NCPA - National Center for Policy Analysis

Third Party Reviews For HMOs

February 1, 1999

Eighteen states and the federal Medicare program have adopted a system of third party review of contested decisions made by health maintenance organizations. Some Capitol Hill politicians want to pass legislation to mandate the process nationwide.

In 1978, Michigan became the first state to allow third-party review of health claims denied by HMOs -- with most of the other states which have established reviews passing enabling legislation during the 1990s.

Nationally, Democrats want to couple external review with changes that let more patients sue health plans -- but Republicans argue that would significantly increase costs and cause more people to lose coverage.

  • Right-to-sue legislation would raise premiums by 1.2 percent according to the Congressional Budget Office.
  • But third-party appeals of denied claims would increase premiums by only 0.1 percent, says the CBO.
  • Even without any new mandates, employers expect their health premiums to jump by 9 percent in 1999, according to a William M. Mercer Inc. survey.

Even without national legislation, some health plans are already adopting third-party review -- among them Aetna U.S. Healthcare and 16 plans that belong to the California Association of Health Plans.

Source: Laura M. Litvan, "Reforming HMOs: Sue or Review?" Investor's Business Daily, February 1, 1999.


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