More regulation on state horizons? - healthcare regulation - special edition: The State of Health Care in America 1995

Business & Health, Annual, 1995 by Dan Wise

Although many states are loosening antitrust provisions to encourage the formation of integrated health networks, networks dominated by powerful HMOs could engage in monopolistic practices, warranting state public-utility utility type regulation, warns Thomas Weil, of Bedford Health Associates, an Asheville, N.C., health services consultant who advises hospitals and provider groups.

He cites a Wisconsin federal jury's recent decision to award $48 million in damages to Blue Cross Blue Shield United of Wisconsin in Milwaukee. The defendant, the Marshfield Clinic, of Marshfield, Wis., is a large physician-owned multispecialty clinic with 23 satellite facilities that represents about 80 percent of the physicians in central Wisconsin. The jury agreed with Blue Cross's contention that the Marshfield Clinic engaged in monopolistic behavior, such as price-fixing and agreeing not to compete with other affiliated clinics. The jury awarded damages to Blue Cross for overcharges on fees that it paid to the clinic due to the clinic refusal to accept a capitated payment contract with Blue Cross. Weil says the jury's verdict underscores the public's uneasiness over the rapid consolidation of medical care delivery by provider groups across the nation.

A related concern in the states is the continued provider-driven support for any-willing-provider (AWP) laws, says Brice Oakley, director of state services of the Blue Cross Blue Shield Association, in Chicago. He says AWP proposals will continue to be a major agenda item in the state legislatures. (See "The Battle Over Any-Willing-Provider Laws," page 28.)

Another emerging issue in state regulation of health care delivery will be the evolution of the role of self-insured companies in those markets, maintains Mary Jo O'Brien, who stepped down in February as Minnesota's health commissioner, and is now serving as a consultant and speaker on state health issues. She says the debate will extend beyond the battle over amending the Employee Retirement income Security Act (ERISA), the federal law that exempts self-insured health plan benefits from state regulation and from tax levies.

O'Brien says the trend toward the use of capitated plans by employers calls into question their claim to self-insured status. As employers continue to shift risk to providers, their self-insured plans come closer to resembling insured plans, which would fall under state regulation. O'Brien says that whether or not ERISA is amended, the states will not let up on their pressure to involve major employers in dealing with the problems of health care. "There is going to have to be a discussion of not only the partnership between the federal government and the states but between the employers and the states," says O'Brien.

As an example of how the purchasers and the state can work together, O'Brien cites the example of the Business Health Care Action Group, a purchasing alliance of Twin Cities employers. Last year, the group agreed to participate in Minnesota data initiatives an pay a 2 percent tax on health services while the state agreed to allow the group to maintain its self-insured status even though it was shifting the health care risk to providers.