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Office of Program Policy Analysis and Government Accountability

Performance Audit of the Regulation of Health Maintenance Organizations and Other Prepaid Health Service Plans Administered by the Department of Insurance , Report No. 12200, December 1993

  • The Department's monitoring of financial data for early warning signals of financially troubled plans has three weaknesses. First, the Health Care Services Section has not developed instructions regarding the methods staff should use in assessing the financial conditions of plans. Second, staff do not adequately document their reviews of financial data. Third, the files we reviewed did not contain any indication of supervisory review of staff decisions.
  • Department staff conducted field examinations of HMOs and other prepaid health service plans as required by statutes and documented the results of the field examinations. However, Program staff did not conduct follow-up activities to ensure prepaid health service plans corrected deficiencies.
  • The National Association of Insurance Commissioners (NAIC) recommends that complaint information be used by states as an early warning signal of potential insurer problems. The Division of Insurance Consumer Services has established a data base of complaint information, but it does not compile and analyze complaint data on HMOs and other prepaid health service plans. The availability of complaint information compiled on a regular basis would allow the Health Care Services Section to compare the complaint level among plans and evaluate changes over time as part of the early warning system for identifying problematic HMOs and other prepaid health service plans.
  • Agency managers need to establish program goals and objectives and develop performance measures to help assess progress in achieving their goals and objectives. The Department's objectives do not always specify baselines or benchmarks against which progress in achieving the objectives will be assessed. Further, the Department did not include performance measures related to the goals and objectives in its 1992 Strategic Plan Annual Performance Report to the Governor. In addition, the Department's 1992-93 Legislative Budget Request does not include effectiveness indicators indicating the extent to which it is meeting its objectives for regulation of HMOs and other prepaid health plans.

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