Under new state regulations that take effect Nov. 1, Colorado hospitals and physicians with as little as $100,000 in the bank will be allowed to sign capitated and other risk-sharing contracts directly with insurers and employers.
The regulations, issued late last month, create a new type of state license for providers that want to act like insurers. However, the licenses are narrow in scope and limit what providers can do under them.
The regulations establish three categories of limited-service licensed provider networks. A network may provide services in a defined specialty, such as radiology or mental health. It may be limited to a single type of licensed facility, such as an inpatient hospital or hospice. Or it may cover services provided in patients' homes.
The regulations, promulgated by the Colorado Department of Insurance, require networks to maintain a minimum net worth of $100,000, excluding intangible assets. The insurance commissioner has the discretion to raise that minimum depending on the amount of risk a network assumes.
By contrast, HMOs operating in Colorado generally must carry reserves of at least $1.5 million.
Providers in Colorado and elsewhere that want to contract directly with insurers and employers without meeting strict insurance requirements say their networks need less reserves than HMOs because networks deliver services instead of contract for them.
HMOs argue that they also deliver services, and they fear providers will be given an advantage in the market.
The Colorado license allows networks to offer services "limited in scope and significantly less" than basic healthcare services provided by an HMO. The network must deposit securities equivalent to its net worth to protect consumers in case of insolvency.
"This was the best compromise that could be reached without dismantling the HMO market," said Patricia Foos, a credit examiner for the Colorado Department of Insurance.
Regulations originally were intended for implementation in July, but the department received too many comments on its proposal to meet the deadline, Foos said.
At press time, Colorado Hospital Association President Larry Wall said he hadn't reviewed the final regulations. The association approved previous drafts.
"We're going to see how they're applied," Wall said.