This past legislative session, the Washington House of Representatives considered regulation of third party administrators (TPAs) as recommended by the state Insurance Commissioner. After some confusion over what the Commissioner intended and what should be amended, the bill died a quiet death in committee. Policymakers quickly discovered that TPA regulation had become a surrogate for indirectly addressing complaints about health plan management. Viewing the hearings was like watching people trying to eat soup with a fork.
Legislative hearings revealed wildly divergent notions of TPA regulation with many groups focused on issues relating to managed health care networks. The Insurance Commissioner disavowed his own legislation as unintended. Confusion swirled around the meaning and purpose of different types of work performed by administrators. Health care practitioners supporting TPA regulation saw the legislation as a solution to health care utilization review issues despite acknowledging that insurers were primarily responsible and not TPAs.
Every insurance policy and employee health or welfare benefit plan requires someone to collect and distribute payments and administer benefits. For the most part, insurance companies perform these functions themselves through employees, outside adjustors, insurance producers, or through contracts with other service professionals. Many Insurers also sell administrative services to self-funded plans. Most people refer to these service professionals as “third party administrators” or TPAs; but the term isn’t very useful in identifying the wide range of service providers who may or may not consider themselves TPAs.
Many of the complaints about health plan administration relate to benefit management, to coverage determinations, and to credentialing of health care practitioners. Moreover, some groups supporting TPA regulation observed that the Insurance Commissioner lacked authority to address such complaints. Yet these issues do not arise from the failure of Washington State to license or register TPAs. The failure arises from inadequate oversight and enforcement of existing laws.
Except for self-funded employer health plans governed solely by federal ERISA law, every health plan sold in Washington becomes the responsibility of the health insurance carrier selling the plan. The carrier has complete liability for the decisions relating to health plans. For example, here are two separate laws explaining the insurer’s responsibility for the troubles expressed by supporters of the TPA legislation.
“(1)(a) A health carrier shall adhere to the accepted standard of care for health care providers under chapter 7.70 RCW when arranging for the provision of medically necessary health care services to its enrollees. A health carrier shall be liable for any and all harm proximately caused by its failure to follow that standard of care when the failure resulted in the denial, delay, or modification of the health care service recommended for, or furnished to, an enrollee.
(b) A health carrier is also liable for damages under (a) of this subsection for harm to an enrollee proximately caused by health care treatment decisions that result from a failure to follow the accepted standard of care made by its:
(ii) Agents; or
(iii) Ostensible agents who are acting on its behalf and over whom it has the right to exercise influence or control or has actually exercised influence or control.
(2) The provisions of this section may not be waived, shifted, or modified by contract or agreement and responsibility for the provisions shall be a duty that cannot be delegated. Any effort to waive, modify, delegate, or shift liability for a breach of the duty established by this section, through a contract for indemnification or otherwise, is invalid.” [Emphasis added. RCW 48.43.545]
“Each carrier is accountable for and must oversee any activities required by [the health care patient bill of rights] that it delegates to any subcontractor. No contract with a subcontractor executed by the health carrier or the subcontractor may relieve the health carrier of its obligations to any enrollee for the provision of health care services or of its responsibility for compliance with statutes or rules.” [RCW 48.43.550]
Every function of a health carrier not done internally by the carrier is conducted by a “third party” under a contract for which the carrier has responsibility to ensure compliance with patient protections. So what’s going on here?
Fundamentally, health care reform continues to foster disruptions in traditional markets by forcing changes that favor consolidation, uniformity, and cost reduction often at the expense of beneficiaries. Many health carriers either cannot or will not spend to create the new systems and organizations required to squeeze additional savings out of the health care market. Carriers turn to new companies created to serve these needs.
Unfortunately, our regulatory system has failed to adapt to these new market forces with sufficient speed and efficiency. In other words, change occurs at a pace that government has failed to anticipate; ironic, given the change wrought by regulation. Nevertheless, tools exist to resolve these issues and in some instances, rules simply need to be enforced. Here are two examples of existing insurance rules.
“A carrier may not offer as a defense to a violation of any [health plan regulation] that the violation arose from the act or omission of a participating provider or facility, network administrator, claims administrator, or other person acting on behalf of or at the direction of the carrier, or acting pursuant to carrier standards or requirements under a contract with the carrier rather than from the direct act or omission of the carrier.” [Wash. Admin. Code 284-43-0120]
“[A carrier] must establish sufficiency and adequacy of choice of providers based on the number and type of providers and facilities necessary within the service area for the plan to meet the access requirements set forth in this subchapter. Where an issuer establishes medical necessity or other prior authorization procedures, the issuer must ensure sufficient qualified staff is available to provide timely prior authorization decisions on an appropriate basis, without delays detrimental to the health of enrollees. [Wash. Admin. Code 284-43-9970]
Problems with the administration of health plans have been exhaustively addressed through legislation and regulation. Another law to directly regulate yet another organization will not fundamentally address the problems and frustrations expressed by health plan beneficiaries and their health care providers. For that matter, even insurers have grown frustrated by calcification of the regulatory process. Instead of more rules, resources must be redirected to ensure that the many protections already enacted get enforced in a consistent and predictable way.
Too many consumers and many small health care practices quickly discover that laws exist to address their problems; but, no one outside of government can afford to enforce these laws. The amounts in dispute or the issue itself requires resolution from someone other than a lawyer or a consultant. For example, many consumer complaints involve issues that put the consumer in between health care providers and insurance carriers. These disputes can range from inappropriate referrals and unauthorized care to inflated bills and out of network surcharges.
Alternatively, health care providers find themselves swallowed up by health care bureaucracy completely unresponsive to daily rhythms of a health care practice. Doctors or their office managers spend hours futilely trying to upload information to a broken online payment system. The next day, a practitioner discovers that the carrier has contracted with a new company that has a new system unfamiliar to everyone at the clinic. And the wheel turns and grinds again.
These problems can all be addressed with thoughtful, consistent, persistent enforcement of a wide range of existing laws. The regulatory system must try to be as nimble as the marketplace even if it can’t. Resources must be focused on providing solutions to routine problems and a place to go for small problems that shouldn’t require an attorney. Regulatory tools need to be repurposed to reflect the daily experience of plan beneficiaries rather than used for more rules to little effect.
We must stop trying to eat soup with a fork.