Health
MaintenanceOrganizations Federal
Requirements
Although the emphasis on prevention and containing costs was a major
factor
in the development of HMOs, federal HMO laws further encouraged
development by two primary means:
- Providing for government grants
- Requiring certain
employers who provide health benefits to employees
to offer enrollment in an HMO as an option
In order to receive government grants, HMOs must
- Maintain
certain minimum financial requirements in terms of the net
worth of the HMO and/or reserves to pay health claims.
- Provide
a defined package of health services that includes routine
preventive care.
- Require no more than nominal “use charges” or
copayments (in addition
to the prepaid amounts) for services actually rendered to individuals.
- Establish premiums on a community rating basis without considering
actual usage of services by individuals.
When an HMO has met the minimum standards as well as
other federal and
state requirements, it is allowed to operate in a designated service
area—often
within a certain county or a specified distance surrounding the HMO
facilities.
Then, the federal law regarding employers comes into play.
The HMO Act of 1973 required employers with certain characteristics
to
offer HMO coverage by a federally qualified HMO as an alternative
to an
indemnity plan. Under this law, if the HMO operates in the service
area of
an employer that has 25 or more employees and that employer provides
health care benefits, enrollment in the HMO must be offered as an
alternative
to traditional health insurance plans. This is often referred to
as the dual
choice option or dual choice law.
This requirement was repealed at the federal level in 1995, although
some
states still impose dual choice requirements. Federal law now simply
requires
that employers “not financially discriminate” in the
amounts of employee
contribution made toward HMO and indemnity plans. Employers are
required to contribute equally to either type of health coverage
for employees.
However, the employer is never required to pay more for the HMO than
it pays for any existing insurance plan already in place.
