Amendments to HMO Act

In order to protect and nurture what was then a new approach in health care, Congress passed the HMO Act of 1973. The HMO Act of 1973 offered financial support for the development of health maintenance organizations and required employers who offered traditional health care plans to also offer an HMO alternative if a "federally qualified" health maintenance organization was in reasonable proximity. In order to become federally qualified, an HMO was required by the Act to meet a number of federal standards, which included offering a mandatory minimum package, establishing a rating system based on community rather than experience rating, and providing open enrollment so anyone could join (Langwell, 1990, p. 6).

The federal requirements on employers, along with the availability of federal loans for qualifying HMOs, provided powerful incentives for HMO's to seek federal qualification in the 1970s and 1980s. In 1983, for example, 59 percent of all HMOs' obtained federal qualification. The program had been very successful in boosting the gro

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alifornia) introduced H.R. 3235, the Health Maintenance Organization Amendments Act, to the House Energy and Commerce Committee in 1987. It was originally debated in the House Energy and Commerce Subcommittee on Health and the Environment, where Waxman was chairman. The bill was originally planned to be introduced in 1988, but a series of attacks by the Reagan Administration on the HMO Act of 1973 meant its introduction had to be moved up a year. President Reagan had begun calling for the repeal of the entire Act since the law was seen as a hindrance to competition and the health of HMOs altogether. H.R. 3235 called for several adjustments in the HMO Act of 1973 while preserving a strong federal role in the operations of the health care industry. The House measure was designed to help level the playing field between federally qualified and non-qualified health maintenance organizations, while increasing the purchasing power of employers. Perhaps the key change offered by the House amendments is that, in addition to operating by the existing community rating pricing mechanism, federally qualified HMOs would also be allowed to target community rates according to demographic group, such as by age or gender. This would be tantamoun
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Approximate Word count = 1623
Approximate Pages = 6 (250 words per page)

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