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Understanding the Alphabet Soup of Managed Care Integrated Delivery Systems

Adding to the Framework

A Context for State Policymaking Concerning Integrated Delivery Systems


Patricia Butler, Health Policy Consultant, Boulder, CO.

Patrick Finnerty, Executive Director, Virginia Joint Commission on Health Care.

This session examined two important considerations affecting State policymaking with respect to integrated delivery systems, namely:

  • The implications of the Federal ERISA statute on the States' ability to regulate these entities.
  • The context within which IDS-related issues often come before State legislatures.

Patricia Butler, a health policy consultant and nationally recognized expert on the Federal Employee Retirement and Income Security Act of 1974 (ERISA), began her discussion of ERISA by providing an overview of the provisions of the statute that restrict States' ability to regulate private sector employee pension and benefit plans. While this restriction has been interpreted relatively broadly by the courts, Dr. Butler noted that the statute does not limit States' ability to regulate the "business of insurance." Therefore, regulations directed at integrated delivery systems (IDSs) that bear some financial risk and define these IDSs as engaging in the business of insurance are more likely to be able to withstand an ERISA challenge. Dr. Butler also noted that States should also be able to regulate IDSs under their public health/police power authority.

Patrick Finnerty, the Executive Director of the Virginia Legislature's Joint Commission on Health Care, discussed the key role of State legislatures with respect to policy affecting IDSs. He observed that, in addition to considerations about the technical aspects of IDSs, State legislators would likely raise the following questions about IDS-related issues:

  • How will my constituents be affected? What will be the practical day-to-day impact on enrollees, providers, and purchasers?
  • Will IDS development advance other key health policy goals?
  • Will IDSs affect/impact State institutions and benefit programs?
  • How will IDSs "fit" in the current marketplace?

Mr. Finnerty emphasized the importance of giving adequate consideration to State legislators' questions and concerns, noting that even if legislation is not needed for the development, implementation, or expansion of IDSs in a particular State, such activity could be affected, or even halted completely, as the result of legislative action in future years.


The Regulation of Health Risk-Bearing Entities. National Association of Insurance Commissioners. Kansas City, MO, 1997.

State Managed Care Oversight: Policy Implications of Recent ERISA Court Decisions. National Governor's Association Center for Best Practices. Washington, DC, 1998.

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