Providers that contract with employers or individuals to furnish healthcare on a capitated basis are acting like insurers and should be regulated as such, according to a draft bulletin released last week by the National Association of Insurance Commissioners.
While the group's hard-line stance may make it harder for provider-led plans to enter the market in some states, the report by itself does not carry any regulatory or legislative weight. It merely provides guidance for individual state insurance regulators.
"This is not that much different than what we were expecting to see," said Ellen Pryga, director of policy development at the American Hospital Association. "But this kind of aggressive position may exceed where a fair number of states are."
The AHA and other provider groups have argued that under direct contracts the employers, not providers, retain the risk. The provider is only at limited risk for the specific services it agrees to provide.
They say subjecting providers to the same regulations will make it impossible for providers to enter the market and therefore reduce competition.
But managed-care plans, led by the Group Health Association of America and the national Blue Cross and Blue Shield Association, say there is little difference between a provider plan that contracts with an employer and a managed-care plan and that regulation for both should be uniform.
In its draft bulletin, the NAIC agreed with the managed-care groups.
"The providers become the insurer because they have accepted the risk of providing a schedule of healthcare benefits on a fixed prepayment basis," the NAIC document said.
That stand disappointed provider representatives.
"Instead of just looking at what happened in the past and regulating it that way, I hoped (the NAIC) would have realized that the world is changing and there are new types of networks that need to be regulated in a different way," said Mark Skubic, vice president of policy and government relations at HealthSystem Minnesota.
Lawmakers considering proposals to expand options for Medicare beneficiaries also have struggled with the question. At a recent hearing of the House Ways and Means Committee health subcommittee, Chairman William Thomas (R-Calif.) hinted that he believed provider plans should be subject to some regulation but not as strict as insurers.
Jim Matthews, a lawyer with Lindquist and Vennum in Minneapolis, said providers can still structure networks that fit under the NAIC guidelines in most states if they are careful.
"If providers have been foresightful in the way they structure their networks, being cognizant of state insurance laws, they are going to be OK," he said. "Other networks may be in for a rude awakening."