EVOLUTION OF EMPLOYER-BASED GROUP HEALTH INSURANCE: FROM INDEMNITY/SERVICE PLANS TO MANAGED HEALTH INSURANCE PLANS – THROUGH 2000

HSA 312

MANAGED HEALTH CARE

FALL 2020 L. EITEL

READING 5.:

THE PREVALENCE OF MANAGED CARE IN THE 1990s AND THE MANAGED CARE BACKLASH: KEY POINTS

I. THE PRINCIPAL TYPES OF MANAGED CARE PLANS IMPLEMENTED IN THE 1990s – HEALTH MAINTENANCE ORGANIZATIONS (HMOs), POINT OF SERVICE PLANS (POS), AND PREFERRED PROVIDER ORGANIZATIONS (PPO).

· By the late 1980s the primary kinds of Managed Care Health Plans had been developed and were offered to employers and employees throughout the period of the great health insurance plan transitions between 1988 and 1996.

· HMOs, Point of Service Plans, and PPOs varied in the extent to which the particular type of insurance plan regulated key aspects of the process by which enrollees, advised by doctors, accessed personal health care services covered by those plans.

A. Key areas in which Managed Care Plans differed in the intensity and extent of their control of medical management, and physician and plan enrollee choice, included the following :

· Managing limited networks of individual and institutional providers, and requiring that plan enrollees only used those provider networks to access care.

· Requiring plan enrollees and their families to access most personal health care services with the approval of a “gatekeeper” or Primary Care Practitioner (individual or team.)

· Aggressively negotiating payment rates for provider services, often using capitation for Primary Care Practitioners, and negotiating lower payment rates for Specialty Care Practitioners.

· Requiring PCPs to take on extensive risk.

· Implementing extensive Utilization Management, Case Management, and Disease Management programs.

· Subjecting critical decisions on selected hospital admissions, access to diagnostic imaging, and access to specialty physician consultations to approval not only from PCPs, but from medical management staff within the plan.

HMOs and POS plans were most controlling forms of Managed Health Insurance, and PPOs were much less so.

B. In the 1990s HMOs and POS plans had the highest levels of enrollment, unlike the post Managed Care Backlash experience in the post- 2000 era when PPOs predominated (and continue to do so).

Understanding the various types of Managed Care Health Insurance Plans, their relative levels of enrollment, and the different ways they impacted on providers, employers, and plan enrollees in the 1990s is key to understanding the successes and failures of these plans in the 1990s, and understanding the Managed Care Backlash.

II. The New Managed Care Plans: how they worked:

By the 1990s, Managed Care health insurance plans existed in three principal forms: HMOs (health maintenance organizations), POS (point of service plans), and PPOs (preferred provider organizations).

HMOs and to a certain extent POS plans were the most restrictive forms of Managed Care health plan, and PPOs were the least restrictive.

A. The restrictive aspects of Managed Care in these newly minted, large Blue Cross/Blue Shield and commercial Managed Health plans (as well as in the plans administered by the newer regional managed care organizations) were the following:

1. The insurers created and implemented limited networks of individual, group, and institutional health care service providers.

2. They implemented extensive case management, disease management, and inpatient and outpatient utilization review programs.

3. Using significant market share and the threat of limiting provider network size and composition, the insurers negotiated low provider payment rates with individual, group, and institutional providers. This was one of the main reasons that yearly National Health Expenditure and health insurance premium increases significantly slowed and decreased in the mid-1990s. It was also one of the reasons that the late 1990s and early 2000’s saw the rapid development of large integrated provider health care delivery systems. (As a protective reaction to the way in which managed health insurance plans had exploited their size and market advantage.)

4. These insurers implemented their own mass-produced and simplified version of the complex, subtle, and consensual patient/Primary Care Provider relationship that had been developed by the PHSPs, and especially by Kaiser Permanente. As part of the massive shift to Managed Care in the 1990s, Managed Health Plans instituted the role of Primary Care Provider or Primary Care Provider Team as “gatekeeper.”

· PCPs/PCP teams were given the responsibility for regulating the flow of inpatient admissions, limiting the use of Specialty Care Practitioners, and limiting the utilization of unnecessary diagnostic tests and expensive medical procedures.

· In some Managed Health Insurance Plans, PCPs were actually expected to bear financial risk for the level of use, not only of primary care services, but also of hospital, testing, and specialty care services.

· For certain selected procedures and tests PCPs and Specialty Care Practitioners were required to get approval from centralized health plan medical and other utilization review staff.

· PCP responsibility for the prudent use of health care goods and services was reinforced by the extensive use of Capitation (fixed per-patient payments) to pay PCPs and PCP teams. (However, Capitation rates were based on estimated averages of per person utilization of health care services: PCPs who had an especially unhealthy mix of patients were underpaid for their services.) Even in the best of circumstances PCPs and PCP teams were paid relatively low Capitation rates.

· The original idea of Managed Care was that PCPs and PCP teams were especially important for providing optimal Continuous, Comprehensive, Coordinated Care to individuals and their families: it was assumed that PCPs would have a relatively stable panel of patients. They would be able to get to know those patients and their families over time, would develop a personal relationship with them, and would have a deep understanding of all their acute, preventive, and other health care service needs (including, as they aged, palliative care and hospice care). However, the sheer volume of patients assigned to individual PCPs and PCP teams by the various Managed Care Plans, and the constant changes in the composition of those panels, made that critical personal connection infeasible.

III. POSITIVE IMPACTS OF MANAGED HEALTH INSURANCE PLANS IN THE 1990s:

Managed Care health insurance plans had a number of positive impacts:

A. They significantly slowed the growth of National Health Expenditures for the first time in almost 15 years.

B. They significantly reduced cost sharing for insurance plan enrollees. In the 1990s the majority of those covered by Managed Care plans were covered by HMOs and POS plans. The philosophy of those plans, especially HMOs, was that the enrollee’s premium was all the enrollee should pay. It would be up to the insurance plans and networks of providers to work to make high quality affordable health care available to most people. The focus on enrollee cost-sharing which would characterize Consumer Directed Health Plans in the early 2000’s was the exact opposite of the philosophy of the major health insurance plans that covered most people in the 1990s.

C. It is very likely that the mass implementation of Managed Health Insurance plans in the 1990s had a significant impact on the unnecessary utilization of health care goods and services in the U.S. However, at this point this is speculative – largely because the most recent estimates of unnecessary health care utilization in the U.S. have been done several years after the years when HMOs and POS plans dominated the health insurance marketplace. Clearly the reduction in annual increases in National Health Expenditures in the mid-1990s was not simply from constrained payments to providers, nor from the denial of needed care.

D. They emphasized the use of Preventive Health Care Services and of exercise and Wellness programs, which had never been an emphasis of Indemnity and Service plans when they were the predominant form of private employer-based health insurance in the United States.

IV. WHY WAS THERE A BACKLASH?

A. who was against managed care IN the 1990S ?

Providers and Employees/Plan Members, interacting with negative media coverage of the most blatant failings of Managed Health Insurance Plans, placed increasing pressure on the health insurance plans and employers to change their strategy of massively implementing the most restrictive forms of Managed Care (HMOs, POS plans). Each of these groups had their own reasons, sometimes overlapping, for serious opposition to Managed Care as it had been implemented.

B. Provider Concerns:

Overall, the Providers reacted strongly to the massive and rapid implementation of Managed Health Insurance plans which, unlike traditional Indemnity and Service plans, presumed to challenge the primacy of physician and hospital medical decision-making, and the previously unchallenged status of those providers.

· Payment Issues:

· Late payment;

· Low payment rates, not adequately increased over a number of years;

· The sense that payment rates were negotiated with little respect for individual, group, and institutional providers, and that the insurance plans used their sheer market power and threats of provider network exclusion to get those rates;

· Capitation payments for Primary Care Practitioners.

· Limits on Provider Networks: Either real limits were imposed, or the providers considered the payment and other concessions that were the price of provider inclusion in insurance plan networks too high.

· Limits on Provider Tests and Procedures: Through Utilization Management, Case Management, the use of PCPs as “gatekeepers,” and other centralized health plan controls on inpatient admissions, inpatient lengths of stay, and on selected diagnostic tests and procedures.

· PCP Disenchantment: See the Section I.B.4. Above on the reasons for PCP antagonism and disenchantment.

C. employee/PLAN MEMBER Concerns:

Employees/Plan Members reacted strongly to the massive and rapid implementation of Managed Health Insurance plans. Although health insurance premium increases slowed, National Health Expenditure did the same, and patient cost-sharing was in some cases significantly reduced, for many Employees/Plan Members these positive benefits were either not visible, were too abstract, or seemed to be an inadequate payoff for what was perceived as massive and unwarranted health plan interference in access to providers, tests, and medical procedures.

1. Making Access Difficult: Routine Care:

Perhaps most important was the sense of Employees/Plan Members that they were being denied necessary care, even if that was not true. Central health plan interference, extensive use of PCPs as “gatekeepers,” and the various seemingly bureaucratic obstacles to getting certain tests and procedures, and to accessing Specialty Care Providers, all worked to frustrate Employees/Plan Members as well as Providers. For years Employees had been able to access Specialists as they wished, with interference from neither plans nor PCPs.

2. Making Access Difficult: Experimental Care and Life-Threatening Conditions:

There was a belief, supported by some high-profile cases, and encouraged by the mainstream U.S. media, that innovative and often life-preserving care was being denied because of Managed Health plan oversight, policies and procedures, and overall interference in the doctor/patient relationship.

3. Belief that Health Plans were Not Acting in the Best Interest of Employees/Plan Members:

Many Employees/Plan Members felt that the restrictions on choice of provider, tests, and treatment were meant to generate profits for the Managed Health plans, not to improve the quality and affordability of personal health care goods and services.

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