Regulation & Licensing
Recall from the discussion in Chapter 17 that the word "insurance" when discussing health plans means percentage. HMOs do not pay benefits on a percentage approach, and therefore are not insurance and can not offer or contract insurance. You may also recall that Chapter 16 discussed how HMOs are self-contained and self-funded, meaning that they are a separately managed section of the insurance company and independent of it, although they may contract for excess insurance and administrative services from the insurance company itself. Again, all of this is to say that HMOs can not offer or contract insurance. HMOs make contracts with doctors and hospitals, not with subscribers. Subscribers simply pay a fee for services covered under the plan.
Although HMOs can not offer insurance, they are still regulated by the Office of Insurance Regulation and require a Certificate of Authority to do business.
Marketing Practices
Only licensed and appointed health insurance agents may solicit HMOs, however there is an exception to that rule. HMO contracts may also be sold by a full-time salaried employee or officer of an HMO who devotes most of his or her services to activities other than soliciting HMO contracts from the public and who receives no commission or compensation for procuring such contracts.
Unfair trade practices
Unfair trade for HMOs is very similar to that of insurance contracts, and includes but is not limited to:
- Misrepresentation, false advertising and defamation
- Failure to keep procedures for handling claims
- Operating without a certificate of authority
- Twisting
- Rebating (although HMOs can offer rewards and incentives for participation in a voluntary wellness program; i.e. silver sneakers, smoking cessation program)
Defamation
Defamation is circulating any false or maliciously critical statements, oral or written, of any person and that is intended to injure that party.
Misrepresentation
Knowingly making a false or fraudulent representation on any HMO-related paperwork to get a premium; basically trying to make your company/product look better then it actually is while inducing someone to by a contract.
Twisting
Inappropriate replacement of HMOs from other companies to your own company, meaning the subscriber would have been better off staying with the other current company.
Special procedures for Medicare Beneficiaries****
There are all types of rules when dealing with seniors, and here are some rules for enrolling a senior into an HMO, which really means a Medicare Advantage plan:
- Subscribers must be told that when they enroll in an HMO, they are disenrolled from Medicare.
- The Notice to Buyer must be printed, typed or stamped (but not handwritten) on the first page of the application and on the contract:
- Notice to Buyer: When you enroll in this HMO, you will be disenrolled from Medicare. The buyer should be aware that in order to receive payment or coverage for services, such services must be rendered by physicians, hospitals and other health care providers designated by the HMO. If the services are rendered by a non-participating-physician, hospital or other health care provider, the purchaser may be liable for payment for such services except in very limited circumstances.
- The agent has to ask if the person has previously been enrolled in the same or another HMO while on Medicare to identify instances of churning.
- Further, the 1992 Legislature passed a law that requires the agent to ask each person solicited:
- If the person is covered under a health insurance policy, continuing care or health maintenance contract or a Medicare supplement insurance policy
- The agent must then explain the extent that the coverage being sold will overlap or duplicate the existing coverage.
HMO Consumer Assistance Plan (CAP)
This is basically the same thing as the Insurance Guarantee Fund discussed in Chapter 26, but for HMOs. It is meant to pay claims if an HMO becomes insolvent. Just like its counterpart, it is not allowed to be used as an inducement in advertising or sales.