To the dismay of healthcare providers, the Clinton administration is considering changing its provider-sponsored organization legislation to give states a greater regulatory role because of the number of states that have passed new PSO laws.
One HCFA official, who estimated that about a dozen states have forged ahead with their own PSO legislation, said letting states take a more active role in regulating PSOs from their inception "is something we will probably look at."
PSOs are networks of providers that would be able to directly contract with Medicare and assume the financial risk of treating beneficiaries.
The issue of whether states or the federal government should regulate PSOs has been heating up recently. Insurers say states, which traditionally have had oversight of the insurance market, should also regulate PSOs. The National Association of Insurance Commissioners, the National Governors' Association and other state government associations agree.
The NAIC said it will complete by June its new solvency standards for risk-bearing organizations. The standards would be applied to any network or PSO.
But providers are wary that insurers will use their clout with state insurance commissioners to hinder the development of PSOs, which traditional insurers view as competitive threats. Consequently, providers want the federal government to regulate PSOs, at least initially.
Under the White House PSO plan released last month, the federal government would develop solvency and quality regulations governing PSOs. For two years, the feds would have exclusive reign over PSOs. But during that period, states that are willing to administer the federal guidelines could assume oversight of PSOs.
The White House plan differs from PSO legislation introduced in the House and Senate. Under those bills, the federal government would write regulations for PSOs and would administer those rules for four years. After that, states with similar or more stringent rules could take over the regulation of PSOs.
Provider groups have endorsed the House and Senate bills and have expressed support of the original White House plan.
However, a change in the White House plan to give states more leeway in regulating PSOs would not be welcomed by providers.