Self-insured health plans go untouched

Coverage affecting thousands is exempt from Maryland law

Patient complaints grow

Federal pension law shields self-insured from damage suits

Managed care

April 04, 1999|By M. William Salganik | M. William Salganik,SUN STAFF

Once again this year, Maryland lawmakers are debating how to rein in the excesses of managed care.

It's become an annual exercise as HMOs have grown through the '90s -- and complaints from patients and doctors have grown with them.

The lawmakers have directed insurers to pay for specific services, such as in-vitro fertilization. They have crafted an appeals procedure for patients who think their health plan has failed to cover medically necessary care. They have limited retroactive denials of claims from hospitals and doctors.

Yet whatever rules the lawmakers come up with, hundreds of thousands of insured Marylanders are outside the reach of the legislation.

A broad federal law governing pensions, health and other benefits, the Employee Retirement Income Security Act (ERISA), prevents the states from regulating health plans in which an employer is self-insured.

The law also prevents the health plans from being sued for punitive damages.

Most employers pay premiums to HMOs or other health plans, and the health plan is at risk for the cost of care. But many companies, particularly large ones, assume the risk themselves and pay a management fee to a health plan or administrator. The states cannot regulate such self-insured plans. Some, particularly insurers and business groups, view this exemption from state rules as important for employers, particularly large companies with workers in many states.

"It can be so onerous to come up with a separate plan in each state," said Brian Bark, a benefits consultant in the Baltimore office of Buck Consultants, a national firm that advises clients on whether self-insurance or conventional insurance is better for them.

Others, including health care providers and consumer groups, say it's a problem.

The argument of the multistate employers "needs to be balanced against the need to provide some core benefits and core protections," said Steven B. Larsen, Maryland's insurance commissioner. Larsen has become something of a crusader on the issue, doggedly attempting to generate interest in the arcana of "ERISA pre-emption."

Both supporters and opponents of limits on state authority agree there is little likelihood of change on the horizon.

"There will be some form of federal legislation this year that will erode some part of the ERISA pre-emption," predicted Richard Service, editor of the trade magazine Business & Health.

However, Service said, what is likely to result from competing "patients bills of rights" is more federal regulation of the self-insured plans, not an expansion of state reach.

When ERISA was enacted 25 years ago, it was intended to safeguard pensions and encourage companies to offer health insurance by protecting them from interference from the states. HMOs were not widespread.

But, as states and the federal government have responded to managed care backlash by legislating patient rights and mandating coverage, ERISA has turned into a shield for self-insured companies that critics call a giant, if unintended, loophole.

Nationally and in Maryland, about one person in five is covered by an employer self-insured plan, according to estimates by the Employee Benefits Research Institute and the state Health Care Access and Cost Commission (HCACC). That's about 48 million people nationally and about 872,000 in Maryland.

One of those people is Robert Freaner, a forklift operator from Beltsville. After cancer surgery left him with a hole in his throat, his doctor referred him to a prosthetic dentist for a repair that would allow him to eat and drink.

CIGNA, his health insurer, initially said the prosthetic dentist was not one of its providers and offered to send Freaner to an oral surgeon. Dissatisfied, he filed a complaint with the Maryland Insurance Administration, which has the authority, under a new appeal procedure, to order a health plan to provide care. An investigator for the insurance administration began collecting information about the case.

"Then, she called me and said she couldn't do anything any more," Freaner recalled. "I said, `What do I do now' and she said, `Don't give up.' " His doctors persisted, and eventually CIGNA honored the referral.

It's not just patients who turn to state regulators, only to find out they are dealing with a self-insured plan.

The Maryland Hospital Association last year filed a complaint with the insurance administration covering 106 disputed claims -- either disagreements over whether care had been medically necessary or whether proper information (such as codes for the care given) had been provided.

But when the insurance administration reviewed the claims, the agency found it lacked jurisdiction over 15 because the patients were covered by self-insured plans.

Similarly, doctors turned to the state insurance administration with their complaint that Mid Atlantic Medical Services Inc., a Rockville managed-care insurer, had improperly been denying claims more than six months after they were initially approved.

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