Health Plan Delegation Model in the ACA Era

By Stacy Liang, Chris Stanley, and James Smith

A large physician management company with over 650,000 lives in California was shut down abruptly last year because of a whistleblower’s report regarding poor delegation and delegation oversight. The company had improperly denied care to thousands of patients, and even falsified documents to hide the misdeed. The shutdown forced health plans and providers to scramble to make transition plans and minimize impact to affected patients. This is a classic case of delegation gone awry, and everyone losing. In this instance, the company was fully delegated by health plans. But even for organizations not in or not contemplating full delegation, the organizations are most likely to operate in a manner that still requires regulatory compliance and oversight. The delegation model can be a critical avenue to decrease overall administrative expenses and improve efficiencies across the health ecosystem, but only when done correctly.

This paper examines the delegation partnership model between payers and providers, and includes details about the delegation process, benefits, and considerations.

The Health Plan Delegation Model

The health plan delegation model occurs when a payer holds the insurance license but delegates select insurance responsibilities to providers, such as utilization management and provider credentialing. This model has been around for decades, and is most prevalent in California where enrollment in health maintenance organizations with capitated payment arrangements is much higher than the rest of the country. However, delegation also works for preferred provider organization products, especially for risk-based contracts.

Delegation Model Process 

There are several strategic questions that both payers and providers need to consider as they go through the delegation model process:

Step 1: Outline and Align on Shared Vision with Partner

It is critical to engage key stakeholders and invest in what furthers a stronger partnership and a rewarding alliance. The goal is to have a defined and agreed-upon vision, and a detailed division of financial, administrative, and clinical responsibilities that will be the touchstone of the partnership, leading to product differentiation and venture parties in the market.

Step 2: Determine the Best Contractual Structure to Support the Vision

Determine the organizational structure that will most effectively support the outlined vision. The contractual structure of the partnership does not need to be limited to a specific arrangement. Rather, there are multiple ways to achieve the delegation model: (1) form an accountable care organization or clinically integrated network, (2) form a joint venture between payer and provider, or (3) form a new company entirely.

Step 3: Determine Which Insurance Functions Will Be Delegated

After aligning on a shared vision and contractual structure, determine which functions should be delegated. Below are key elements of the payer-provider integration model:

Depending on which functions are delegated, there are downstream implications to the staffing model and associated administrative fees. Even for functions that are retained, health plans should anticipate changes to how they would perform those functions, given that they are now being held accountable by the providers and the regulators (especially if providers are fully responsible for downside financial risk).

Step 4: Determine the Timeline for Transitioning Delegated Functions

Finally, agree on a timeline to transition the delegated functions over to the provider. For this step, both payers and providers need to understand where they are today (current state) and outline where they want to be in the future (aspired future state). The readiness to move any and all delegated functions will depend in part on the provider’s willingness and readiness to assume financial risk and delegated functions. Just as critical will be the other key enablers and dependencies, including but not limited to IT and data-sharing capabilities.



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