TMA Wins "Silent PPO" Legislation
Legislative Affairs Feature – September 2013
Tex Med. 2013;109(9):41-45.
By Amy Lynn Sorrel
Plano psychiatrist Philip Korenman, MD, thought he had a clean slate after canceling most of his health insurance contracts by 2008. The last one ended in December 2012. He informed his patients, too, so they understood he no longer accepted the insurance plans or the payment rates he once negotiated with them in exchange for a steady volume of patients.
So when years later, some of his patients came in with explanation-of-benefit forms indicating that Dr. Korenman was still in network for some of those plans and that his patients were eligible for reduced rates on his services, he knew those "discounts" were somehow taken improperly.
Finding out exactly how that happened mired Dr. Korenman and his staff in a web of detective work to trace the discounts back to their sources. In one case, months of phone calls, faxes, and digging through old paperwork revealed that a 1993 contract rate he canceled in 2000 was applied to a patient's claim nearly 20 years later in 2012. As it turned out, the contract – even though it was obsolete – was bought and sold among several preferred provider organizations (PPOs), which assemble and rent out physician networks, and third-party administrators, which access those contracts to manage claims on behalf of payers such as employers and health plans.
Confused? So was Dr. Korenman. He didn't even recognize the name of some of the companies because he never directly contracted with them. Some of them had consolidated; others he tried to call were out of business. Yet, behind the scenes, mysterious entities used his old contract rates without his permission and seemingly without any rules. That left Dr. Korenman with no recourse but to take the task on himself before seeking help from the Texas Medical Association's Payment Advocacy Department.
"It's a very nerve-racking situation," he said. "I am trying to run a practice and take care of patients, while doing all this sleuth work. And I'm worrying in the back of my mind, is this going to turn into a legal issue, and are these insurance companies going to come after me and accuse me of breaking my contract?"
More importantly, "patients are the ones who get hurt," Dr. Korenman added. They are led to believe physicians are in network when they are not; they wonder why they are not entitled to a particular discount and unexpectedly end up with higher out-of-pocket costs.
The confusion also reflects on physician practices "and undermines our credibility. And as a physician, and especially as a psychiatrist, a big part of that [patient-physician] relationship is trust and credibility," he said.
Thanks to TMA-won legislation, those so-called "silent-PPO" activities will no longer fly under the radar. Roughly eight years in the making, Senate Bill 822 – spearheaded by Rep. Craig Eiland (D-Galveston) and carried through by Sen. Charles Schwertner, MD (R-Georgetown) – establishes rules to identify those companies, subjects them to oversight by the Texas Department of Insurance (TDI), and regulates how they share a physician's contract information. More importantly, it requires a doctor's permission for the companies to share that information. The law took effect Sept. 1.
"It's really important the playing field is level," said TMA Council on Legislation Chair Dawn Buckingham, MD.
Dr. Korenman fortunately had a paper trail of canceled contracts. Dr. Buckingham, however, says her six-physician ophthalmology practice has more than 200 active insurance contracts and thousands of claims. "It's nearly impossible to ferret out which claims are paid correctly and which are not," she said. "To a practice, this [law] means we are no longer being robbed blind, literally."
The law does not outright prevent the buying, selling, or leasing of a contract rate, but it ensures that such activity occurs within certain parameters, TMA Associate Director for Legislative Affairs Patricia Kolodzey clarified. Prohibiting it altogether was an unlikely scenario, given the growth of so-called rental networks and their entrenchment in the insurance market. But SB 822 does put new regulations on those activities. To buy, sell, or lease a contract rate, entities must first:
- Register with TDI;
- Give physicians a line-item list of all network products covered by a payment contract and separate, corresponding fee schedules; and
- Obtain express authority from and provide prior notification to physicians for each line of business.
TDI also has authority to slap financial fines on companies that don't comply or to revoke their licenses to conduct business.
"A Long Time Coming"
TMA shepherded the bill over the past decade when it helped develop model silent PPO legislation at the American Medical Association that later became the basis for a model bill by the National Conference of Insurance Legislators (NCOIL).
Representative Eiland, a past NCOIL president who worked on the early legislation, carried a version of the bill in Texas over the past three legislative sessions as a vice chair and member of the House Insurance Committee.
"It has been a long time coming, but I am happy to say that doctors will now have more transparency in their contracts. Transparency was a big theme this session, and I believe is one reason that this issue had more traction than in past sessions. This is more about transparency than new regulations," he said. With the new legislation, "we will be able to know what groups are out there taking doctors' discounts and where those discounts are coming from. Doctors will know exactly what the schedule for each line of business will be and who will have access to those discounts."
Dr. Buckingham added that part of the lengthy process stemmed from the fact that these activities were difficult to sort through and understand, for physicians as well as for legislators. Her testimony and that of Dr. Korenman were a critical part of educating lawmakers on the subject.
So was sponsorship of the bill by physician-legislator and first-time state senator Dr. Schwertner, who understood how such activities can burden physician practices. "This bill is about truth in contracting and shining a light on these silent PPO networks. It's a great win for medicine to finally get this bill across the finish line."
The legislation also won key support from Blue Cross and Blue Shield of Texas. The health plan does not use rental networks, but still must comply with the new law, says BCBSTX Chief Medical Officer Dan McCoy, MD.
"Everything about the health insurance marketplace is complicated," he said. "It just makes sense we should know who these entities are and what they represent. It also makes sense physicians should know what they are going to get paid for services they bill."
The new protections also coincide with the launch of a federally run health insurance marketplace in Texas on Oct. 1, another likely impetus for the bill's long-awaited passage, Dr. McCoy added.
The Blues plans to participate in the exchange and as new products spring up, "we felt like it was critically important for Texas physicians to knowingly consent to participate in any new networks and new products that will be available as part of this change," he said. "We felt also this bill would help to fix the confusion (surrounding silent PPOs) … and really ensure Texas consumers would ultimately have access to a network of physicians offered under the federal exchange."
Another TMA legislative victory this session, Senate Bill 1221 by Sen. Ken Paxton (R-McKinney), will provide similar protections for physicians as Medicaid managed care companies look to offer commercial exchange plans using Medicaid payment rates. The law, which also took effect Sept. 1, ensures physicians know when their discounted contract rates under Medicaid managed care or the Children's Health Insurance Program (CHIP) are applied to other products.
In passing SB 822, lawmakers ironed out some wrinkles in earlier proposals that drew opposition in the past from multiple interested parties. The bill's authors amended provisions that some business groups worried would disrupt employer-funded benefit plans and streamlined the notification and consent provisions, easing concerns from health plans and PPOs about their ability to comply with the requirements. Administrative penalties at TDI replaced provisions subjecting companies to court action.
The American Association of Preferred Provider Organizations changed its position midsession to support SB 822. The Texas Association of Health Plans opposed earlier legislative efforts, but was neutral in this session, as was the Texas Association of Business. The Texas Association of Benefit Administrators was opposed to certain provisions.
Out in the Open
The registration provisions under the new law will for the first time provide an inventory of the various contracting entities and any of their affiliated companies or subsidiary networks, whether they are PPOs that assemble and sell or rent out physician networks, third-party administrators that access those contracts to process payers' claims, or insurers. TDI also must make that registration information publicly available.
That level of transparency alone will save practices significant amounts of time and money chasing down improper claims, says Bill Reynolds. He is founder of Austin-based nVenio Analytics, which helps physicians recover improperly paid claims. (See "Claims Detectives," August 2013 Texas Medicine, pages 57-60.)
Beginning in 2000, for example, a number of PPO networks began consolidating, putting roughly a dozen of the larger national networks under single ownership. But a company still can pass negotiated contract rates on to any number of its subsidiaries, he says. So if physicians contract with one company, their discount still may be shared with half-a-dozen other companies.
"It takes a lot of detective work to figure that out," but the new law will make it easier for doctors to know whom they are dealing with, rather than stabbing in the dark, Mr. Reynolds said. While it's currently difficult to tell how many of those networks operate in Texas, he estimates that most practices see patients from around half-a-dozen different regional PPO networks and a dozen more national players.
The disclosures will make it a lot less expensive for practices to resolve improper claims, he added, saying that on average it can cost $50 to chase down a $40 payment.
Physicians also will get to see which fees apply to which networks, specifically HMOs, PPOs, exclusive provider organizations, or Medicare Advantage or Medicaid managed care plans. Companies looking to buy or sell those rates must not only spell out each line of business in physicians' contracts, but also get physicians' line-item approval.
"If you don't have all of those elements, you have not received express authority from the physician to sell a contract rate," TMA Vice President for Medical Economics Lee Spangler said.
Third parties wanting to access physician rates also must comply with all of the other terms of that contract. He says the provision was an important protection for physicians because "a lot of downstream entities were just taking the benefit of the contract rate without any of the obligations," such as promises that physicians will receive a flow of patients within that network.
While the new law adds a significant level of transparency, it also requires some homework by physicians.
New notice provisions in the law provide timelines for transitioning to the new regulations without erasing existing contracts.
For new contracts created after Sept. 1, doctors must agree line by line to the arrangements offered and sign off on each one for the contract to be valid.
For contracts in place before Sept. 1, physicians will begin receiving renewal letters detailing the various networks and fee schedules they originally signed up for and giving them a chance to object and opt out if they choose. Not all of those notices will show up in the mailbox on Sept. 1. The timing for the notice for older contracts depends on the renewal dates contained in those contracts.
Physicians must respond to the notices within 60 days. If they don't, they will have given their permission without saying anything, Mr. Spangler cautions.
That means physicians must scrutinize network contracts and pay attention to which networks they are joining, he says. For instance, one contract may include a dozen lines of business. Although the new law requires some products to have separate signature lines, other coverage, such as workers' compensation or discount card programs, does not have to be singled out, so physicians should carefully review contract offers to make sure they exclude insurance products they don't want.
Mr. Reynolds adds that physician practices should be diligent about organizing and maintaining those contracts and corresponding fee schedules and making that information easily available to billing staff. Practices also should keep an account of which networks they contract with, not just where they send claims – often two different entities.
Despite the legislative win, TMA's work will continue as TDI develops rules on the registration process. The law is already in effect, however, and companies must comply regardless of when those regulations materialize.
Ms. Kolodzey says TMA will work with newly appointed TDI Commissioner Julia Rathgeber to ensure the rules establish an effective registration process.
"This will allow TDI to better identify those networks or third-party payers in the market who incorrectly portray a physician's network participation and levy appropriate fines or penalties when necessary. This will go a long way in making the advertised networks credible and help patients know when physicians who care for them are truly network physicians and not be surprised by unexpected out-of-pocket costs."
A TDI spokesman told Texas Medicine those rules are "in the works," but had no further comment.
Amy Lynn Sorrel can be reached by telephone at (800) 880-1300, ext. 1392, or (512) 370-1392; by fax at (512) 370-1629; or by email.
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