The term “prior approval law” refers to legislation that grants the officials of a state the power to review and approve health insurance premium increases before they take effect. These laws are passed at the state level and usually give the authority to the State Insurance Department. Without prior approval laws, states are restricted in their ability to regulate premium increases and, de facto or de jure, the insurance industry self-regulates.

Prior approval laws have gained attention as a result of the recent healthcare reform, which affords the federal government limited power to curtail premium increases. Although the federal reform includes provisions such as that which requires insurers to justify “unreasonable” rate increases, much of the power necessary for premium moderation has been left outside the reach of the national government.

Regulating premiums has traditionally been the responsibility of the states, and now, as we continue to see double digit premium increases during this economic crisis, it is more important than ever for states to fulfill this responsibility. It is the disappointing truth that only 19 states currently have prior approval legislation on the books. Of those 19, however, some states are making great progress by enforcing these laws. For example, Oregon officials have modified or dismissed 20 of 71 proffered premium increases in the individual and small group markets since April 2009.

Some consumer advocates and politicians support granting prior approval authority to all states. Doing so would likely end many current lawsuits between insurance companies and states. But the effectiveness of such legislation in suppressing premium increases would depend on politicians’ willingness to resist the influence of the insurance industry.

It is well known that the healthcare insurance industry aggressively lobbies federal officials and helped pen much of the recent healthcare reform. Few realize, however, that the industry exerts significant pressure at the state level as well. Much of that pressure comes from over $42 million in contributions since 2003. Jim Duffett, executive director of the Illinois-based Campaign for Better Health Care, describes the result of excessive lobbying: “State government here has basically been a wholly owned subsidiary of the insurance industry.”

Apparently, insurance companies already know what many of us are just learning; as Washington State Insurance Commissioner Mike Kreidler warns, “The battle has shifted to the states.”

Look for more on this and other healthcare legislation in future posts.

Sources:
EconomicCollapseBlog
L.A. Times
N.Y. State Government

1. Rent-a-Patient Scheme
In this scheme organizations pay for—or “rent”—individuals to go to clinics for unnecessary diagnostic tests and cursory examinations. The scary thing is that licensed physicians sometimes participate in the rent-a-patient scheme. Case and point: Robert Bourseau, 75, was sentenced to 37 months in prison and ordered to pay $4.1 million in restitution for his role in a scheme to defraud Medicare and Medi-Cal. He pleaded guilty in June to paying a recruiter to deliver homeless patients to his hospital for unnecessary medical services.

2. Pill Mill Scheme
In this scheme, separate health care individuals and entities (usually including a pharmacy) collude to generate a flood of fraudulent claims that Medicaid pays. After a prescription is filled, the beneficiary sells the medication to pill buyers on the street who then sell the drugs back to the pharmacy. Example: Rick Kloxin, pharmacist in charge of Hogan’s Pharmacy in Lyons, Kans., was found guilty in an internet pill mill scheme. Kloxin pled no contest and was found guilty of 14 misdemeanor counts of violating Kansas Pharmacy laws.

3. Drop Box Scheme
This scheme uses a private mailbox facility as the fraudulent health care entity’s address, with the entity’s “suite” number actually being its mailbox number. The fraudulent health care entity then uses the address to submit fraudulent Medicare, Medicaid, and other insurance claims and to receive insurance checks.

4. Third-Party Billing Scheme
The third-party billing scheme revolves around a third-party biller—who may or may not be part of the scheme—who prepares and remits claims to Medicare or Medicaid (electronically or by paper) for health care providers. It is possible, however, for a third-party biller to defraud Medicare, Medicaid, and others by adding claims without the providers’ knowledge and keeping the remittances or by allowing fraudulent claims to be billed to Medicare or Medicaid through its service. Example: Recently, in Miami, Ihosvany Marquez and several alleged conspirators were indicted on charges of having filed $55 million in phony Medicare claims for HIV, AIDS, cancer, pain and varicose vein treatments.

In our current economic forecast with fraud running rampant (the Madoff scandal, the collapse of the financial market etc.) the False Claims Act is still relevant. Even with the abundance of accounting fraud, the major focus of the False Claims Act is still healthcare fraud. According to an article in the American Medical News, “Healthcare cases made up the lion’s share of false claims settlements and judgments in the fiscal year, brining in $1.6 billion, or two-thirds of the total $2.4 billion recouped.

Read full article here.

Healthcare fraud is a huge industry for the ethically challenged in our country. Keep reporting – it is a great deterrent.

The next round of the competition, taking place September 24th at the University of Illinois Urbana-Champaign, includes a 5-minute pitch followed by a short question and answer session.

Grand prize is $30,000 in grant money. Good luck Rebecca Busch and Medical Business Associates!

Read more about Innovate Illinois.

This introduction illustrates one of the very first critical “cost shifting” market movements. What does cost shifting mean? It is when the cost of certain activities is shifted to another party. The question is, to whom? Private payers profited by removing high-risk individuals from their plans – they were growing at a rapid rate because during WWII a wage hold was put into place. Employers started to realize that benefit plans could be seen as a non-wage form of compensation. The tax code encouraged employers to view benefit plans as a cost of doing business, and employees never had to claim their benefits as income.

The benefit plan offering generated a significant amount of cash in the healthcare system. During the 1940s and going forward, teaching hospitals were also recipients of large amounts of cash infusion by the government’s investment in research and technology. The flow of cash from both areas generated a significant offering of healthcare diagnostics and treatment options. By 1946, the healthcare market had increased cash flow for hospital coverage. This resulted in increased utilization of hospital services. The amounts of insurance payments and premium programs went up. Hospitals expanded because of the available cash. The market had a significant buildup of resources. The amount of technology was growing at an accelerated rate. This fueled additional use and sale of insurance. The gap between the haves and have-nots exploded. From 1930 to 1965, there was the first big cost shift of high-risk individuals to uninsured status. Who were these people? They were the elderly, the unemployed, the self-employed, the retired and the disabled. With the aggressive advancements in healthcare, the disproportionate offerings between the haves and the have-nots became obvious.

The political arena debated the concept of compulsory insurance or a nationalized health plan. Instead, in 1965 Medicare was born to serve the have-nots. Medicare takes a social insurance approach, and its members are referred to as beneficiaries. Medicaid was also established; it is managed at the state level. Medicaid, however, uses a welfare approach, and its members are referred to as recipients. The market at the time believed that employer-linked insurance would eventually serve as a form of nationalized health insurance. Medicare Part A was created to pay hospital services, and Medicare Part B was created to serve the professional component. To devise a nationalized healthcare program was not necessary. The market, it was thought, would take care of itself.

Excerpt from Healthcare Fraud Auditing & Detection Guide by Rebecca Busch