About Emergencies

Managed Care Q&A


Q. What kinds of health plans are there?

Medical FormsHealth care has evolved dramatically in the past 25 years when most people had indemnity insurance plans (sometimes called fee-for-service plans). Under these plans, patients could visit any physician or hospital, which would then bill for each service. The insurance company and the patient would each pay part of the bill. Indemnity plans usually have deductibles that must be paid each year before the insurer starts paying a percentage (generally 80 percent, with the patient paying 20 percent).

Today, more than 85 percent of insured employees are enrolled in some kind of managed care plan. These plans establish agreements with physicians, hospitals, and other health care professionals to provide services at reduced costs. Managed care plans may be health maintenance organizations (HMOs), preferred provider organizations (PPOs), or point-of-service (POS) plans.

Managed care is an approach to providing health care that emphasizes wellness and preventive care and seeks to reduce costs by coordinating care through a primary care physician, such as a family physician, who serves as a "gatekeeper."

  • HMOs set monthly fees and require members to use specific physicians, as well as choose a primary care physician to coordinate care and refer them to specialists. If a plan member visits a physician not on the list or goes directly to a specialist, the member pays the bill.

  • PPOs make arrangements with physicians, hospitals, and other care providers to accept lower fees for their services. Plan members can refer themselves to other physicians, including those outside the plan, but they will pay more of the bill.

  • Some HMOs offer indemnity-type options known as POS plans in which primary care physicians make referrals to other providers in the plan. Members can refer themselves outside the plan and still receive some coverage. If a physician refers someone out of network, the plan will pay all or most of the bill. If a member refers to an out-of-network provider, and the service is covered, he will pay the co-insurance.

Q. Do health plans create barriers to obtaining emergency care?

Society has placed great responsibility on emergency physicians to provide a health care safety net. The Emergency Medical Treatment and Labor Act (EMTALA) requires emergency care to be provided to everyone who needs it, regardless of their ability to pay or insurance status. However, health plans are not required to pay for emergency care, and some have created administrative and financial barriers that can prevent patients from getting the care they need in an emergency:

  • Insured patients are denied coverage by their managed care plans for legitimate visits to emergency departments, based on their final diagnoses, or because they did not obtain prior authorization.

  • Patients sometimes must follow a cumbersome preauthorization process. This means a patient might have to make several phone calls and experience prolonged waits before obtaining permission from their insurer to go to the emergency department. The decision is made over the phone, not based on an examination, and often using predetermined criteria.

Denial of reimbursement for emergency claims is a major problem. The evidence is not just anecdotal. For example:

  • In California, Kaiser Permanente was fined $1.1 million for "systemic problems" with the health plan's emergency care procedures, which resulted in the deaths of three patients. In June 2002, the health plan lost its bid to have the fine overturned.

  • In September 2000, the Emergency Department Practice Management Association said that Medicaid enrollees were being denied emergency claims, violating the prudent layperson standard.

  • In 2001, several patients in Utah sued the Intermountain Health Care insurance plans for regularly denying emergency billings without first reviewing patients' medical record.

  • In 2002, PacifiCare of Arizona was fined $125,000 by the state for more than 1,000 violations of state laws governing health plans, including unfairly denying claims for emergency care between 1996 and 1998. PacifiCare agreed to pay the fine without challenging the state's findings.

  • In 2002, emergency patients in Ohio were receiving bills because the emergency physicians did not participate in their health plans, even though the hospitals were "in-network."

  • In 2001, Blue Cross Blue Shield of Rochester (NY) agreed to pay hospitals for 25,000 emergency department claims it previously denied between 1997 and 2000, worth potentially $1 million.

  • In 2001, the state of Colorado fined the Rocky Mountain Health Maintenance Organization $40,000 for improperly handling claims, including those for emergency care.

  • In 1999, the state of Florida fined five managed care organizations $200,000 each for denying reimbursement and late payments for emergency department claims.

  • Studies in the March 2000 issue of Annals of Emergency Medicine found that managed care plans are not complying with state regulations.

  • In 2000, the state of Washington fined Premera $55,000 for discouraging people from seeking emergency care. In 1999, the state fined Qual Med $25,000 for improperly denying emergency claims and ordered the health plan to pay the claims.

Q. Don't the states regulate insurance?
A. Although 32 states plus the District of Columbia since 1993 have adopted emergency care regulations, nearly 40 percent of the 126 million people in employer-sponsored health plans are in self-funded ERISA health plans. These plans are exempt from state regulations and therefore millions of Americans are not protected by emergency care regulations, according to the U.S. Department of Labor. Only a federal law can address the growing problem of retrospective denial in the managed care system. Voluntary measures have not worked. They are not enforceable, and the economic pressures of keeping costs down are too great to make a voluntary approach a realistic solution.
Q. What is the prudent layperson standard?

The prudent layperson standard was first enacted in Maryland in 1993. In 1996, ACEP supported efforts by Congressional leaders to introduce the first bill proposing a national prudent layperson standard. ACEP led a successful grassroots effort to recruit more than 35 national medical organizations to support the standard. Several ACEP Presidents and other ACEP leaders have testified before Congress in support of the standard. In addition, ACEP's 911 Network members, through their regular efforts to communicate with their Congressional representatives, have helped increase policymaker support for the standard.

The standard is contained in the proposed Access to Emergency Medical Services Act, introduced in the 107th Congress. If enacted, it would:

  • Establish a uniform definition of an emergency and require health plans to pay for emergency care based on a patient's presenting symptoms, not a final diagnosis.

  • Define an emergency as any situation in which a "prudent layperson," a person possessing an average knowledge of health and medicine, could expect serious impairment to his or her health.

  • Prohibit health plans from requiring, as a condition for coverage, that patients obtain prior authorization before seeking emergency care.

  • Establish a process for emergency physicians and health plans to work together to coordinate appropriate post-stabilization care or followup care.

Q. Will the prudent layperson standard increase visits to emergency departments? Will it increase health care costs?

No. The prudent layperson standard does not increase visits to emergency departments, and there is no evidence to suggest it does. In fact, the evidence suggests it does not, since overcrowding is occurring in states without a prudent layperson standard. America still does not have a national prudent layperson standard that applies to all plans.

Managing health care costs is a legitimate concern for everyone, and emergency physicians have supported managed care. The proposed legislation only applies to people with health insurance who are already paying for care. A cost analysis by Price Waterhouse estimated the Access to Emergency Medical Services Act would impact health care premiums by only 1 percent.


  • Emergency departments are a foundation of America's health care safety net for everyone, regardless of their ability to pay or insurance status.
  • Many health plans continue to deny coverage for emergency care based on a final diagnosis, not a patient's symptoms. Safeguards must be established to protect consumers from health insurance practices that may cause delays of emergency care.
  • Managing health care costs is a legitimate concern for everyone, but people in potentially life- or health-threatening situations should not be forced to diagnose their own conditions out of fear their health plans will not pay.
  • ACEP advocates for a national "prudent layperson" standard, which would require insurers to base coverage on a patient's symptoms, not a final diagnosis, and eliminate requirements for preauthorization.
  • Congress must enact a national prudent layperson standard that applies to all health plans.
  • Since 1993, 32 states and the District of Columbia have adopted emergency care regulations; however, nearly 40 percent of the 126 million people in employer sponsored health plans are in self-funded ERISA health plans that are exempt from those regulations.

For additional information on this and other topics, visit www.ACEP.org. You may be interested in the following materials available on the website: Defending America's Safety Net, Emergency Care: Know What Your Health Plan Covers (brochure), and ACEP policy statement "Managed Care and Medical Ethics."

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