Davis Asks DMHC To Develop New Regulations To Prohibit ‘Phantom Coverage’ for HMO Patients
Gov. Gray Davis (D) yesterday asked the Department of Managed Health Care to develop new regulations that would require HMOs to notify members directly if their employers temporarily stop paying premiums, the Sacramento Bee reports (Rapaport, Sacramento Bee, 11/21). The directive stems from patient complaints registered with DMHC regarding "phantom coverage," a process under which a patient's health coverage is retroactively terminated without their knowledge (Office of the Governor release, 11/20). Phantom coverage generally occurs when an employer, in an attempt to manage expenses, defaults on HMO premiums. Hoping that the employer will resume payments, HMOs generally do not discontinue coverage. If payments do not resume, HMOs then drop coverage and retroactively bill patients for services. According to DMHC Director Daniel Zingale, some HMOs and employers fail to inform workers about the situation. Davis said that the new regulations would prevent employees from being held financially responsible for medical bills accrued during those types of lapses. In developing the new regulations, Zingale said the "primary decision" would be determining how long HMOs will continue coverage before notifying employees, the San Francisco Chronicle reports. He said that he does not expect it will be longer than three months (Gledhill, San Francisco Chronicle, 11/21). John Grgurina, executive director of PacAdvantage, a statewide health insurance purchasing pool for small companies, said the notification rules may "do more harm than good," adding that small companies are responsible for the "vast majority" of missed or late payments, the Bee reports. Grgurina said, "In small business, there are employers who are late paying every couple of months but still manage to maintain coverage. It's a balancing act to have regulations that tell workers their employer may be behind in payments without having the notifications come so quickly that it wreaks havoc for no good reason" (Sacramento Bee, 11/21).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.