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Health Care Costs and Financing

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States vary widely in how they regulate private health insurers and managed care organizations

Individual States vary considerably in how they regulate private health insurers and managed care organizations (MCOs), according to the results of two surveys on the topic. Robert J. Buchanan, Ph.D., of the Texas A&M University System Health Sciences Center, and his colleagues sent the surveys to State insurance commissioners in 2000. The surveys, which focused on policies regulating conventional health insurance and managed care organizations (MCOs), were returned by 49 States and the District of Columbia. This study was supported by the Agency for Healthcare Research and Quality (HS09819).

Survey analyses revealed differences in State insurance regulation in several areas. For example, 39 States do not require conventional private health insurers to offer prescription drug coverage. However, 10 States and the District of Columbia require individual, small-group, and/or standard plans to provide such coverage. Almost all States allow conventional health insurers to impose annual dollar limits on the amount of prescription drugs that beneficiaries may receive. None of the States have protections from these annual dollar limits for beneficiaries with terminal illnesses, including AIDS. Most States allow insurers to have restrictive drug formularies and lifetime drug prescription limits.

In more than 20 States, patients have a right to bring a legal claim against an insurer if harmed by denial of care. Twelve States allow patients to sue their MCOs for damages if harmed by denial of care. By early 2000, a total of 32 States had enacted laws requiring some form of internal or external appeals or grievance procedures. Only five States have laws pertaining to the payment of routine costs or medications associated with experimental treatments. Most States do not require MCOs to pay routine health care costs associated with experimental medications and treatments.

See "State regulation of private health insurance: Prescription drug benefits, experimental treatments, and consumer protection," by Jane Nelson Bolin, Ph.D., J.D., R.N., Dr. Buchanan, and Scott R. Smith, Ph.D., in the November 2002 American Journal of Managed Care 8(11), pp. 977-985.

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