United Hospital Fund: Goals For State Regulation Of Risk Sharing Between Health Care Providers And Insurers

Thursday, November 19, 2015

United Hospital Fund: Goals For State Regulation Of Risk Sharing Between Health Care Providers And Insurers

The United Hospital Fund  published a report that focuses on the increasingly common “risk-transfer” agreements between health insurance plans and health care providers, along with the policy and regulatory challenges such arrangements present. The report concludes with a checklist of goals for policymakers, State regulators, health plans, providers, and other stakeholders to consider.

Risk transfers include capitation and other agreements often known as “shared savings” or “shared risk.” Rooted in the theory that providers will have strong incentives to allocate resources most effectively if they themselves are at risk for the quality and cost of their treatment decisions, such agreements are a key component in the effort to shift reimbursement from fee-for-service to value-based payments.

The report, "Setting the Stage for Payment Reform: Updating New York’s Regulations on Risk Transfers Between Health Plans and Providers," notes that updating State rules “must consider multiple, often competing priorities, account for a variety of existing state and federal regulatory schemes, and be flexible enough to apply to various types of existing arrangements as well as new ones that are likely to emerge.” It adds that New York’s aggressive timetable for its Medicaid Value-Based Payment Roadmap and other efforts outside Medicaid add urgency and complexity to regulatory questions surrounding risk transfers.

The list of six goals to consider in developing an updated regulatory scheme includes harmonizing risk-transfer regulation and related public reporting across all types of licensed health insurers (i.e., Article 42, 43, and 44 insurers); standardizing regulations so they apply equally across Medicare, Medicaid, and commercial markets; defining clear points at which risk rises to the level of requiring regulatory review and approval; reconciling financial review and reporting requirements across the State’s Department of Financial Services and Department of Health’s regulatory schemes; reviewing laws to ensure that consumers are adequately protected when treatment decisions are being made by providers or intermediaries that have taken on risk; and developing resources and technical assistance programs to help provider organizations enter into and manage risk-transfer arrangements.

The report also notes that many New York regulations were adopted after a 1990s wave of experimentation with risk transfers that triggered disastrous results, and determining whether and how they should be modernized is a front-burner issue for New York.

“Revisiting New York’s governing rules for regulating risk transfers will help set the stage for payment reform, which has emerged as a key tool for reducing costs and improving quality in our health care system,” said Peter Newell, director of the Health Insurance Project and an author of the report. “History has provided a number of cautionary tales—examples that demonstrate the need for protections for health plan enrollees as well as for health care providers, payers, and the State.”

“Regulation is a complicated issue,” said Chad Shearer, director of the Medicaid Institute and a second author of the report. “The current patchwork of regulations was not designed to deal with the complexities of today’s quickly changing delivery and payment systems. An intentional reevaluation of the regulatory structure is sorely needed as providers take on new responsibilities and financial risk.”

“New York State has assumed a leadership role nationally on health care reform, including payment reform,” said Jim Tallon, president of the United Hospital Fund. “As risk-transfer agreements become more commonplace, and as the number of beneficiaries receiving care under such agreements grows, it is wholly prudent to revisit the regulatory framework. We hope this report helps inform related discussions.”

Setting the Stage for Payment Reform: Updating New York’s Regulations on Risk Transfers Between Health Plans and Providers was written by Peter Newell, Chad Shearer, and Nikhita Thaper, research assistant. The project was supported by the New York State Health Foundation.

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