TMA Testimony on HB 1534 on Silent PPO Regulation

Testimony: Committee Substitute House Bill 1534 by Rep. Craig Eiland (D-Galveston)  

House Insurance Committee
By: Dawn Buckingham, MD

April 12, 2011

Good afternoon, Chairman Smithee and members of the committee. My name is Dawn Buckingham and I am a practicing ophthalmologist in Austin. On behalf of the Texas Medical Association and its nearly 45,000 physicians and medical student members, I would like to thank the committee for the opportunity to testify today in favor of the Committee Substitute for House Bill 1534, relating to the regulation of health care provider network contract arrangements.  We believe the Committee Substitute for HB 1534 is an encouraging step in the right direction toward ensuring that rental networks actions are transparent and appropriate.  More importantly, I am happy to tell you the language before you today is the result of negotiation and agreement among several stakeholders.   

Over the past few months, the Texas Medical Association (TMA), the Texas Hospital Association (THA), the Texas Association of Health Plans (TAHP), and the American Association of Preferred Provider Organizations (AAPPO) worked to reach an agreement on new language to HB 1534.  The committee substitute seeks to balance access to preferred provider organization networks while making PPO actions transparent when they use a physician or other health care provider discount.  Those of you who have been on the committee for some time now probably are familiar with some form of this legislation from past sessions. What is different this year is that those parties who usually disagree are bringing you an agreed-upon bill.   

The language in the committee substitute tracks the National Conference of Insurance Legislators RENTAL NETWORK CONTRACT ARRANGEMENTS MODEL ACT.  The model act was adopted by the NCOIL Executive Committee and by its Health, Long-Term Care, and Health Retirement Issues Committee in the fall of 2008.  For those members who are new to the House Insurance Committee — NCOIL is an organization of state legislators who focus on insurance legislation and regulation.  Legislators active in NCOIL either chair or serve on committees responsible for insurance regulation in their respective state houses across the country. In fact, Representatives Eiland, Taylor, and Vo all attend and participate in NCOIL committees and meetings regularly.  

NCOIL model-bill workgroups consist of state legislators who will eventually entertain a model act for adoption, insurance industry stakeholders in their own states, as well as provider and consumer groups.  If NCOIL considers and passes a model bill you can be assured it has had to pass a lot of muster.  NCOIL staff and the stakeholder workgroups represented by their national associations sometimes meet for more than a year before model language is finally ready for review by the various NCOIL committees.  

More than a decade ago, the Texas Legislature passed Senate Bill 130.  It was pretty straight forward. It prohibited insurers from taking discounts unless there was a direct contract arrangement.  Since SB 130’s passage, insurers have been sanctioned by the Texas Department of Insurance based on complaints by physicians or other health care providers who can determine that an unauthorized discount was taken.  Unfortunately, there are other entities in the market today that inappropriately access these same discounts without the benefit of a contract.  They consist of re-pricers, rental or PPO networks, and other third parties whose various activities are not regulated or transparent.  Their unregulated and inappropriate activity has been tagged with the term “Silent PPO.”  To give you an idea of how difficult it is to know just who is doing what, please find attached to my testimony a visual of how many parties may be able to access a discount when they shouldn’t. 

For several years now, TMA and other stakeholder associations have sought a solution to the “Silent-PPO” problem.  What began as a random problem due to a few bad actors has turned into a more pervasive problem due to the proliferation of third-party entities in the health care market today. 

These entities gain access to legitimate contracts that physicians and providers have previously entered into through direct contracting or through “PPO rental networks.”  These contracts are often accessed, rented, or leased without the physician or health care provider’s consent or prior knowledge.  Only after a service has been provided, and after the physician or health care provider has been paid, can they determine if the insurer or third party has paid them correctly or incorrectly based on a contracted rate.  They sometimes find that the rate in question may have been entered into years ago with a totally different carrier.  In fact, that rate for that particular contract may have even been terminated.  These inappropriate discounts cause confusion and ultimately higher costs to the patient. 

These “Silent PPO” rental network entities, as well as some of these other third parties, are not currently required to be licensed, nor are they required to even be registered in the state.  As a result, their presence in the market remains under the radar and the inappropriate accessing of discounts goes unregulated.  At least eighteen other states have recognized the need for transparency in this sector of the market and have taken steps to regulate this activity. 

The Committee Substitute for HB 1534 establishes criteria for network and discount access and contract termination, and sets out contracting entity rights and responsibilities.  Additionally, this legislation requires disclosures to be made to providers and other contracting entities when a third-party obtains access to their proprietary contract.  The committee substitute also requires registration of currently unlicensed entities, and gives physician and other health care providers remedies when a contract discount is taken and used without a contractual basis for that use.  

Chairman Smithee and members of the committee, thank you again for allowing me to testify today.  TMA would like to thank Representative Eiland and his staff, along with the Texas Association of Health Plans, the Texas Hospital Association and Kerry Cammack, and Amy Beard on behalf of Coventry, and the Association of Preferred Provider Organizations.  They all worked with us to come up with what we consider a good first step solution in identifying these entities, as well as giving them specific disclosure and contracting responsibilities if they desire to be part of the health care market in Texas.

82nd Texas Legislature Testimonies 


Last Updated On

April 15, 2011

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