State insurance regulation of provider-sponsored organizations

Provider-sponsored organizations (PSOs) are health risk-bearing entities that assume risk either by contracting directly with individuals, employers, or other groups, or by entering into risk agreements with HMOs. Under the former arrangement, the PSO is generally subject to state insurance licensure requirements. Under the latter arrangement, the PSO is generally not directly regulated. The National Association of Insurance Commissioners (NAIC) has recommended that direct-contracting PSOs be subjected to the same requirements as HMOs, including minimum cash reserves. Arguments have been made that requiring such reserves of PSOs is burdensome and inappropriate. The NAIC has begun a Consolidated Licensure for Entities Assuming Risk (CLEAR) initiative to establish means by which states may regulate all organizations that perform managed care functions and assume health insurance risk.