In our last article, we discussed the fact that managed care is not, in itself, health insurance. Instead, it is a delivery and payment system for health care services. One of the main purposes of it is to control health care costs.
There are many models of managed care, including some designed specifically for Seniors who are on Medicare. This article will discuss a bit of the inside scoop on managed care. It will be helpful to know this when you are on your own buying health insurance before you enroll in Medicare. That’s because the trend is and has been towards managed care. Like it or not, it is hard to avoid.
Another article will discuss how the various models work, including ones designed specifically for Seniors on Medicare.
Financing the Care
Regardless of the managed care model, there is an element of “risk-bearing” in each. That refers to the fact that you, as the member of the managed care entity pre-pay for the healthcare services and the managed care entity holds the money. More importantly, it means that the entity is financially responsible for performance under the managed care contract. Therefore, you are entrusting money to the managed care entity in return for its promise of future delivery of health care services.
This is much like the premium paid to an insurance company for other kinds of insurance. There, the insurance company collects a premium in advance and promises to bear the risk of a covered loss occurring while the policy is in force. For those of you old enough to remember (like me), all of this is not like Wimpy on Popeye the Sailor Man, who said: “I’ll gladly pay you Tuesday for a hamburger today.” Members of a managed care entity pay in advance for the promise of care and expect it to be furnished for as long as they continue to pay (and the company does business in the area).
In some cases, the managed care entity is itself risk-bearing. That means that it is financially responsible for providing the care. In other cases, a health insurance company has, as part of its business, created a managed care operation or offers health insurance products that are delivered in a managed care way. In that case, the insurance company (or a subsidiary) is the risk-bearing entity. You may have heard advertisements for managed care arrangements “brought to you by XXX Health Care.”
Protect Yourself by Confirming Before Enrolling
Insurance companies and managed care organizations that are risk-bearing are regulated by the state(s) in which they do business. The “license” that they get is often called a certificate of authority.
The regulation covers many aspects of operation, but a main concern of state insurance regulators is finances (sometimes called “solvency”). That means that the entity has enough money and that the money is handled correctly, to provide the services promised. There are complicated formulas and many laws with which a managed care entity or the insurance company behind it must comply. The regulator also must approve the forms (contracts) that the managed care organization issues to make sure that they comply with state law.
The point is, you should always confirm with your state insurance regulator that the managed care entity is authorized to do business in your state. Understand, though, that not all managed care entities do business in all states, and some don’t even choose to do business in all parts of a state. Therefore, you may not be able to deal with a certain managed care organization depending on where you live. Visit the National Association of Insurance Commissioners website so you can call to confirm licensure in each state. Generally, managed care organizations will be regulated by the “life and health” section of the insurance departments.