Direct contracts, data sharing and employee risk selection: New stakes for patient privacy in tomorrow's health insurance markets

American Journal of Law and Medicine

Volumn 25, Issue 2-3, 1999, Pages 233-265

  Studdert, David M ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

AUTOMATION; CONTRACT; COST CONTROL; EMPLOYEE; EMPLOYMENT; HEALTH CARE QUALITY; HEALTH CARE SYSTEM; HEALTH INSURANCE; HEALTH STATUS; MEDICAL RECORD; MEDICARE; PATIENT INFORMATION; PRIVACY; REIMBURSEMENT; REVIEW;

AMERICANS WITH DISABILITIES ACT 1990; COMPENSATION; CONTRACTS; FEDERAL GOVERNMENT; GOVERNMENT REGULATION; HEALTH CARE AND PUBLIC HEALTH; INCENTIVES; LEGAL APPROACH; PROFESSIONAL PATIENT RELATIONSHIP; SOCIAL DISCRIMINATION; UNITED STATES;

COMPENSATION AND REDRESS; COMPUTER SECURITY; CONFIDENTIALITY; CONTRACT SERVICES; CONTRACTS; DISCLOSURE; FEDERAL GOVERNMENT; FORECASTING; GOVERNMENT REGULATION; HEALTH BENEFIT PLANS, EMPLOYEE; HEALTH CARE SECTOR; HUMANS; INFORMATION SERVICES; INSURANCE SELECTION BIAS; MOTIVATION; PROVIDER-SPONSORED ORGANIZATIONS; RISK SHARING, FINANCIAL; UNITED STATES;

EID: 0032803967     PISSN: 00988588     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (128)

1. See Whalen v. Roe, 429 U.S. 589, 607 (1977) (holding that a New York statute requiring the state to obtain and record in a centralized computer system the name, address, and age of persons who obtain prescriptions for certain dangerous does not invade privacy rights under the 14th Amendment).
2. See COMMITTEE ON IMPROVING THE PATIENT RECORD, INSTITUTE OF MEDICINE, THE COMPUTER-BASED PATIENT RECORD: AN ESSENTIAL TECHNOLOGY FOR HEALTH CARE 4, 136 (Richard S. Dick & Elaine B. Steen eds., 1991) [hereinafter IOM I] (recommending that the computer-based patient record be adopted as the standard for medical and all other records related to patient care); COMMITTEE ON MAINTAINING PRIVACY & SECURITY IN HEALTH CARE APPLICATIONS OF THE NATIONAL INFORMATION INFRASTRUCTURE, NATIONAL RESEARCH COUNCIL, FOR THE RECORD: PROTECTING ELECTRONIC HEALTH INFORMATION 25 (1997) [hereinafter NATIONAL RESEARCHED COUNCIL] (reporting that 56% of hospitals were investing in electronic medical records in 1995 and that the market is projected to grow into a $1.5 billion industry by 2000); Lawrence O. Gostin, Health Information Privacy, 80 CORNELL L. REV. 451, 456-70 (1995) (summarizing advances leading to the proliferation of electronic medical record systems) [hereinafter Gostin I].
3. See COMMITTEE ON IMPROVING THE PATIENT RECORD, INSTITUTE OF MEDICINE, THE COMPUTER-BASED PATIENT RECORD: AN ESSENTIAL TECHNOLOGY FOR HEALTH CARE 4, 136 (Richard S. Dick & Elaine B. Steen eds., 1991) [hereinafter IOM I] (recommending that the computer-based patient record be adopted as the standard for medical and all other records related to patient care); COMMITTEE ON MAINTAINING PRIVACY & SECURITY IN HEALTH CARE APPLICATIONS OF THE NATIONAL INFORMATION INFRASTRUCTURE, NATIONAL RESEARCH COUNCIL, FOR THE RECORD: PROTECTING ELECTRONIC HEALTH INFORMATION 25 (1997) [hereinafter NATIONAL RESEARCHED COUNCIL] (reporting that 56% of hospitals were investing in electronic medical records in 1995 and that the market is projected to grow into a $1.5 billion industry by 2000); Lawrence O. Gostin, Health Information Privacy, 80 CORNELL L. REV. 451, 456-70 (1995) (summarizing advances leading to the proliferation of electronic medical record systems) [hereinafter Gostin I].
4. See COMMITTEE ON IMPROVING THE PATIENT RECORD, INSTITUTE OF MEDICINE, THE COMPUTER-BASED PATIENT RECORD: AN ESSENTIAL TECHNOLOGY FOR HEALTH CARE 4, 136 (Richard S. Dick & Elaine B. Steen eds., 1991) [hereinafter IOM I] (recommending that the computer-based patient record be adopted as the standard for medical and all other records related to patient care); COMMITTEE ON MAINTAINING PRIVACY & SECURITY IN HEALTH CARE APPLICATIONS OF THE NATIONAL INFORMATION INFRASTRUCTURE, NATIONAL RESEARCH COUNCIL, FOR THE RECORD: PROTECTING ELECTRONIC HEALTH INFORMATION 25 (1997) [hereinafter NATIONAL RESEARCHED COUNCIL] (reporting that 56% of hospitals were investing in electronic medical records in 1995 and that the market is projected to grow into a $1.5 billion industry by 2000); Lawrence O. Gostin, Health Information Privacy, 80 CORNELL L. REV. 451, 456-70 (1995) (summarizing advances leading to the proliferation of electronic medical record systems) [hereinafter Gostin I].
5. See Whalen, 429 U.S. at 605, 607.
6. Id. at 593.
7. See 1998 N.Y. Laws 537. See also New York State Department of Health, Bureau of Controlled Substances, New York State's New Controlled Substance Law (visited Apr. 26, 1999) 〈http://www.health.state.ny.us/nysdoh/newlaw.htm〉.
8. See 1998 N.Y. Laws 537. See also New York State Department of Health, Bureau of Controlled Substances, New York State's New Controlled Substance Law (visited Apr. 26, 1999) 〈http://www.health.state.ny.us/nysdoh/newlaw.htm〉.
9. See New York State Department, supra note 5.
10. See Jon Gabel et al., Employer-Sponsored Health Insurance in America, HEALTH AFF., Summer 1989, at 116, 117, 126-27 (noting premium increases of 12% between 1987 and 1988, nearly double the rate of increase from the previous year); Cynthia B. Sullivan & Thomas Rice, The Health Insurance Picture in 1990, HEALTH AFF., Summer 1991, at 104, 114 (finding that 75% of employers are satisfied with their health plans, while only 57% are satisfied with the cost of the health plans).
11. See Jon Gabel et al., Employer-Sponsored Health Insurance in America, HEALTH AFF., Summer 1989, at 116, 117, 126-27 (noting premium increases of 12% between 1987 and 1988, nearly double the rate of increase from the previous year); Cynthia B. Sullivan & Thomas Rice, The Health Insurance Picture in 1990, HEALTH AFF., Summer 1991, at 104, 114 (finding that 75% of employers are satisfied with their health plans, while only 57% are satisfied with the cost of the health plans).
12. See TROYEN A. BRENNAN & DONALD M. BERWICK, NEW RULES: REGULATION, MARKETS, AND THE QUALITY OF AMERICAN HEALTH CARE 150-65 (1995) (summarizing the growth of health maintenance organizations and federal and state legislation).
13. See generally James C. Robinson, Health Care Purchasing and Market Changes in California, HEALTH AFF., Winter 1995, at 117;. James C. Robinson & Lawrence P. Casalino, Vertical Integration and Organizational Networks in Health Care, HEALTH AFF., Spring 1996, at 7 (evaluating two forms of organization: virtual integration and vertical integration).
14. See generally James C. Robinson, Health Care Purchasing and Market Changes in California, HEALTH AFF., Winter 1995, at 117;. James C. Robinson & Lawrence P. Casalino, Vertical Integration and Organizational Networks in Health Care, HEALTH AFF., Spring 1996, at 7 (evaluating two forms of organization: virtual integration and vertical integration).
15. See James C. Robinson, The Future of Managed Care, HEALTH AFF., Mar.-Apr. 1999, at 231; Robinson & Casalino, supra note 9, at 7. See generally STEPHEN M. SHORTELL ET AL., REMAKING HEALTH CARE IN AMERICA: BUILDING ORGANIZED DELIVERY SYSTEMS (1996) (discussing the movement toward functional, physician, and clinical integration of managed care organizations).
16. See James C. Robinson, The Future of Managed Care, HEALTH AFF., Mar.-Apr. 1999, at 231; Robinson & Casalino, supra note 9, at 7. See generally STEPHEN M. SHORTELL ET AL., REMAKING HEALTH CARE IN AMERICA: BUILDING ORGANIZED DELIVERY SYSTEMS (1996) (discussing the movement toward functional, physician, and clinical integration of managed care organizations).
17. See James C. Robinson, The Future of Managed Care, HEALTH AFF., Mar.-Apr. 1999, at 231; Robinson & Casalino, supra note 9, at 7. See generally STEPHEN M. SHORTELL ET AL., REMAKING HEALTH CARE IN AMERICA: BUILDING ORGANIZED DELIVERY SYSTEMS (1996) (discussing the movement toward functional, physician, and clinical integration of managed care organizations).
18. See Gail A. Jensen et al., The New Dominance of Managed Care: Insurance Trends in the 1990s, HEALTH AFF., Jan.-Feb. 1997, at 125, 126; Katharine R. Levit et al., National Health Spending Trends In 1996, HEALTH AFF., Jan.-Feb. 1998, at 43 & n.20; Tudor et al., Satisfaction With Care: Do Medicare HMOs Make a Difference?, HEALTH AFF., Mar.-Apr. 1998, at 165, 166.
19. See Gail A. Jensen et al., The New Dominance of Managed Care: Insurance Trends in the 1990s, HEALTH AFF., Jan.-Feb. 1997, at 125, 126; Katharine R. Levit et al., National Health Spending Trends In 1996, HEALTH AFF., Jan.-Feb. 1998, at 43 & n.20; Tudor et al., Satisfaction With Care: Do Medicare HMOs Make a Difference?, HEALTH AFF., Mar.-Apr. 1998, at 165, 166.
20. See Gail A. Jensen et al., The New Dominance of Managed Care: Insurance Trends in the 1990s, HEALTH AFF., Jan.-Feb. 1997, at 125, 126; Katharine R. Levit et al., National Health Spending Trends In 1996, HEALTH AFF., Jan.-Feb. 1998, at 43 & n.20; Tudor et al., Satisfaction With Care: Do Medicare HMOs Make a Difference?, HEALTH AFF., Mar.-Apr. 1998, at 165, 166.
21. See NATIONAL RESEARCH COUNCIL, supra note 2, at 21-24.
22. See COMMITTEE ON REGIONAL HEALTH DATA NETWORKS, INSTITUTE OF MEDICINE, HEALTH DATA IN THE INFORMATION AGE: USE, DISCLOSURE, AND PRIVACY 140-41 (Molla S. Donaldson & Kathleen N. Lohr. eds., 1994); NATIONAL COMMITTEE ON VITAL & HEALTH STATISTICS, DEPARTMENT OF HEALTH AND HUMAN SERVICES, HEALTH PRIVACY AND CONFIDENTIALITY RECOMMENDATIONS (visited May 19, 1999) 〈http://aspe.os.dhhs.gov/ncvhs/privrecs.htm〉 (see Part B entitled "Technology and Identifiable Information"). I use the term privacy in this discussion to refer generally to the notion of nondisclosure of personal information. See COMMITTEE ON REGIONAL HEALTH DATA NETWORKS, supra, at 15. Confidentiality refers to nondisclosure of personal information generated in the context of a fiduciary relationship, such as the health care professional-patient relationship. See id. at 16.
23. See COMMITTEE ON REGIONAL HEALTH DATA NETWORKS, INSTITUTE OF MEDICINE, HEALTH DATA IN THE INFORMATION AGE: USE, DISCLOSURE, AND PRIVACY 140-41 (Molla S. Donaldson & Kathleen N. Lohr. eds., 1994); NATIONAL COMMITTEE ON VITAL & HEALTH STATISTICS, DEPARTMENT OF HEALTH AND HUMAN SERVICES, HEALTH PRIVACY AND CONFIDENTIALITY RECOMMENDATIONS (visited May 19, 1999) 〈http://aspe.os.dhhs.gov/ncvhs/privrecs.htm〉 (see Part B entitled "Technology and Identifiable Information"). I use the term privacy in this discussion to refer generally to the notion of nondisclosure of personal information. See COMMITTEE ON REGIONAL HEALTH DATA NETWORKS, supra, at 15. Confidentiality refers to nondisclosure of personal information generated in the context of a fiduciary relationship, such as the health care professional-patient relationship. See id. at 16.
24. NATIONAL COMMITTEE ON VITAL & HEALTH STATISTICS, DEPARTMENT OF HEALTH AND HUMAN SERVICES, HEALTH PRIVACY AND CONFIDENTIALITY RECOMMENDATIONS (visited May 19, 1999) 〈http://aspe.os.dhhs.gov/ncvhs/privrecs.htm〉 (see Part B entitled "Technology and Identifiable Information"). I use the term privacy in this discussion to refer generally to the notion of nondisclosure of personal information. See COMMITTEE ON REGIONAL HEALTH DATA NETWORKS, supra, at 15. Confidentiality refers to nondisclosure of personal information generated in the context of a fiduciary relationship, such as the health care professional-patient relationship. See id. at 16.
25. The Balanced Budget Act of 1997 defines provider-sponsored organization (PSO) as: (1) [A] public or private entity (A) that is established or organized, and operated by a health care provider or group of affiliated health care providers, (B) that provides a substantial proportion . . . of the health care items and services directly through the providers or affiliated group of providers, and (C) with respect to which the affiliated providers share, directly or indirectly, substantial financial risk with respect to the provision of such items and services and have at least a majority financial interest in the entity. The Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4001, 111 Stat. 251, 316. With the exception of "substantial financial risk" as a defining feature (a provider-sponsored entity need not necessarily assume such risk to qualify as a PSO), this definition is sufficiently broad to serve as a useful reference.
26. See NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, THE REGULATION OF RISK-BEARING ENTITIES I-17 (1997) [hereinafter NAIC].
27. The term health plan or plan in this discussion refers to the discrete corporate entity in health insurance markets that contracts both with individual/group purchasers and providers for the delivery of care and issues insurance policies to enrollees or subscribers. The prototypical health plan is the HMO.
28. See Alan Hillman et al., Contractual Arrangements Between HMOs and Primary Care Physicians: Three Tiered HMOs and Risk Pools, 30 MED. CARE 136, 137 (1992).
29. See Douglass J. Seaver & Stephen H. Kramer, Direct Contracting: The Future of Managed Care, HEALTHCARE FIN. MGMT., Aug. 1994, at 20, 21.
30. This division reduces transfer costs and redundant systems costs. See id.
31. See id. at 22-26. See generally James J. Unland, The Emergence of Providers as Health Insurers, J. HEALTH CARE FIN., Fall 1996, at 58 (discussing why providers have begun to assume risk); James J. Unland, The Range of Provider/Insurer Configurations, J. HEALTH CARE FIN., Winter 1998, at 12 (discussing the limitations of the traditional physician-hospital organization (PHO) model).
32. See id. at 22-26. See generally James J. Unland, The Emergence of Providers as Health Insurers, J. HEALTH CARE FIN., Fall 1996, at 58 (discussing why providers have begun to assume risk); James J. Unland, The Range of Provider/Insurer Configurations, J. HEALTH CARE FIN., Winter 1998, at 12 (discussing the limitations of the traditional physician-hospital organization (PHO) model).
33. See id. at 22-26. See generally James J. Unland, The Emergence of Providers as Health Insurers, J. HEALTH CARE FIN., Fall 1996, at 58 (discussing why providers have begun to assume risk); James J. Unland, The Range of Provider/Insurer Configurations, J. HEALTH CARE FIN., Winter 1998, at 12 (discussing the limitations of the traditional physician-hospital organization (PHO) model).
34. See Seaver & Kramer, supra note 18, at 23-24.
35. See id. at 24.
36. See id.
37. See EASTERN HEALTH CARE CONSORTIUM, DIRECT CONTRACTING ISSUES AND OPPORTUNITIES 15 (Sept. 1991) (discussing a survey of medium and large hospitals and hospital networks and systems regarding various aspects of direct contracting, including sales, budget payment arrangement and revenues).
38. See id. at 24.
39. See id.
40. See id. at 22-26.
41. See Dan Wise, Private Matters, BUS. & HEALTH, Feb. 1995, at 22, available in Westlaw, BUSHLTH database (discussing privacy issues surrounding employers' adoption of wellness and employee assistance programs (EAPs)). For analysis of a decline in employers' use of EAPs for mental health and substance abuse in the 1990s, see generally Jeffrey A. Buck & Beth Umland, Covering Mental Health And Substance Abuse Services, HEALTH AFF., July-Aug. 1997, at 120.
42. See Dan Wise, Private Matters, BUS. & HEALTH, Feb. 1995, at 22, available in Westlaw, BUSHLTH database (discussing privacy issues surrounding employers' adoption of wellness and employee assistance programs (EAPs)). For analysis of a decline in employers' use of EAPs for mental health and substance abuse in the 1990s, see generally Jeffrey A. Buck & Beth Umland, Covering Mental Health And Substance Abuse Services, HEALTH AFF., July-Aug. 1997, at 120.
43. See generally Donna Diblase, Direct Ties with Providers Can Cut Health Care Costs, BUS. INS., June 26, 1989, at 121 (stating that direct contracting provides significant benefits to both parties including control of health care costs); Julie Johnsson, Direct Contracting: Employers Look to Hospital-Physician Partnerships to Control Costs, HOSPITALS, Feb. 20, 1992, at 56 (concluding that "the best way to create long-term benefits savings is by eliminating third parties like HMOs and [preferred provider organizations] . . . ."); Julie Johnsson, Direct Contracting: Hospitals Discover its Risks and Rewards, HOSPITALS, May 20, 1990, at 40 (stating that employers are frustrated by the inability of intermediaries to control health care costs); Paul J. Kenkel, Direct Contracting: A Recipe for Savings, MODERN HEALTHCARE, Oct. 15, 1990, at 24 (same); Nellie O'Gara, Hospitals Should Pursue Employer Contracts, HOSPITALS, Dec. 5, 1990, at 64 (providing suggestions for an efficient direct contracting approach); Alden Solovy, Cutting out the Middlemen, HOSPITALS, Nov. 20, 1988, at 52, 52 ("Imagine them gone . . . [n]o one between the hospital and the purchaser.").
44. See generally Donna Diblase, Direct Ties with Providers Can Cut Health Care Costs, BUS. INS., June 26, 1989, at 121 (stating that direct contracting provides significant benefits to both parties including control of health care costs); Julie Johnsson, Direct Contracting: Employers Look to Hospital-Physician Partnerships to Control Costs, HOSPITALS, Feb. 20, 1992, at 56 (concluding that "the best way to create long-term benefits savings is by eliminating third parties like HMOs and [preferred provider organizations] . . . ."); Julie Johnsson, Direct Contracting: Hospitals Discover its Risks and Rewards, HOSPITALS, May 20, 1990, at 40 (stating that employers are frustrated by the inability of intermediaries to control health care costs); Paul J. Kenkel, Direct Contracting: A Recipe for Savings, MODERN HEALTHCARE, Oct. 15, 1990, at 24 (same); Nellie O'Gara, Hospitals Should Pursue Employer Contracts, HOSPITALS, Dec. 5, 1990, at 64 (providing suggestions for an efficient direct contracting approach); Alden Solovy, Cutting out the Middlemen, HOSPITALS, Nov. 20, 1988, at 52, 52 ("Imagine them gone . . . [n]o one between the hospital and the purchaser.").
45. See generally Donna Diblase, Direct Ties with Providers Can Cut Health Care Costs, BUS. INS., June 26, 1989, at 121 (stating that direct contracting provides significant benefits to both parties including control of health care costs); Julie Johnsson, Direct Contracting: Employers Look to Hospital-Physician Partnerships to Control Costs, HOSPITALS, Feb. 20, 1992, at 56 (concluding that "the best way to create long-term benefits savings is by eliminating third parties like HMOs and [preferred provider organizations] . . . ."); Julie Johnsson, Direct Contracting: Hospitals Discover its Risks and Rewards, HOSPITALS, May 20, 1990, at 40 (stating that employers are frustrated by the inability of intermediaries to control health care costs); Paul J. Kenkel, Direct Contracting: A Recipe for Savings, MODERN HEALTHCARE, Oct. 15, 1990, at 24 (same); Nellie O'Gara, Hospitals Should Pursue Employer Contracts, HOSPITALS, Dec. 5, 1990, at 64 (providing suggestions for an efficient direct contracting approach); Alden Solovy, Cutting out the Middlemen, HOSPITALS, Nov. 20, 1988, at 52, 52 ("Imagine them gone . . . [n]o one between the hospital and the purchaser.").
46. See generally Donna Diblase, Direct Ties with Providers Can Cut Health Care Costs, BUS. INS., June 26, 1989, at 121 (stating that direct contracting provides significant benefits to both parties including control of health care costs); Julie Johnsson, Direct Contracting: Employers Look to Hospital-Physician Partnerships to Control Costs, HOSPITALS, Feb. 20, 1992, at 56 (concluding that "the best way to create long-term benefits savings is by eliminating third parties like HMOs and [preferred provider organizations] . . . ."); Julie Johnsson, Direct Contracting: Hospitals Discover its Risks and Rewards, HOSPITALS, May 20, 1990, at 40 (stating that employers are frustrated by the inability of intermediaries to control health care costs); Paul J. Kenkel, Direct Contracting: A Recipe for Savings, MODERN HEALTHCARE, Oct. 15, 1990, at 24 (same); Nellie O'Gara, Hospitals Should Pursue Employer Contracts, HOSPITALS, Dec. 5, 1990, at 64 (providing suggestions for an efficient direct contracting approach); Alden Solovy, Cutting out the Middlemen, HOSPITALS, Nov. 20, 1988, at 52, 52 ("Imagine them gone . . . [n]o one between the hospital and the purchaser.").
47. See generally Donna Diblase, Direct Ties with Providers Can Cut Health Care Costs, BUS. INS., June 26, 1989, at 121 (stating that direct contracting provides significant benefits to both parties including control of health care costs); Julie Johnsson, Direct Contracting: Employers Look to Hospital-Physician Partnerships to Control Costs, HOSPITALS, Feb. 20, 1992, at 56 (concluding that "the best way to create long-term benefits savings is by eliminating third parties like HMOs and [preferred provider organizations] . . . ."); Julie Johnsson, Direct Contracting: Hospitals Discover its Risks and Rewards, HOSPITALS, May 20, 1990, at 40 (stating that employers are frustrated by the inability of intermediaries to control health care costs); Paul J. Kenkel, Direct Contracting: A Recipe for Savings, MODERN HEALTHCARE, Oct. 15, 1990, at 24 (same); Nellie O'Gara, Hospitals Should Pursue Employer Contracts, HOSPITALS, Dec. 5, 1990, at 64 (providing suggestions for an efficient direct contracting approach); Alden Solovy, Cutting out the Middlemen, HOSPITALS, Nov. 20, 1988, at 52, 52 ("Imagine them gone . . . [n]o one between the hospital and the purchaser.").
48. See generally Donna Diblase, Direct Ties with Providers Can Cut Health Care Costs, BUS. INS., June 26, 1989, at 121 (stating that direct contracting provides significant benefits to both parties including control of health care costs); Julie Johnsson, Direct Contracting: Employers Look to Hospital-Physician Partnerships to Control Costs, HOSPITALS, Feb. 20, 1992, at 56 (concluding that "the best way to create long-term benefits savings is by eliminating third parties like HMOs and [preferred provider organizations] . . . ."); Julie Johnsson, Direct Contracting: Hospitals Discover its Risks and Rewards, HOSPITALS, May 20, 1990, at 40 (stating that employers are frustrated by the inability of intermediaries to control health care costs); Paul J. Kenkel, Direct Contracting: A Recipe for Savings, MODERN HEALTHCARE, Oct. 15, 1990, at 24 (same); Nellie O'Gara, Hospitals Should Pursue Employer Contracts, HOSPITALS, Dec. 5, 1990, at 64 (providing suggestions for an efficient direct contracting approach); Alden Solovy, Cutting out the Middlemen, HOSPITALS, Nov. 20, 1988, at 52, 52 ("Imagine them gone . . . [n]o one between the hospital and the purchaser.").
49. See Alden Solovy & Reid Sunseri, Leading the Way, HOSP. & HEALTH NETWORKS, Aug. 1998, at 30, 30.
50. See id. A 1998 survey of 700 health care executives conducted by the 1998 Hospitals & Health Networks Leadership Survey group asked respondents to rate the importance of 30 issues on a five-point scale as well as the respondents' preparedness to deal with the issues. See id. Direct contracting received a moderate score for importance (3.02), on a 1-to-5 scale (ranging from extremely unimportant to extremely important) and a lower score (2.56) for preparedness to deal with this issue. See id. Investigators concluded that this was an area where a "strategic gap" existed (i.e. the gap between an issue's importance and the organization's ability to handle the issue. See id.
51. See id. A 1998 survey of 700 health care executives conducted by the 1998 Hospitals & Health Networks Leadership Survey group asked respondents to rate the importance of 30 issues on a five-point scale as well as the respondents' preparedness to deal with the issues. See id. Direct contracting received a moderate score for importance (3.02), on a 1-to-5 scale (ranging from extremely unimportant to extremely important) and a lower score (2.56) for preparedness to deal with this issue. See id. Investigators concluded that this was an area where a "strategic gap" existed (i.e. the gap between an issue's importance and the organization's ability to handle the issue. See id.
52. See id. A 1998 survey of 700 health care executives conducted by the 1998 Hospitals & Health Networks Leadership Survey group asked respondents to rate the importance of 30 issues on a five-point scale as well as the respondents' preparedness to deal with the issues. See id. Direct contracting received a moderate score for importance (3.02), on a 1-to-5 scale (ranging from extremely unimportant to extremely important) and a lower score (2.56) for preparedness to deal with this issue. See id. Investigators concluded that this was an area where a "strategic gap" existed (i.e. the gap between an issue's importance and the organization's ability to handle the issue. See id.
53. See id. A 1998 survey of 700 health care executives conducted by the 1998 Hospitals & Health Networks Leadership Survey group asked respondents to rate the importance of 30 issues on a five-point scale as well as the respondents' preparedness to deal with the issues. See id. Direct contracting received a moderate score for importance (3.02), on a 1-to-5 scale (ranging from extremely unimportant to extremely important) and a lower score (2.56) for preparedness to deal with this issue. See id. Investigators concluded that this was an area where a "strategic gap" existed (i.e. the gap between an issue's importance and the organization's ability to handle the issue. See id.
54. See id.
55. Jon B. Christianson, The Role of Employers in Community Health Care Systems, HEALTH AFF., Jul.-Aug. 1998, at 158, 162.
56. Uncertainty and debate persist about the relationship between state insurance regulation and risk-bearing PSOs. See Allison Overbay & Mark Hall, Insurance Regulation of Providers that Bear Risk, 22 AM. J.L. & MED. 361, 361 (1996). One issue in the debate has been whether conventional HMO-style insurance regulation of risk-bearing PSOs is warranted in instances where they merely assume downstream risk. See id. at 372. The National Association of Insurance Commissioners (NAIC) has recommended against insurance regulation in such circumstances, preferring instead to regard downstream risk assumption as merely a form of service subcontract. See id. In addition, NAIC notes that "[b]oth the provider community and traditional players in the managed care market seem to agree that PSOs which contract with licensed insurers to provider services on a risk basis should not be subject to licensure requirements that are as strict as those imposed on HMOs." NAIC, supra note 15, at I-24, I-25. See Douglas J. Witten, Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field, 23 AM. J.L. & MED. 449, 470 (1997) (stating that licensure requirements of PSOs that contract downstream from licensed entities should be less strict than those that contract with upstream entities). A more contentious issue involves whether, and to what extent, PSOs that engage in direct contracts should be subject to the type of insurance regulation imposed on HMOs and other health carriers. See id. at 465-66. Provider representatives and some employers have argued that such an approach is unduly insensitive to organizational differences in the provider model and that such heavy-handed insurance oversight stifles growth in this important area. See id. at 466; NAIC at I-17, I-18. HMOs and other established insurers argue that special treatment of risk-bearing PSOs that enter direct contracts confers unfair market advantages on such entities, and raises solvency and quality of care concerns. See id. There now appears to be reasonably broad agreement that risk-bearing PSOs engaging in direct contracting spread risk in a manner consistent with McCarran-Ferguson criteria defining the "business of insurance," and as such should be subject to state insurance regulation. See Witten, supra, at 459, 468. However, states have adopted different positions on whether the same regulations as are applied to more conventional health insurance carriers are appropriate. See infra note 117.
57. Uncertainty and debate persist about the relationship between state insurance regulation and risk-bearing PSOs. See Allison Overbay & Mark Hall, Insurance Regulation of Providers that Bear Risk, 22 AM. J.L. & MED. 361, 361 (1996). One issue in the debate has been whether conventional HMO-style insurance regulation of risk-bearing PSOs is warranted in instances where they merely assume downstream risk. See id. at 372. The National Association of Insurance Commissioners (NAIC) has recommended against insurance regulation in such circumstances, preferring instead to regard downstream risk assumption as merely a form of service subcontract. See id. In addition, NAIC notes that "[b]oth the provider community and traditional players in the managed care market seem to agree that PSOs which contract with licensed insurers to provider services on a risk basis should not be subject to licensure requirements that are as strict as those imposed on HMOs." NAIC, supra note 15, at I-24, I-25. See Douglas J. Witten, Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field, 23 AM. J.L. & MED. 449, 470 (1997) (stating that licensure requirements of PSOs that contract downstream from licensed entities should be less strict than those that contract with upstream entities). A more contentious issue involves whether, and to what extent, PSOs that engage in direct contracts should be subject to the type of insurance regulation imposed on HMOs and other health carriers. See id. at 465-66. Provider representatives and some employers have argued that such an approach is unduly insensitive to organizational differences in the provider model and that such heavy-handed insurance oversight stifles growth in this important area. See id. at 466; NAIC at I-17, I-18. HMOs and other established insurers argue that special treatment of risk-bearing PSOs that enter direct contracts confers unfair market advantages on such entities, and raises solvency and quality of care concerns. See id. There now appears to be reasonably broad agreement that risk-bearing PSOs engaging in direct contracting spread risk in a manner consistent with McCarran-Ferguson criteria defining the "business of insurance," and as such should be subject to state insurance regulation. See Witten, supra, at 459, 468. However, states have adopted different positions on whether the same regulations as are applied to more conventional health insurance carriers are appropriate. See infra note 117.
58. Uncertainty and debate persist about the relationship between state insurance regulation and risk-bearing PSOs. See Allison Overbay & Mark Hall, Insurance Regulation of Providers that Bear Risk, 22 AM. J.L. & MED. 361, 361 (1996). One issue in the debate has been whether conventional HMO-style insurance regulation of risk-bearing PSOs is warranted in instances where they merely assume downstream risk. See id. at 372. The National Association of Insurance Commissioners (NAIC) has recommended against insurance regulation in such circumstances, preferring instead to regard downstream risk assumption as merely a form of service subcontract. See id. In addition, NAIC notes that "[b]oth the provider community and traditional players in the managed care market seem to agree that PSOs which contract with licensed insurers to provider services on a risk basis should not be subject to licensure requirements that are as strict as those imposed on HMOs." NAIC, supra note 15, at I-24, I-25. See Douglas J. Witten, Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field, 23 AM. J.L. & MED. 449, 470 (1997) (stating that licensure requirements of PSOs that contract downstream from licensed entities should be less strict than those that contract with upstream entities). A more contentious issue involves whether, and to what extent, PSOs that engage in direct contracts should be subject to the type of insurance regulation imposed on HMOs and other health carriers. See id. at 465-66. Provider representatives and some employers have argued that such an approach is unduly insensitive to organizational differences in the provider model and that such heavy-handed insurance oversight stifles growth in this important area. See id. at 466; NAIC at I-17, I-18. HMOs and other established insurers argue that special treatment of risk-bearing PSOs that enter direct contracts confers unfair market advantages on such entities, and raises solvency and quality of care concerns. See id. There now appears to be reasonably broad agreement that risk-bearing PSOs engaging in direct contracting spread risk in a manner consistent with McCarran-Ferguson criteria defining the "business of insurance," and as such should be subject to state insurance regulation. See Witten, supra, at 459, 468. However, states have adopted different positions on whether the same regulations as are applied to more conventional health insurance carriers are appropriate. See infra note 117.
59. Uncertainty and debate persist about the relationship between state insurance regulation and risk-bearing PSOs. See Allison Overbay & Mark Hall, Insurance Regulation of Providers that Bear Risk, 22 AM. J.L. & MED. 361, 361 (1996). One issue in the debate has been whether conventional HMO-style insurance regulation of risk-bearing PSOs is warranted in instances where they merely assume downstream risk. See id. at 372. The National Association of Insurance Commissioners (NAIC) has recommended against insurance regulation in such circumstances, preferring instead to regard downstream risk assumption as merely a form of service subcontract. See id. In addition, NAIC notes that "[b]oth the provider community and traditional players in the managed care market seem to agree that PSOs which contract with licensed insurers to provider services on a risk basis should not be subject to licensure requirements that are as strict as those imposed on HMOs." NAIC, supra note 15, at I-24, I-25. See Douglas J. Witten, Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field, 23 AM. J.L. & MED. 449, 470 (1997) (stating that licensure requirements of PSOs that contract downstream from licensed entities should be less strict than those that contract with upstream entities). A more contentious issue involves whether, and to what extent, PSOs that engage in direct contracts should be subject to the type of insurance regulation imposed on HMOs and other health carriers. See id. at 465-66. Provider representatives and some employers have argued that such an approach is unduly insensitive to organizational differences in the provider model and that such heavy-handed insurance oversight stifles growth in this important area. See id. at 466; NAIC at I-17, I-18. HMOs and other established insurers argue that special treatment of risk-bearing PSOs that enter direct contracts confers unfair market advantages on such entities, and raises solvency and quality of care concerns. See id. There now appears to be reasonably broad agreement that risk-bearing PSOs engaging in direct contracting spread risk in a manner consistent with McCarran-Ferguson criteria defining the "business of insurance," and as such should be subject to state insurance regulation. See Witten, supra, at 459, 468. However, states have adopted different positions on whether the same regulations as are applied to more conventional health insurance carriers are appropriate. See infra note 117.
60. Uncertainty and debate persist about the relationship between state insurance regulation and risk-bearing PSOs. See Allison Overbay & Mark Hall, Insurance Regulation of Providers that Bear Risk, 22 AM. J.L. & MED. 361, 361 (1996). One issue in the debate has been whether conventional HMO-style insurance regulation of risk-bearing PSOs is warranted in instances where they merely assume downstream risk. See id. at 372. The National Association of Insurance Commissioners (NAIC) has recommended against insurance regulation in such circumstances, preferring instead to regard downstream risk assumption as merely a form of service subcontract. See id. In addition, NAIC notes that "[b]oth the provider community and traditional players in the managed care market seem to agree that PSOs which contract with licensed insurers to provider services on a risk basis should not be subject to licensure requirements that are as strict as those imposed on HMOs." NAIC, supra note 15, at I-24, I-25. See Douglas J. Witten, Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field, 23 AM. J.L. & MED. 449, 470 (1997) (stating that licensure requirements of PSOs that contract downstream from licensed entities should be less strict than those that contract with upstream entities). A more contentious issue involves whether, and to what extent, PSOs that engage in direct contracts should be subject to the type of insurance regulation imposed on HMOs and other health carriers. See id. at 465-66. Provider representatives and some employers have argued that such an approach is unduly insensitive to organizational differences in the provider model and that such heavy-handed insurance oversight stifles growth in this important area. See id. at 466; NAIC at I-17, I-18. HMOs and other established insurers argue that special treatment of risk-bearing PSOs that enter direct contracts confers unfair market advantages on such entities, and raises solvency and quality of care concerns. See id. There now appears to be reasonably broad agreement that risk-bearing PSOs engaging in direct contracting spread risk in a manner consistent with McCarran-Ferguson criteria defining the "business of insurance," and as such should be subject to state insurance regulation. See Witten, supra, at 459, 468. However, states have adopted different positions on whether the same regulations as are applied to more conventional health insurance carriers are appropriate. See infra note 117.
61. Uncertainty and debate persist about the relationship between state insurance regulation and risk-bearing PSOs. See Allison Overbay & Mark Hall, Insurance Regulation of Providers that Bear Risk, 22 AM. J.L. & MED. 361, 361 (1996). One issue in the debate has been whether conventional HMO-style insurance regulation of risk-bearing PSOs is warranted in instances where they merely assume downstream risk. See id. at 372. The National Association of Insurance Commissioners (NAIC) has recommended against insurance regulation in such circumstances, preferring instead to regard downstream risk assumption as merely a form of service subcontract. See id. In addition, NAIC notes that "[b]oth the provider community and traditional players in the managed care market seem to agree that PSOs which contract with licensed insurers to provider services on a risk basis should not be subject to licensure requirements that are as strict as those imposed on HMOs." NAIC, supra note 15, at I-24, I-25. See Douglas J. Witten, Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field, 23 AM. J.L. & MED. 449, 470 (1997) (stating that licensure requirements of PSOs that contract downstream from licensed entities should be less strict than those that contract with upstream entities). A more contentious issue involves whether, and to what extent, PSOs that engage in direct contracts should be subject to the type of insurance regulation imposed on HMOs and other health carriers. See id. at 465-66. Provider representatives and some employers have argued that such an approach is unduly insensitive to organizational differences in the provider model and that such heavy-handed insurance oversight stifles growth in this important area. See id. at 466; NAIC at I-17, I-18. HMOs and other established insurers argue that special treatment of risk-bearing PSOs that enter direct contracts confers unfair market advantages on such entities, and raises solvency and quality of care concerns. See id. There now appears to be reasonably broad agreement that risk-bearing PSOs engaging in direct contracting spread risk in a manner consistent with McCarran-Ferguson criteria defining the "business of insurance," and as such should be subject to state insurance regulation. See Witten, supra, at 459, 468. However, states have adopted different positions on whether the same regulations as are applied to more conventional health insurance carriers are appropriate. See infra note 117.
62. Uncertainty and debate persist about the relationship between state insurance regulation and risk-bearing PSOs. See Allison Overbay & Mark Hall, Insurance Regulation of Providers that Bear Risk, 22 AM. J.L. & MED. 361, 361 (1996). One issue in the debate has been whether conventional HMO-style insurance regulation of risk-bearing PSOs is warranted in instances where they merely assume downstream risk. See id. at 372. The National Association of Insurance Commissioners (NAIC) has recommended against insurance regulation in such circumstances, preferring instead to regard downstream risk assumption as merely a form of service subcontract. See id. In addition, NAIC notes that "[b]oth the provider community and traditional players in the managed care market seem to agree that PSOs which contract with licensed insurers to provider services on a risk basis should not be subject to licensure requirements that are as strict as those imposed on HMOs." NAIC, supra note 15, at I-24, I-25. See Douglas J. Witten, Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field, 23 AM. J.L. & MED. 449, 470 (1997) (stating that licensure requirements of PSOs that contract downstream from licensed entities should be less strict than those that contract with upstream entities). A more contentious issue involves whether, and to what extent, PSOs that engage in direct contracts should be subject to the type of insurance regulation imposed on HMOs and other health carriers. See id. at 465-66. Provider representatives and some employers have argued that such an approach is unduly insensitive to organizational differences in the provider model and that such heavy-handed insurance oversight stifles growth in this important area. See id. at 466; NAIC at I-17, I-18. HMOs and other established insurers argue that special treatment of risk-bearing PSOs that enter direct contracts confers unfair market advantages on such entities, and raises solvency and quality of care concerns. See id. There now appears to be reasonably broad agreement that risk-bearing PSOs engaging in direct contracting spread risk in a manner consistent with McCarran-Ferguson criteria defining the "business of insurance," and as such should be subject to state insurance regulation. See Witten, supra, at 459, 468. However, states have adopted different positions on whether the same regulations as are applied to more conventional health insurance carriers are appropriate. See infra note 117.
63. Uncertainty and debate persist about the relationship between state insurance regulation and risk-bearing PSOs. See Allison Overbay & Mark Hall, Insurance Regulation of Providers that Bear Risk, 22 AM. J.L. & MED. 361, 361 (1996). One issue in the debate has been whether conventional HMO-style insurance regulation of risk-bearing PSOs is warranted in instances where they merely assume downstream risk. See id. at 372. The National Association of Insurance Commissioners (NAIC) has recommended against insurance regulation in such circumstances, preferring instead to regard downstream risk assumption as merely a form of service subcontract. See id. In addition, NAIC notes that "[b]oth the provider community and traditional players in the managed care market seem to agree that PSOs which contract with licensed insurers to provider services on a risk basis should not be subject to licensure requirements that are as strict as those imposed on HMOs." NAIC, supra note 15, at I-24, I-25. See Douglas J. Witten, Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field, 23 AM. J.L. & MED. 449, 470 (1997) (stating that licensure requirements of PSOs that contract downstream from licensed entities should be less strict than those that contract with upstream entities). A more contentious issue involves whether, and to what extent, PSOs that engage in direct contracts should be subject to the type of insurance regulation imposed on HMOs and other health carriers. See id. at 465-66. Provider representatives and some employers have argued that such an approach is unduly insensitive to organizational differences in the provider model and that such heavy-handed insurance oversight stifles growth in this important area. See id. at 466; NAIC at I-17, I-18. HMOs and other established insurers argue that special treatment of risk-bearing PSOs that enter direct contracts confers unfair market advantages on such entities, and raises solvency and quality of care concerns. See id. There now appears to be reasonably broad agreement that risk-bearing PSOs engaging in direct contracting spread risk in a manner consistent with McCarran-Ferguson criteria defining the "business of insurance," and as such should be subject to state insurance regulation. See Witten, supra, at 459, 468. However, states have adopted different positions on whether the same regulations as are applied to more conventional health insurance carriers are appropriate. See infra note 117.
64. Uncertainty and debate persist about the relationship between state insurance regulation and risk-bearing PSOs. See Allison Overbay & Mark Hall, Insurance Regulation of Providers that Bear Risk, 22 AM. J.L. & MED. 361, 361 (1996). One issue in the debate has been whether conventional HMO-style insurance regulation of risk-bearing PSOs is warranted in instances where they merely assume downstream risk. See id. at 372. The National Association of Insurance Commissioners (NAIC) has recommended against insurance regulation in such circumstances, preferring instead to regard downstream risk assumption as merely a form of service subcontract. See id. In addition, NAIC notes that "[b]oth the provider community and traditional players in the managed care market seem to agree that PSOs which contract with licensed insurers to provider services on a risk basis should not be subject to licensure requirements that are as strict as those imposed on HMOs." NAIC, supra note 15, at I-24, I-25. See Douglas J. Witten, Regulation of "Downstream" and Direct Risk Contracting by Health Care Providers: The Quest for Consumer Protection and a Level Playing Field, 23 AM. J.L. & MED. 449, 470 (1997) (stating that licensure requirements of PSOs that contract downstream from licensed entities should be less strict than those that contract with upstream entities). A more contentious issue involves whether, and to what extent, PSOs that engage in direct contracts should be subject to the type of insurance regulation imposed on HMOs and other health carriers. See id. at 465-66. Provider representatives and some employers have argued that such an approach is unduly insensitive to organizational differences in the provider model and that such heavy-handed insurance oversight stifles growth in this important area. See id. at 466; NAIC at I-17, I-18. HMOs and other established insurers argue that special treatment of risk-bearing PSOs that enter direct contracts confers unfair market advantages on such entities, and raises solvency and quality of care concerns. See id. There now appears to be reasonably broad agreement that risk-bearing PSOs engaging in direct contracting spread risk in a manner consistent with McCarran-Ferguson criteria defining the "business of insurance," and as such should be subject to state insurance regulation. See Witten, supra, at 459, 468. However, states have adopted different positions on whether the same regulations as are applied to more conventional health insurance carriers are appropriate. See infra note 117.
65. See Overbay & Hall, supra note 34, at 369-74.
66. See id. at 366.
67. See Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332, 348-55 (1982) (stating that the rule is violated by "a price restraint that tends to provide the same economic rewards to all practitioners regardless of their skill, their experience, their training, or their willingness to employ innovative and difficult procedures in individual cases.").
68. See Edward Hirshfeld, Interpreting the 1996 Federal Antitrust Guidelines for Physician Joint Venture Networks, 6 ANN. HEALTH L. 1, 11 (1997).
69. See id. at 11-12.
70. See Overbay & Hall, supra note 34, at 367.
71. See U.S. Department of Justice & Federal Trade Commission, Guidelines and Policy Statements (visited Apr. 26, 1999) 〈http://www.usdoj.gov/atr/public/guidelines/guidelin.htm〉.
72. Overbay & Hall, supra note 34, at 366.
73. See Robert J. Blendon et al., Understanding the Managed Care Backlash, HEALTH AFF., Jul.-Aug. 1998, at 80, 86-87; Eve A. Kerr, Managed Care and Capitation in California: How do Physicians at Financial Risk Control Their Own Utilization?, 123 ANNALS OF INTERNAL MED. 500, 500 (1995).
74. See Robert J. Blendon et al., Understanding the Managed Care Backlash, HEALTH AFF., Jul.-Aug. 1998, at 80, 86-87; Eve A. Kerr, Managed Care and Capitation in California: How do Physicians at Financial Risk Control Their Own Utilization?, 123 ANNALS OF INTERNAL MED. 500, 500 (1995).
75. See Robert Berenson, Beyond Competition, HEALTH AFF., Mar.-Apr. 1997, 173-75.
76. See id. at 174 (discussing physicians' patient-centered views on care).
77. See Roberto Ceniceros, Providers, Health Plan Settle: California Pricing Dispute May Signal Problems for Employers, BUS. INS., June 8, 1998, at 1, 1.
78. See Galvin, supra note 44, at 9.
79. See Peter T. Kilborn, California Agency Ponders Bypassing Health Groups, N.Y. TIMES, Mar. 22, 1998, at A20, A20. See also Galvin, supra note 44, at 9.
80. See Peter T. Kilborn, California Agency Ponders Bypassing Health Groups, N.Y. TIMES, Mar. 22, 1998, at A20, A20. See also Galvin, supra note 44, at 9.
81. See Ceniceros, supra note 87, at 1.
82. See id.
83. See Smith et al., supra note 45, at 133.
84. See generally Galvin, supra note 44 (discussing the definition of value in the health care context).
85. The main intermediary functions health plans perform are claims processing, provider reimbursement, risk pooling, utilization management, actuarial services and marketing. See Alden Solovy, Backlash to the Future: Is an HMO an HMO an HMO?, HOSP. & HEALTH NETWORKS, Apr. 20, 1996, at 42. As providers continue to aggregate and enter capitated contracts, plans' role as "risk-poolers" may become somewhat redundant. Many PSOs will demand that utilization management of review functions accompany any assumption of risk so that they are able to maintain active control over their financial exposure. See David C. Hillman, A Primer on PHO Capitation Contracts, 29 HEALTH & HOSP. L. 288 (1996), available in LEXIS, Genmed Library, HOSPLW File.
86. The main intermediary functions health plans perform are claims processing, provider reimbursement, risk pooling, utilization management, actuarial services and marketing. See Alden Solovy, Backlash to the Future: Is an HMO an HMO an HMO?, HOSP. & HEALTH NETWORKS, Apr. 20, 1996, at 42. As providers continue to aggregate and enter capitated contracts, plans' role as "risk-poolers" may become somewhat redundant. Many PSOs will demand that utilization management of review functions accompany any assumption of risk so that they are able to maintain active control over their financial exposure. See David C. Hillman, A Primer on PHO Capitation Contracts, 29 HEALTH & HOSP. L. 288 (1996), available in LEXIS, Genmed Library, HOSPLW File.
87. See Galvin, supra note 44, at 9.
88. See U.S. DEPARTMENT OF JUSTICE & FEDERAL TRADE COMMISSION, supra note 113, at 73.
89. Id. at 47.
90. For example, Illinois exempts capitated PSOs from licensure if the employer agrees to assume responsibility for provision of benefits to its employees in the event that the PSO becomes insolvent. The attorney general of North Carolina has issued an opinion essentially agreeing with Illinois's position. See Hirshfeld, supra note 38, at 47 & n.93. Idaho's Department of Insurance, which assesses PSO arrangements on a case-by-case basis, has stated that "it would probably not require an insurance license if a provider enters into an arrangement with a licensed insurer or self-funded employer and the responsibility to members remains with the insurer or self-funded employer." NAIC, supra note 15, at I-18 to I-24. See Hirshfeld, supra note 38, at 46-47. In addition, several other states have passed PSO-specific legislation that establishes special licensure concessions, including lower thresholds for deposit, reserve and solvency requirements than are imposed on other risk-bearing health insurers such as HMOs. See, e.g., GA. CODE ANN. § 33-3-6-7; MINN. STAT. § 62N.28 (West 1996).
91. For example, Illinois exempts capitated PSOs from licensure if the employer agrees to assume responsibility for provision of benefits to its employees in the event that the PSO becomes insolvent. The attorney general of North Carolina has issued an opinion essentially agreeing with Illinois's position. See Hirshfeld, supra note 38, at 47 & n.93. Idaho's Department of Insurance, which assesses PSO arrangements on a case-by-case basis, has stated that "it would probably not require an insurance license if a provider enters into an arrangement with a licensed insurer or self-funded employer and the responsibility to members remains with the insurer or self-funded employer." NAIC, supra note 15, at I-18 to I-24. See Hirshfeld, supra note 38, at 46-47. In addition, several other states have passed PSO-specific legislation that establishes special licensure concessions, including lower thresholds for deposit, reserve and solvency requirements than are imposed on other risk-bearing health insurers such as HMOs. See, e.g., GA. CODE ANN. § 33-3-6-7; MINN. STAT. § 62N.28 (West 1996).
92. See Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4001 (1997). A detailed set of provisions regarding solvency and other PSO requirements were published in June 1998. See 42 C.F.R. §§ 422.350-.390 (1998).
93. See Vickie Yates Brown & Barbara Reid Hartung, Managed Care at the Crossroads: Can Managed Care Organizations Survive Government Regulation, 7 ANN. HEALTH L. 25, 50 (1998) (reporting that the American Medical Association "successfully lobbied for this definition, as it would permit physicians to organize PSOs without hospital ownership partners.")
94. See id.
95. See Mary Jane Fisher, Medicare+Choice Apps Trickle in Slowly, NAT'L UNDERWRITER LIFE & HEALTH-FINANCIAL SERV. ED., Sept. 21, 1998, at 39, 39; Harris Meyer, Look Before You Launch, HOSP. & HEALTH NETWORKS, Jan. 20, 1998, at 22, 22.
96. See Mary Jane Fisher, Medicare+Choice Apps Trickle in Slowly, NAT'L UNDERWRITER LIFE & HEALTH-FINANCIAL SERV. ED., Sept. 21, 1998, at 39, 39; Harris Meyer, Look Before You Launch, HOSP. & HEALTH NETWORKS, Jan. 20, 1998, at 22, 22.
97. See Blendon et al., supra note 84, at 81.
98. See Robert M. Goldberg, Why HMOs Now Love Regulation, WALL ST. J., July 17, 1998, at A14, A14.
99. A series of rival bills were introduced in the 105th Congress, and have been reintroduced for debate in the 106th Congress, that would strengthen procedural protections afforded managed care patients in benefits decision-making processes. Some bills would also facilitate patients' ability to bring suit against their health plan for inappropriate delay or denial of benefits. See, e.g., H.R. 4250,
100. 42 U.S.C. §§ 12101-12213 (1990).
101. See infra notes 189-95 and accompanying text. Note, however, that some decision making by employers about the content and limits of employee health benefits plans may be protected from American with Disabilities Act claims by the Employee Retirement Income Security Act (ERISA). See McGann v. H&H Music Co., 946 F.2d 401 (5th Cir. 1991), cert. denied, 113 S. Ct. 482 (1992) (holding that an employer did not unlawfully discriminate against employee for exercising rights under an ERISA-qualified plan).
102. See infra notes 189-95 and accompanying text.
103. See Gary S. Becker, Crime and Punishment: An Economic Approach, 76 J. OF POL. ECON. 169, 172-73 (1968).
104. See generally Donald F. Cox & Christopher Hogan, Biased Selection and Medicare HMOs: Analysis of the 1989-1994 Experience, 54 MED. CARE RES. & REV. 259 (1997) (examining an analysis of preenrollment and postdisenrollment experiences of Medicare-risk HMO enrollees); Daniel L. Dunn, Applications of Health Risk Adjustment: What Can be Learned from Experience to Date?, 35 INQUIRY 132 (1998) (summarizing four case studies describing real-world applications of health status risk adjustment to determine payments to health plans and providers); Harold S. Luft, Potential Methods to Reduce Risk Selection and its Effects, 32 INQUIRY 23 (1995) (analyzing several settings where risk differences occur, the individual problems for each setting and several approaches for their assessment);
105. See generally Donald F. Cox & Christopher Hogan, Biased Selection and Medicare HMOs: Analysis of the 1989-1994 Experience, 54 MED. CARE RES. & REV. 259 (1997) (examining an analysis of preenrollment and postdisenrollment experiences of Medicare-risk HMO enrollees); Daniel L. Dunn, Applications of
106. See generally Donald F. Cox & Christopher Hogan, Biased Selection and Medicare HMOs: Analysis of the 1989-1994 Experience, 54 MED. CARE RES. & REV. 259 (1997) (examining an analysis of preenrollment and postdisenrollment experiences of Medicare-risk HMO enrollees); Daniel L. Dunn, Applications of Health Risk Adjustment: What Can be Learned from Experience to Date?, 35 INQUIRY 132 (1998) (summarizing four case studies describing real-world applications of health status risk adjustment to determine payments to health plans and providers); Harold S. Luft, Potential Methods to Reduce Risk Selection and its Effects, 32 INQUIRY 23 (1995) (analyzing several settings where risk differences occur, the individual problems for each setting and several approaches for their assessment);
107. For example, firms will already have easy access to some reasonable markers for employees with high medical costs, such as data on absenteeism or special accommodations in the workplace. See Wise, supra note 28. In addition, data from longstanding employee assistance programs may be at their disposal. See id. See also Paul M. Schwartz, The Protection of Privacy in Health Care Reform, 48 VAND. L. REV. 295, 304 (1995).
108. See Marc L. Berk & Alan C. Monheit, HEALTH AFF., Winter 1992, at 145, 146 (reporting that in 1987 the top 1% of the population in accounted for 30% of all medical expenditures, while the "healthiest" half of the total population accounted for only 3%). For a discussion of selection issues that may arise given this skewed distribution, see Harold S. Luft, Modifying Managed Competition to Address Cost and Quality, HEALTH AFF., Spring 1996, at 23, 26-28.
109. See Marc L. Berk & Alan C. Monheit, HEALTH AFF., Winter 1992, at 145, 146 (reporting that in 1987 the top 1% of the population in accounted for 30% of all medical expenditures, while the "healthiest" half of the total population accounted for only 3%). For a discussion of selection issues that may arise given this skewed distribution, see Harold S. Luft, Modifying Managed Competition to Address Cost and Quality, HEALTH AFF., Spring 1996, at 23, 26-28.
110. See Bartley L. Barefoot, Enacting a Health Information Confidentiality Law: Can Congress Beat the Deadline?, 77 N.C. L. REV. 283, 348 (1998) (citing congressional testimony from several major employers attesting to voluntary implementation of internal guidelines designed to protect the confidentiality of employees' health data).
111. See IOM II, supra note 145, at 246.
112. See Ronald Bayer & Kathleen E. Toomey, HIV Prevention and the Two Faces of Partner Notification, 82 AM. J. PUB. HEALTH 1158, 1158 (1992).
113. Subterfuge is not defined under the Act; however, guidelines issued in 1993 stated that a "disability-based distinction" - defined as a distinction that singles out a particular disability such as acquired immune deficiency syndrome, deafness or schizophrenia - shifts the burden of proof to the employer to prove no subterfuge is involved. The guidelines further define subterfuge as a "disability based disparate treatment that is not justified by the risks or costs associated with the disability." EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, INTERIM ENFORCEMENT GUIDANCE TO THE APPLICATION OF THE ADA TO DISABILITY BASED DISCRIMINATION IN EMPLOYER PROVIDER HEALTH INSURANCE 7, 11 (June 8, 1993). The clarifications provided in these guidelines do not constitute a resounding refutation of the possibility that certain forms of employee risk selection undertaken by self-insuring firms in direct contracts could be construed as exceptions to the ADA's discrimination provisions under section 501(c).
114. See COMMITTEE ON REGIONAL HEALTH DATA NETWORKS, supra note 13, at 158-60.
115. See, e.g., Mike Martindale, Secret Files Spark Postal Service Suit, DETROIT NEWS, Oct. 6, 1998, at D6, D6; Alissa J. Rubin, Records No Longer for Doctor's Eyes Only, L.A. TIMES, Sept. 1, 1998, at A1, A1; Ellen E. Schultz, Open Secrets: Medical Data Gathered by Firms Can Prove Less Than Confidential, WALL ST. J., May 18, 1994, at A1, A1.
116. See, e.g., Mike Martindale, Secret Files Spark Postal Service Suit, DETROIT NEWS, Oct. 6, 1998, at D6, D6; Alissa J. Rubin, Records No Longer for Doctor's Eyes Only, L.A. TIMES, Sept. 1, 1998, at A1, A1; Ellen E. Schultz, Open Secrets: Medical Data Gathered by Firms Can Prove Less Than Confidential, WALL ST. J., May 18, 1994, at A1, A1.
117. See, e.g., Mike Martindale, Secret Files Spark Postal Service Suit, DETROIT NEWS, Oct. 6, 1998, at D6, D6; Alissa J. Rubin, Records No Longer for Doctor's Eyes Only, L.A. TIMES, Sept. 1, 1998, at A1, A1; Ellen E. Schultz, Open Secrets: Medical Data Gathered by Firms Can Prove Less Than Confidential, WALL ST. J., May 18, 1994, at A1, A1.
118. See COMMITTEE ON REGIONAL HEALTH DATA NETWORKS, supra note 13, at 1.
119. See Janlori Goldman, Protecting Privacy to Improve Health Care, HEALTH AFF., Nov.-Dec. 1998, at 47, 52; Rubin, supra note 206, at A1.
120. See Janlori Goldman, Protecting Privacy to Improve Health Care, HEALTH AFF., Nov.-Dec. 1998, at 47, 52; Rubin, supra note 206, at A1.
121. See Goldman, supra note 208, at 52 (reporting that more than 250 bills with medical privacy provisions were introduced into state legislatures in the last year alone). See also Key Lawmakers Announce Plans to Push for Privacy in Medical Records, 8 Health L. Rep. (BNA) 23, 23 (1999) (stating that the Connecticut Senate president plans to introduce legislation shortly that will establish a right to privacy related to medical records); D. Ward Primley, Maine Experience Shows Potential Snag As Public Grapples with Patient Privacy, 8 Health L. Rep. (BNA) 173, 173 (1999) (stating that Maine legislators are responding to the medical information privacy concerns of Maine residents).
122. See Goldman, supra note 208, at 52 (reporting that more than 250 bills with medical privacy provisions were introduced into state legislatures in the last year alone). See also Key Lawmakers Announce Plans to Push for Privacy in Medical Records, 8 Health L. Rep. (BNA) 23, 23 (1999) (stating that the Connecticut Senate president plans to introduce legislation shortly that will establish a right to privacy related to medical records); D. Ward Primley, Maine Experience Shows Potential Snag As Public Grapples with Patient Privacy, 8 Health L. Rep. (BNA) 173, 173 (1999) (stating that Maine legislators are responding to the medical information privacy concerns of Maine residents).
123. See Goldman, supra note 208, at 52 (reporting that more than 250 bills with medical privacy provisions were introduced into state legislatures in the last year alone). See also Key Lawmakers Announce Plans to Push for Privacy in Medical Records, 8 Health L. Rep. (BNA) 23, 23 (1999) (stating that the Connecticut Senate president plans to introduce legislation shortly that will establish a right to privacy related to medical records); D. Ward Primley, Maine Experience Shows Potential Snag As Public Grapples with Patient Privacy, 8 Health L. Rep. (BNA) 173, 173 (1999) (stating that Maine legislators are responding to the medical information privacy concerns of Maine residents).
124. See Jeremy A. Colby, An Analysis of Genetic Discrimination Legislation Proposed by the 105th Congress, 24 AM. J.L. & MED. 443, 464-66 (1998); Rothstein et al., supra note 167, at 401-03.
125. See Jeremy A. Colby, An Analysis of Genetic Discrimination Legislation Proposed by the 105th Congress, 24 AM. J.L. & MED. 443, 464-66 (1998); Rothstein et al., supra note 167, at 401-03.
126. See HHS, supra note 169.
127. 42 U.S.C. §§ 1320d to d-8 (1998).
128. The Act charged the Secretary of the Department of Health and Human Services with preparing for Congress "detailed recommendations with respect to the privacy of individually-identifiable health information." These recommendations were submitted in September, 1997. See