HCFA has begun contacting special-interest groups with a stake in creating financial solvency standards for provider-sponsored organizations. The agency is gearing up for what will surely be contentious negotiations.
Under the balanced-budget law, the solvency standards for PSOs will be created using a new "negotiated rulemaking" system.
Most regulations are developed internally by HCFA, which then solicits comments from interested parties. But under negotiated rulemaking, HCFA convenes a panel of interested parties-in this case the group is likely to include providers, insurers, actuaries and insurance commissioners-and lets them reach consensus on regulations to be implemented.
By law, the new PSO solvency regulations must be issued by April 1, 1998 (See chart). That leaves the committee just a few months to come to what must be unanimous agreement on solvency regulations. But given the animosity that has been built up between providers and insurers over PSOs, that could be a tall order.
PSOs are networks of providers that can contract directly with Medicare for care to beneficiaries and assume the financial risk of providing that care. Previously, only traditional insurers contracted directly with Medicare. At issue in the rulemaking process is how much money PSOs must have in the bank before the government lets them assume risk. No hard figures have been cited.
The budget law requires that the commission consider the "Health Organizations Risk-Based Capital" framework being tested by the National Association of Insurance Commissioners. That framework was designed to cover the solvency requirements of all managed-care plans, including PSOs.
Lawmakers, including Rep. Bill Thomas (R-Calif.), chairman of the House Ways and Means health subcommittee, have expressed support for the NAIC framework.
At a recent press briefing HHS Secretary Donna Shalala said the "NAIC framework is something we can probably work with."
The most obvious flashpoint between the two sides is over what types of assets can be counted when satisfying solvency requirements. Providers want hard assets to be counted toward what they have in reserves, decreasing the liquid assets they would be required to have on hand before contracting with Medicare. Insurers want only liquid assets counted toward the government's solvency requirements. The NAIC framework, in general, considers only liquid assets as reserves.
For the most part, insurers support the NAIC standards, which they say will create a level playing field between insurers and PSOs.
But provider groups say delivery assets like hospitals and clinics and machinery should be considered because they allow a provider to furnish care even if the PSO has low liquid reserves.