Health Care Alliances:

Issues Relating To Geographic Boundaries

HEHS-94-139: Published: Apr 8, 1994. Publicly Released: Apr 8, 1994.

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Pursuant to a congressional request, GAO reviewed the provisions of major health bills concerning the configuration of health care alliance boundaries, focusing on the: (1) features and procedures for establishing Metropolitan Statistical Areas (MSA); (2) experiences of two states that have established entities similar to alliances; and (3) potential effects of alliance boundaries on existing health markets, access to health care, and distribution of health care costs within a state.

GAO found that: (1) the health reform bills vary on whether alliance boundaries can cross state lines, the minimum population size for an alliance area, and the number of alliances that can operate in each coverage area; (2) all the health reform bills permit health plans to operate across state lines or alliance boundaries; (3) if changes in MSA definitions require states to reconfigure their alliance boundaries, the implications for health plans and health delivery could be substantial; (4) each health care proposal requires states to keep MSA intact when defining alliance boundaries, primarily to prevent discrimination against disadvantaged or high-risk groups by health plans; (5) Florida and Washington have already worked to define alliance boundaries and their experience could be instructive regarding the size, number, and boundaries of alliances; (6) coordination could be most critical in areas where alliance boundaries separate existing health markets; (7) some alliances could represent a disproportionate share of a state's high-risk population and result in a limited choice of plans for consumers; and (8) while cost redistribution is inevitable under health care reform, alliance boundaries could result in some persons paying higher insurance premiums.

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