ANNAPOLIS – Health maintenance organizations need to be more accountable for the contracts made with the smaller companies they use to lessen their monetary risks and fulfill their health care responsibilities, the commissioner of the Maryland Insurance Administration said Tuesday.
HMOs contract with these companies, called “downstream” risk providers, to shift the risk and responsibility of patient care and paying claims to smaller service providers, which offer the same services.
“In many cases, these providers are mini-insurance companies,” Steven Larsen, MIA commissioner, told Maryland lawmakers. However, because these providers do not require a separate insurance license, they are harder to regulate.
This issue is getting attention now because of a recent decision by the MIA to order United Health Care to pay the outstanding claims of three defunct service providers that contracted with United: Doctors Health Inc., Maryland Personal Physicians Inc., and Dimensions Health Network. Doctors Health and MPPI declared bankruptcy within the last 14 months and Dimensions ceased operation in November. The bankruptcies left many physicians working for these companies with unpaid claims.
United is appealing the decision and could not be reached.
Current law requires sufficient funds be set aside to cover expenses should the service contractor be unable to pay claims, but it does not specify whether the HMO or the provider is responsible for setting up the fund and how much money is considered sufficient, Larsen said. He recommended that new legislation correct this.
Sen. Leonard Teitelbaum, D-Montgomery, agreed that a model should be created to determine how much money should be set aside.
“If you are covering 10,000 people, you have to put aside X amount of money,” Teitelbaum said. “I think you would be getting out of a lot of quicksand.”
The fund would become the responsibility of the HMO under the MIA’s recommendations. Making service providers handle the funds can be risky if the provider declares bankruptcy, Larsen added. In bankruptcy, these funds become frozen.
Sen. Delores Kelley, D-Baltimore, wondered if the fee paid by the HMO was sufficient enough to secure the financial solvency of the service providers.
Another of the MIA’s recommendations was to name the HMO as the ultimate responsible party in paying claims, making them less likely to enter into a risky arrangement.
Another senator agreed with this proposal and said the problem could be more about poor management decisions by the HMO. However, Sen. Thomas Bromwell, D-Baltimore, said he was reluctant to pass too much legislation.
A House bill has been introduced that would require any company declaring itself a service provider to meet certain criteria, including proving solvency, according to Delegate Michael Busch, D-Anne Arundel.