ERISA, HMO, MCO, NCQA....Getting Through The Legalities & Alphabet Soup Of Managed Health Care

(August 2, 1998) Over the last few weeks there has been much in the news regarding various federal plans to "improve" the present Managed Health Care System in the U.S. This has been fueled in large part by the virtual explosion of Health Maintenance Organizations (HMOs) and other types of entities that now manage the health care of most of our citizenry.

The sudden impact of this "new" health industry, has also lead to much confusion among plan participants as to what and what may not be covered in their plans, and to accusations of fraud and abuse.

How does one pick a good, reliable health plan, and judge its performances in comparison to others? What are the legal recourses, if any, if the plan does not deliver proper medical care?

Only an informed individual can make reasonable judgments as to how the present debate in Congress should end, and which of the diverse fixes to the health care system should be enacted. In addition, only a well-informed individual who has done the appropriate research can decide which Managed Care Plan, if any, is right for them. And finally, only a well-informed and well-educated patient will be aware if the level of medical care they are receiving meets present standards. This last issue is extremely important given the presently debated issue regarding a patient's right to sue their Managed Care Organization (MCO).

So here are some basic facts and guides as to where you can find sources to make these decisions, just in time to bug your government representatives about these issues:


There are two proposals up before Congress - Democratic and Republican versions.

Where They Agree

Both plans agree in doing the following:

  • Provide direct access to an obstetrician/gynecologist.
  • Guarantee emergency-room access without prior HMO approval.
  • Institute safeguards for personal information.
  • Allow physicians to discuss with patients various medical options regarding their treatment.
  • Provide the right to appeal a managed-care decision outside the Managed Care provider.

Where They Differ

The Democratic plan:

  • Permits states to give patients the option to sue health plans for improperly denying coverage.
  • Provides access to specialists "without impediments."
  • Assures continued treatment by one's physician even if he/she is removed from a health plan.
  • Permits reconstructive breast surgery after mastectomy.

The Republican plan:

  • Places a cap on the dollar amount that doctors can be sued for in medical malpractice cases.
  • Increases use and availability of medical savings accounts.
  • Creates associations of health plans that allow small businesses to pool together for coverage.
  • Allows the development of "Health Marts", where families can shop for and compare insurance.

Now that you know what all the shouting is about on Capitol Hill and you realize what needs to be done to cure the nation's ills, you can sit down and try to figure out what personal health plan (if any) is best for you. To do this you should research your various options carefully.

To get you started with researching Managed Care, here are explanations of the terms referred to in the title of this article:

ERISA- Employment Retirement Income Security Act of 1974 which set up the ground rules for pension and retirement plans and in doing so, created a section that prohibited states from regulating these plans. Most Health Care plans in the US are covered by ERISA, and therefore these plans are exempt from certain regulatory practices, including the ability to be sued outside of federal court.

HMO-Health Maintenance Organization

MCO-Managed Care Organization; Managed Care Organizations (MCO) include HMO, PPO, POS, EPO, PHO, IDS, AHP, IPA, etc.

These definitions come from the Pam Pohly Associates web site (which contains an A-Z Glossary of terms used by the Managed Care Industry.

To help you research your health plan options, there is a non-profit organization called the National Committee for Quality Assurance (NCQA). NCQA "assesses and reports on the quality of managed care plans." You can obtain their Consumer Brochure at the NCQA web site.

Last Editorial Review: 8/14/1998