The California Department of Corporations has ordered Maxicare Health Plans to stop participating in an incentive program in which Cedars-Sinai Medical Center in Los Angeles is offering $100 to hospital employees if they enroll in one of Maxicare's plans.
The program violates a federal law that "prohibits enrollment practices that are inimical to the general purpose of enabling a rational choice to the consumer public," said Anita Ostroff, senior counsel for the Corporations Department.
Cedars' program is aimed at about 1,200 single employees who don't pay premiums for their HMO coverage.
Cedars is steering its employees into a Maxicare plan that has contracted with two medical groups managed by the hospital: Cedars-Sinai Health Associates and Medical Group of Beverly Hills.
Besides the Corporations Department, Health Source Medical Group, an independent practice association formerly affiliated with Cedars and embroiled in litigation with the hospital, also objects to the program. Health Source physicians now treat thousands of Cedars' 6,500 employees and their families.
Last fall, Cedars was successful in its federal suit to halt the group from using its name. Cedars filed another suit last week for payment of "a whole series of services" it provided for the group before 1989, said Peter Braveman, Cedars' vice president for legal affairs.
Maxicare says it is not violating any laws because Cedars is offering the incentives. Cedars says it is not doing anything different from many cost-conscious employers that steer employees into certain health plans by offering better benefits such as lower deductibles.
"What is drawing the attention is the $100," Mr. Braveman said. "If we had simply restructured the plans in some way, for example, by offering better pharmacy benefits, no one would have ever questioned that."
The incentive program "is a rather unique approach to doing what employers are doing all over the country. It could be a cutting-edge approach," said Ed Coghlan, Maxicare's vice president of advertising and communications. "A health plan can't do it, but if Cedars does it, that's their business."
Ms. Ostroff said, "We have no regulation over the benefit structure." It is illegal to offer inducements to enroll in a certain plan, she said. But "what we're regulating here is a marketing practice that is a one-time bonus."
Martin J. Coyne, M.D., president of Health Source, said that as a teaching hospital, Cedars is not fulfilling its responsibility to "clarify the ethical responsibility of doctors" as healthcare evolves.
"Cedars is not an employer whose business it is to make widgets; (its business is) to deliver healthcare and to train physicians," Dr. Coyne said. "Technically, Cedars may be right. But they dumped the illegality onto Maxicare."
Maria Gonzalez, Health Source's director of corporate development and marketing, said, "The whole underlying issue is that Cedars has a vested interest in the groups," which it controls through a foundation and a physician-hospital organization.
Blue Cross of California also stands to lose. Thousands of Cedars employees are now enrolled in its health plans.
Thomas Geiser, general counsel at the California Blue Cross' WellPoint Health Networks, said he hasn't studied the program's legality and has no position on it.