The Sound Health Association:

A Federally Qualified Health Maintenance Organization

HRD-77-119: Published: Dec 2, 1977. Publicly Released: Dec 13, 1982.

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The Sound Health Association, Inc., of Tacoma, Washington, is a consumer-owned, prepaid health plan and was the first health maintenance organization qualified by the Department of Health, Education, and Welfare (HEW) under the Health Maintenance Organization Act. The provision of health care services on the basis of prepaid rates provides incentives for the organization to emphasize preventive medicine to reduce overall health care costs.

The Sound Health Association appears to be providing comprehensive prepaid health care in accordance with the act. Although delays in the publication of implementing regulations slowed the development of the association and caused increased operational costs, it should have enough operating income to meet operating costs by the second quarter of calendar year 1979 provided that it meets enrollment projections, improves marketing efforts, and controls costs. The association requested a waiver of the open enrollment requirement. HEW did not issue the waiver, but it has not forced the association to have an open enrollment period. The association is serving the indigent but has not actively sought enrollment of high risk individuals. As of December 31, 1976, it was providing comprehensive health care services to 6,016 members. The Federal Government requires employers to include a health maintenance organization in their employees' health benefit plans. For employees represented by a labor union, the health maintenance organization alternative is subject to collective bargining. Generally, unions have not offered the plan as an option.

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