginning July 1, 1998, employers that demonstrate, with actual claims, that their medical costs have increased by more than 1 percent because of the parity requirements, will be permitted to exempt themselves from complying with the MHPA.
Q. Are plans that opt out required to meet any provisions of the laws?
A. Plans that opt out are still required to provide written certification of coverage to terminating employees, which can then be used by the employee to reduce the length of a pre-existing condition under a new employer’s plan, if that employer has not elected to opt out of the provisions of HIPAA.
Q. What are the effective dates of HIPAA?
A. For non-collectively bargained plans, most requirements of HIPAA were effective at the beginning of the first health plan year starting after June 30, 1997. Notification of the opt out must be made to HCFA prior to the first day of the new plan year. There is a special rule for plans covered under collective bargaining agreements ratified before August 21, 1996, that delays the effective date. HIPAA applies to these plans either the first day of the plan year beginning on or after the date on which the collective bargaining agreement expires or July 1, 1997, whichever is later. If the plan covers members of more than one collective bargaining agreement, the opt-out date should be the date of termination of the last bargaining agreement. Notification of the opt-out election must be received by HCFA within 30 days after the date of the agreement between the employer and the union.
Q. What are the effective dates of MHPA and NMHPA?
A. These laws took effect for plan years beginning on or after January 1, 1998. Benefits mandated under the MHPA are for a limited duration. A “sunset” provision in the law provides that these requirements will cease to apply after September 30, 2001. These effective and termination dates are the same, whether benefits are covered under a collectively bargained or non-collectively bargained plan.
Q. What can the union do to stop an employer from opting out of these laws?
A. The election to opt out of the applicable provisions of the law is typically a mandatory subject of collective bargaining. Following is sample contract language requiring the employer to comply with the new laws:
The employer will comply with the Health Insurance Portability and Accountability Act of 1996, the Mental Health Parity Act of 1996, and the Newborns’ and Mothers’ Health Protection Act of 1996.
Alternatively, language could simply require compliance with HIPAA, since an employer can only opt out of the MHPA and the NMHPA if they opt out of HIPAA.
The main provisions of the Employee Retirement Income Security Act (ERISA), passed in 1974, protect the benefits provided by employee pension plans. A portion of the law regulates health plans offered by private employers and unions. State and local government plans, as well as church plans, are exempt from ERISA. ERISA requires that health plans sponsored by private employers make certain information available to plan members and requires that benefits promised by the plan be available to members. ERISA also requires that plans have some type of complaint and appeals procedure and that plans approve or deny claims within 90 days and approve or deny appeals within 60 days.
While ERISA allows states to regulate insurance companies, employers who self insure are not considered insurance companies. Therefore, state managed care protection laws, such as those establishing prudent layperson rules for emergency room visits, guaranteeing members’ rights to receive out-of-network care, or mandating hospital stays for specific periods of time, are pre-empted by ERISA and do not cover members of self-insured plans sponsored by private employers. These state laws, however, do apply to fully insured plans sponsored by private employers.
ERISA’s pre-emption of state laws is even more extensive when it comes to members’ rights to sue their health plans for improper delays, denials or limitations of care. The Supreme Court has ruled that state liability laws, allowing injured patients to sue health plans for damages in state court, do not apply to any ERISA plans, whether they are self funded or fully insured. While members of these plans may bring suit in federal court, recovery is limited only to the dollar value of the benefit denied and possibly attorney fees. If these cases were permitted to be heard in state court, larger awards for loss of life, pain and suffering, lost wages, additional medical costs, and/or punitive damages would be possible. The ERISA pre-emption of state laws leaves members of plans sponsored by private employers with no meaningful recourse for wrongful decisions made by managed care plans. This lack of accountability minimizes, or even eliminates, any incentive an insurance company has to treat members fairly. Again, this ERISA pre-exemption does not apply to public plans.
Under traditional health plans, lawsuits over the denial of benefits are uncommon because the main responsibility of these plans is to pay bills, not to actively manage patient care. Managed care plans, on the other hand, make daily decisions over whether specific medical procedures are covered. Advocates of eliminating ERISA’s pre-emption of state laws governing insurance and health care argue that this loophole was not anticipated when ERISA was passed. In 1974, there was little managed care and relatively few self-insured plans. Because ERISA pre-emption of state laws has been the subject of much litigation, political support for continuing ERISA pre-emption may be eroding. Texas and Missouri passed laws which allow consumers to sue HMOs for medical malpractice. On the federal level, the Supreme Court has made several favorable decisions in the area of preemption. And the proposed Patients’ Bill of Rights Act of 1998 would allow state law to determine whether or not a health care beneficiary can bring suit against health plan administrators who cause harm through their actions. Other proposals would amend ERISA to allow employees to sue for full compensation for any injuries incurred as a result of unfair denials or limitations of coverage.
Proposed Federal Laws
President Clinton has endorsed the concept of federally enforceable standards and a number of the protections contained in the “Consumer Bill of Rights” are embraced in some of the federal consumer protection bills that are currently under consideration by Congress. Some proposed bills are comprehensive, addressing a wide range of consumer concerns, while others address only one or two issues. Generally, the proposals address access to emergency rooms, specialists and prescription drugs, independent appeal procedures, continuity of care, choice of providers within a plan, information disclosure, gag rules, mandatory point-of-service options, whistleblower protection for providers who report abuses and/or the creation of an ombudsman program. HIPAA mandated Congress to address medical confidentiality by August 1999. In the absence of congressional action, regulations will be issued by the Department of Health and Human Services. Several bills would limit disclosures of medical records, establish procedures for patients to authorize the use of their confidential information and/or require health care providers to maintain records of disclosures. A number of bills would allow members of plans regulated by ERISA to sue their plans when the plan’s denial or delay of coverage harms them.