Question

300 words minimum with reference please

Forum Description Briefly explain how state and federal regulations affect MCOs. What is the role of the court when there is conflict between state and federal requirements for MCOs?

Answer 1

The law pertaining to Managed Care Organizations (MCOs) to a great extent depends on who sponsors the plan and who accepts the risk to reimburse the insured services. Normally federal government regulates MCOs and other health plans sponsored by private sector employers.

Furthermore state regulates the insurance companies which comprises MCOs such as Health Maintenance Organization (HMO) that provides a managed care policy to people, company etc. If a private company sponsors a scheme that is not procured from MCO for instance self-insured plans then the plan is exclusively governed by federal government.

However if that employer enters into an agreement with MCO to offer managed care services to his workers then the regulation of that plan will solely depend on who accepts to bear the risk. If it is MCO then the plan is governed by state and if the risk is accepted to a great extent by the company then the plan is regulated solely under federal law.

Employee Retirement Income Security Act of 1974 (ERISA) prevented the states from governing health schemes of private companies but however left to the states the regulation of the insurance business. However the Health Maintenance Organization (HMO) Act of 1973 recognized certain federal standards for HMOs that decided to function under federal law approximately all other regulatory authority over the health insurance business remained with states.

Furthermore U.S. Supreme Court has confirmed that a regulation concerning with an Employee Retirement Income Security Act of 1974 (ERISA) scheme will be deemed to have a connection with ERISA and the provisions of the act providing for the protection of ERISA plans from liability for neglectful damage or grievance thus eliminating the application of state regulation in any form including common law tort law to ERISA plans if the state regulation relates with any an activity of the scheme.

However under an enactment acknowledged as The McCarran-Ferguson Act stipulates to preserve regulatory control over the business of insurance. In general terms while formulating ERISA act Congress did not presupposed to take this authority away from the states.

Thus the provisions ERISA’s act which was considered as preventive in nature was aimed towards protecting insurance regulation for the states and if a state confers a law that regulates insurance business then it can be protected from preemption and enforcement.