Ready and Willing

Supreme Court Endorses Kentucky Any Willing Provider Law  

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Law Feature -- June 2003  

By Walt Borges
Associate Editor

The U.S. Supreme Court handed physicians a major victory in April. But Texas physicians and patients won't be able to benefit from the high court decision without some help from the Texas Legislature.

The court upheld a Kentucky law that allows "any willing provider" (AWP) to be added to a health plan's network, providing the physician agrees to the insurer's contract terms. Thirty-six states have some form of AWP law, but Texas is not one of them.

Such laws define a potential skirmish line between physicians and health plans over the exclusive networks many plans maintain. That's because patients want to see the doctors they know and trust, employers want their employees to be happy with the available choices of physicians, and many physicians complain that being excluded from a health plan's network denies them access to a significant percentage of patients. 

The problem of network membership can punish doctors who move their practices, because being on the network in one geographic region or coverage area does not guarantee that a physician will be admitted by the same plan in another.

David Duffner, MD, an orthopedic surgeon and former member of TMA's Council on Legislation who now practices with a large group in Tulsa, is a prime example of what can happen.

"When I moved several years ago from Tyler to Austin, I hit a brick wall when I tried to join the same plans I was on in East Texas," he recalled. "It was a nightmare. Even finding someone to talk to about network membership was difficult. At one insurer, there simply was no one to talk to. The sad part is that these were responses from the insurers whose panels I was on in Tyler."

Another health plan told Dr. Duffner he would need to get an office and have hospital staff credentials, which would take months to acquire, before he could apply to join the network. While waiting for network admission, practice overhead expenses would be mounting without the benefit of revenues from the same health plans that referred patients to him in Tyler, Dr. Duffner realized. He was barely able to cover his overhead.

Without access to patients referred by insurers, many of Dr. Duffner's patients were covered by Medicaid or were trauma patients. "A physician can't make a living on Medicaid and trauma patients," Dr. Duffner said.

"Back in the golden era of medicine, medicine was all about the physician-patient relationship, and there was a myth that you could hang out a shingle and do well," he said. "But it's different today, when physicians and their practices are at the mercy of insurance companies. Patients are told by the insurance companies, 'Your doctor left our panel. Go to a new doctor on our panel -- or pay.'"

Before moving to Austin, Dr. Duffner realized that panels in the Austin area for two of the state's largest health plans, Aetna U.S. Healthcare and Blue Cross and Blue Shield of Texas (BCBS Texas), might be full, or "closed" in insurance jargon. He also reasoned that Austin might be saturated with orthopedic surgeons. That led him to locate his practice in the Lakeway area in the Hill Country 25 miles west of downtown Austin. He says several insurers promptly notified him that his plan to get on their networks wouldn't work.

"I was told that within the Highway 71 corridor, the standard for admitting a specialist to the closed panel was whether a similar specialist was available within 70 miles," Dr. Duffner said.

"It wasn't just me," he explained. "Even established orthopedic groups were having trouble getting new associates on the panels. But when there is a shortage of specialists, it's different. If you're a neurosurgeon, there's a shortage, so the insurer will tell you there is no problem in joining its panel."

Even those insurers with which he had close relationships balked at quick admission to their networks, apparently because their corporate bureaucracies move slowly. While in Richardson to talk with BCBS Texas executives on legislative business, Dr. Duffner mentioned his frustrations with the slow pace of joining a panel. By the time he left the BCBS Texas headquarters, he was notified he was admitted to the company's network.

Kentucky Tries a New Tack  

In 1994, concerned that some Kentucky health plans offered patients access to only one doctor in some specialties, the Kentucky Legislature passed an AWP law governing insurers and their networks. In 1997, seven Kentucky health maintenance organizations (HMOs) and their state trade association, the Kentucky Association of Health Plans, challenged the law, arguing that the federal Employee Retirement Income Security Act (ERISA) preempted state law.

ERISA generally has been held to preempt state laws that "relate to" insurance, unless they are "saved" from being preempted because they "regulate" insurance, banking, or securities. In recent years, the U.S. Supreme Court has expanded its definition of what constitutes "regulation," most notably allowing states to provide for independent review of health plans' decisions on medical necessity.

Although they lost in the lower courts, the Kentucky health plans got the U.S. Supreme Court to accept the case. They mobilized support from the health insurance industry and the National Association of Manufacturers, while friend-of-the-court briefs supporting Kentucky's position were filed by 12 states and the American Medical Association. The Bush administration also supported the state law.

On April 2, the court unanimously held that ERISA did not preempt the Kentucky law.

In his opinion for the court, Justice Antonin Scalia described the bargain between network physicians and HMOs as an agreement by physicians "to render health-care services to the HMOs' subscribers at discounted rates and to comply with other contractual requirements. In return, they receive the benefit of patient volume higher than that achieved by non-network providers who lack access to petitioners' subscribers."

The key question was whether the Kentucky law was "specifically directed" toward regulating insurance. The health plans argued that it regulated insurers and their contract behavior because "regulation of insurance" is usually defined as controlling the contents of an insurer's contract with the patient. Kentucky maintained that its law did not regulate insurance because it did not control "the actual terms of insurance policies" and focused instead on relationships between insurers and third parties.

The Supreme Court ruled that Kentucky health insurers could not discriminate against any willing provider. "This 'regulates' insurance by imposing conditions on the right to engage in the business of insurance; whether or not an HMO's contracts with providers constitute the 'business of insurance' … is beside the point," Justice Scalia wrote.

The court also held that the three-part legal test on preemption established by federal law applied to conduct by private individuals and organizations, not state laws, so it decided to make a clean break with past decisions and set out a new standard to evaluate ERISA preemption of state laws. From now on, state laws will be deemed to regulate insurance -- thus avoiding preemption -- when they are "specifically directed toward entities engaged in insurance" and when they affect risk-pooling arrangements between the insurer and the insured.

A Mixed Response  

Many health plans object to AWP laws, arguing that relaxing network membership undermines the motivation for doctors to sign contracts that permit insurers to discount fees in exchange for referrals of insured patients.

On the other hand, they recognize that there is significant public pressure on plans to ensure the widest possible choice of doctors.

"The U.S. Supreme Court decision does not have a significant impact on our business nor does it change our practices in Texas, as we have already responded to customer demand for broader networks," said Tania Graves, a spokesman for CIGNA. "We have broadened our networks by recruiting physicians in local markets over the last couple of years."

Norman Chenven, MD, executive vice president of Austin Regional Clinic, says it is unlikely that a large medical group would not be admitted to a network because most plans understand that the greater the number of doctors, the greater the number of patients who will want to access their care.

The contracts between insurers and their limited pool of network physicians is "based on the idea that you will get a reasonable level of patient referrals in exchange for your discounted fees," he said. Insurers also lower administrative costs by using fewer doctors, and while that helps keep premiums down, it also lowers patients' access to specific doctors, a limitation often unpopular with the patients.

Dr. Chenven warns that AWP laws could undermine real efforts by health insurers to ensure quality in their panels and networks. "A health plan that sets out to use quality as a determinant is taken out of its game," he said.

"We have a contract with health insurance companies that allows the insurer to exclude individuals from the network, but the company has to have a reason," Dr. Chenven said. "We can challenge the decision through arbitration, but we've never had that happen in 20 years."

Open Doors  

Some insurers say they are moving toward larger networks to satisfy the interests of patients and physicians, and they are unsure whether AWP laws are needed in Texas.

"BCBS Texas has a philosophy of allowing any physician -- MD or DO -- into our various networks, as long as the physician meets the credentialing criteria and accepts our standard contract language and reimbursement model," said Darren Rodgers, division senior vice president of Health Care Management for BCBS Texas. If the Texas Legislature considers an AWP law, the BCBS response would be tailored to the scope of the proposals, he says.

"BCBS Texas' position would be determined by the language of the specific AWP proposal," he said. "If the proposal applied only to physicians, it's likely that we would not oppose it. If the AWP proposal included ancillary professional providers or facilities, we believe this could raise our administrative costs due to the cost of managing the size of the network, which would mean higher health insurance costs for customers or lower reimbursements to providers."

How does this sit with Dr. Duffner, now an expatriate in Oklahoma? He notes that while he was struggling with his Lakeway practice, he heard a speech by a UnitedHealthcare executive who touted United's policy of open panels. Since he had been rejected by United, Dr. Duffner called the company. He was told that United's panels were open in most places.

Dr. Duffner suspects there is an economic motive for insurers to resist AWP laws in Texas.

"The name of the game for health insurers is to limit and delay losses. If an insurer limits the plan's panel, it takes longer for a patient to see a doctor and longer for the patient to submit a claim."

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