News in brief - Oct. 23/30, 2000

Minn. AG sues Blues - New York insurers merge - HMO enrollment drops - Study refutes direct-access worries - Mass. HMOs start ad blitz - N.Y. hears flood of HMO complaints - Texas forces rate hike - Defined contribution plans launched

Minn. AG sues Blues

Minnesota Attorney General Mike Hatch filed a lawsuit Oct. 3 against Blue Cross Blue Shield of Minnesota, alleging that the insurer is denying coverage of medical treatment for children and teenagers with mental illness, eating disorders and substance abuse.

The lawsuit contends that the Minnesota Blues refused to pay for court-ordered treatment or claimed that care had to be provided through the juvenile justice system. A Minnesota Blues spokesman refuted the charges, stating that the company pays for 94% of coverage requests for mental illness, eating disorders and substance abuse treatments.

New York insurers merge

Excellus Inc., a Rochester, N.Y.-based Blue Cross Blue Shield company, and Univera Health, based in Buffalo, N.Y., have announced plans to merge in an effort to become more competitive with New York's largest insurer, Empire Blue Cross Blue Shield.

If the deal is approved by state regulators, the new company, which will operate under the name Excellus, will have more than 2 million members and revenue of $3.6 billion.

HMO enrollment drops

Total enrollment in HMOs dropped last year, ending a 27-year streak of annual increases, according to InterStudy, a St. Paul, Minn.-based managed care research firm.

Total HMO enrollment fell to 80.9 million on Jan. 1, from 81.3 million on Jan. 1, 1999, or a drop of 0.5%. HIAA said fewer people are enrolling in HMOs because consumers are demanding plans that offer an option of seeing a physician outside the network, a flexibility offered by PPO and point-of-service plans but not by many HMOs.

Study refutes direct-access worries

A study by the U.S. Agency for Healthcare Research and Quality suggests that providing direct access to specialists does not significantly increase HMOs' physician costs.

The federal study also found that the overall cost of physician services was 4% higher in gatekeeper HMO plans with no co-payment for primary care or specialty services. When there was a $10 co-payment, expenditures ranged from equal to 7% higher than in the gatekeeper HMOs.

Mass. HMOs start ad blitz

About 40% of Massachusetts HMO members are up for grabs this fall, and all the managed care insurers want them, causing the state's big HMOs to advertise aggressively for new members.

This enrollment period is particularly important to Harvard Pilgrim, still in the midst of a turnaround plan after a state takeover that lasted five months. The HMO is down to 950,000 members from 1.3 million at the beginning of the year.

N.Y. hears flood of HMO complaints

New York's external appeals law, which allows patients to seek another opinion on an HMO's decision not to cover treatment, prompted 1,400 appeals in its first year of operation, shocking state officials, who had expected only 200. That number was higher than in any other state with a similar law.

Officials speculate that outreach programs and low barriers to filing in New York accounted for the flood of entries.

Texas forces rate hike

Texas managed care companies have been forced to raise rates because of a 1998 rule from the Texas Dept. of Insurance, which said HMOs had to charge rates that would keep them financially sound.

"In the past, [HMOs] had filed rates that were below their cost," said Leah Rummel, executive director of the Texas Assn. of Health Plans, an HMO industry trade group. The drive for larger enrollments led to astronomical losses for HMOs in the past few years in Texas.

Defined contribution plans launched

Aon Corp. and Ridgeview Medical Center, an acute-care hospital and clinic system in Minnesota, this fall will become the first employers in the state to offer Definity Health Corp.'s new defined contribution health plan to their employees.

Under the Definity Health plan, employees pay for routine health care services of their choice out of personal care accounts, which employers fund at a set amount each year using pretax dollars. Any funds left in the account at year end roll over and may be used by the employee for future medical expenses. If employees encounter more serious medical needs, health insurance coverage that complements the personal care account covers those expenses.