The ABCs—and HMOs and PPOs—
of Managed Health Care

With its vast number of acronyms, the fundamentals of managed health care can exhaust anyone’s mind. To help you better help your clients keep this alphabet soup under control, here’s a list of essential terms pulled from the All About Managed Care: The Basics and More for Counsel and Litigators CLE teleconference sponsored by the Health Law Section, the Young Lawyers Division and the Center for Continuing Legal Education.

Products
Managed Care Organization (MCO) — a company (as in HMO or PPO) that offers health care plans and credentials network providers.
Preferred Provider Organization (PPO) — a health plan that offers consumers incentives to seek care from preferred providers with whom the insurance carrier has a contractual relationship.
Health Maintenance Organization (HMO) — prepaid organization that arranges for health care in return for a predetermined premium or arrangement where consumers are steered toward closed networks of providers. Providers agree to a fixed payment, per member per month, capitation.
Point of Service — combines HMO and indemnity under one plan by allowing consumers to seek services from nonparticipating providers without authorizations or referrals, but for higher out-of-pocket cost.
Carve-Out Plans —plans for dental, mental health, vision, etc.

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Organizations
Independent Practice Associations — legal entities formed by physicians across many specialty areas, which accept capitation (and financial risk) from an HMO, in exchange for provider network participation.
Physician-Hospital Organizations — entities where doctors and hospitals bind themselves together for the purpose of negotiating better contractual terms and bear risk of capitation arrangement.
Self-Funded Employers — employers that offer health benefits to their employees but accept the risk of the cost of health care rather than buying a fully insured product from a carrier. Often, self-funded employers contract with third party administrators to administer the health benefit plans.
Third Party Administrators — entities that perform administrative functions (e.g., claims processing, membership eligibility, arranging access to provider network) for a self-funded plan.
Utilization Review Organizations — bodies that review claims to determine whether benefits requested are a covered benefit and/or whether they are medically necessary under a health plan benefit package.
Independent Review Organization — non-affiliated entities that review health plan decisions to deny coverage when the member of provider appeals; sometimes this is done at the request of a state agency.
Disease Management Companies — entities that employ case managers to coordinate care for members with chronic and/or high-cost diseases to ensure the quality of care and cost savings through preventative care.

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Key Regulations
Employee Retirement Income Security Act of 1974 (ERISA) — a comprehensive federal statute regulating employee benefit plans including employer-sponsored health insurance. It provides requirements relating to participation, funding, and vesting of benefits in benefit plans, as well as uniform standards for reporting, disclosure, and fiduciary duties.

The Federal HMO Act (Health Maintenance Organization Act of 1973) — was created to provide assistance in establishing and expanding health maintenance organizations as an alternative to skyrocketing healthcare costs. Initially, the federal government lent money to help get HMOs up and running.

Americans with Disabilities Act of 1990 (ADA) — Title I of the ADA applies to the employment relationship and to a physician-employee relationship. Title III of the ADA prohibits discrimination based on a disability in public accommodations and services operated by private entities.

Health Insurance Portability and Accountability Act of 1996 (HIPAA) —Title I deals with protecting health insurance coverage for people who lose or change jobs. Title II includes an administrative simplification section that deals with the standardization of healthcare-related information systems in regard to security and privacy matters.

Any Willing Provider (AWP) — is a form of state law that requires a managed care organization (MCO) to accept any provider willing to meet the terms and conditions of the MCO’s contract, whether the MCO wants or needs that provider or not.

Prompt Pay Statutes — currently, 49 states have enacted requirements regarding timely payment by insurers of claims made by providers for services rendered to policyholders. The dates range from 15, 45 to 60 days. On the federal level, the Patient Protection Act requires claims to be paid in accordance with Medicare guidelines for prompt payment.

To delve further into managed health care fundamentals, you can download the program materials here.

To purchase the webcast, click here.

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