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Debate about “any willing provider” laws continues in 1995
MARCH 1995, VOL 61, NO 3 i,l<(;lSl
\ I I O N
Debate about “any willing provider“ laws continues in 7995 ith the proliferation of managed health care organizations and the continued struggle toward health care reform, many health care providers are contracting with third-party payers (eg, health maintenance organizations [HMOs], preferred provider organizations, insurance companies). These third-party payers are attempting to control health care costs by selectively contracting with health care providers (eg, physicians, independent pharmacists, dentists, other practitioners). Health care providers and small-supplier pharmacies without contracts are concerned that they will be denied access to federally funded programs, including Medicare and Medicaid, without “any willing provider” laws. Any willing provider laws compel insurers and managed care organizations to enroll any provider who is willing to accept the plan’s reimbursement and live by its credentialing and quality standards. Any willing provider proposals can be limited to physicians or extend to all health care providers. According to a December 1993 survey by the Group Health Association of America (GHAA), approximately 35 states currently have some form of any willing provider law in place.’ Some states require that HMOs open their networks to any pharmacy that is willing to meet the terms and conditions of the network. These “open pharmacy” laws, as they are known, take two forms:
they allow enrollees to select any local pharmacy of their choice (ie, “freedom of choice” laws) or they prevent HMOs from denying an out-of-network pharmacy from joining the HMO if the pharmacy is willing to accept the terms and conditions. Sometimes both provisions are contained in the same law.’ ORIGINATION OF THE LAWS Pharmacists traditionally have led efforts to enact any willing provider laws. As health care plans increasingly cover pharmaceutical services, the number of firms that manage prescription costs has increased.’ These pharmaceutical managers seek volume discounts from providers in exchange for the business of large numbers of patients. The discounters frequently decline to purchase the services of independent pharmacists because these pharmacists are unable to provide volume discounts. As a result, independent pharmacists are going out of business (ie, 5% per year).J Many health care providers are afraid of being left out of selective contracts (eg, contracts with HMOs), which are gaining popularity and locking up customers, and in some sparsely populated areas, health care providers see any willing provider laws as the only means of protecting their businesses. For example, if a large insurance pool selectively contracts with one provider in such an area, the other providers could easily be forced out of business. 594 AORN JOURNAL
Some patients would either have to travel long distances to obtain health care services or go without the services. The local economy of such areas also might suffer because businesses might be reluctant to locate in medically underserved areas.s PROPONENTS Congressional supporters of the legislation say that without any willing provider measures, “vast numbers of health professionals risk being locked out of the . . . managed-care market.”6These supporters contend the provisions would not have adverse effects because providers would have to abide by the payers’ reimbursement and quality rules. Many providers who have been excluded from managed care networks support any willing provider laws, saying they would be willing to adhere to the terms if given the opportunity. One state in which any willing provider laws are supported is Kentucky. Payers are prohibited from discriminating against any provider who is located within the geographic area of the health benefit plan and is willing to meet the terms and conditions for participation established by the health plan. Gov Brereton Jones (D) did not actively oppose the any willing provider provision because research by his staff members showed that other states that use the language “terms and conditions” in such laws did not experience rising health care costs. With
MARCH 1995, VOL 61, NO 3
such language, insurers are able to to negotiate favorably with providers, even though they are obligated to contract with any willing providers.’
OPPONENTS Major managed health care organizations contend that any willing provider legislation will inhibit health care reform by “saddling” them with unneeded providers, thus compromising their ability to effectively manage their services (ie, any willing provider laws would limit their ability to include only the most cost-efficient providers in their networks). They argue that the key to managed care savings is the substantial level of discount made possible by limiting the number of providers in the organizational network. The limited size of the payer organization ensures each provider a sufficient volume of patients to warrant the fee reductions. Insurance industry studies conclude that any willing provider laws force networks to become less efficient and increase enrollees’ costsX Providers who have already managed to contract with one or more managed care plans find the laws offensive because they potentially eliminate the benefits the providers expected to achieve through selective, sometimes exclusive contracts (ie, increased patient base). Opponents of the laws argue that the laws are not intended to affect providers in already underserved areas but rather to reduce overpopulation of providers in many areas. According to Henry Bachofer, Blue Cross and Blue Shield Association’s executive director of legislative policy and
research, an oversupply of professionals and facilities in some areas is one of the major causes of high health care costs. The oversupply means that some of these providers perform very few specialty procedures and are unable to
Any wi Iling provider laws may inhibit competition without providing any substantia I benefit. obtain expertise in these procedures. This lack of expertise results in poor outcome rates (eg, increased morbidity and mortality, high health care costs). The key is to match the number and types of providers to the needs of the patient population to improve quality and hold down costsy Insurers and third-party payers are opposed to the laws because they directly affect their business, but other groups oppose the laws as well. The National Governors’ Association (NGA) says that the any willing provider mandates, which are being brought before many state legislatures, would severely curtail the ability of managed care organizations to control costs through negotiating leverage and simplified administration. The NGA fears the laws would impede managed care plans’ ability to impose standards on providers as a condition of participation. l o Both the Clinton Administration and the Federal Trade Com597 AORN JOURNAL
mission (FTC), one of the federal agencies empowered to enforce antitrust laws, oppose any willing provider laws as anticompetitive and anticonsumer. The FT’Csays that any willing provider laws may inhibit competition among providers without providing any substantial public benefit. It says the laws may discourage providers from making attractive or innovative proposals to payers because there would be no assurance of a higher volume of patients in return. The effect of this reduced competition would be to deny consumers the cost-reducing benefits that often result from selective payer-provider contracting. The FTC did acknowledge the idea that any willing provider statutes are intended to give consumers greater freedom of provider choice; however, the FTC believes that any willing provider laws are likely to have the unintended effect of denying consumers access to lower priced health care.” COSTS ASSOCIATED WITH ANY WILLING PROVIDER LAWS According to one 1992 study, a typical managed care organization could lose as much as 16% in savings each year if forced to admit any willing pharmacy to its network of suppliers.’*Actuarial models show that any willing provider mandates could raise the administrative costs of HMOs by 43% (127% in the worst-case scenario).13Loss of savings and increased costs mean higher premiums and out-ofpocket expenses for plan enrollees. In fact, a 1994 study by the GHAA shows that insurance premiums could go up 9.1% to 28.7% if any willing provider laws are enacted.14
MARCH 1995, VOL 6 I , NO 3
LEGAL CHALLENGES Any willing provider laws have been challenged in court as being preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, the federal government is responsible for establishing standards for and regulating the administration of employee benefit plans. The Act contains broad language that preempts all state laws that relate to employee benefits; however, there is an exemption for state laws that regulate insurance (ie, whether a state’s any willing provider law is preempted by ERISA depends on whether it relates to employee benefit plans but regulates insurance).I5 For example, Virginia’s any willing provider law was saved from preemption by ERISA because it regulates the business of insurance. The US Supreme Court reasoned that, by protecting an insured’s choice of provider, Virginia’s statute not only regulated
the type and cost of treatment, affecting both the relationship between insurer and insured and the type of policy that could be issued, but it also spread the cost component of a policyholder’s risk-hallmarks of laws that regulates the business of insurance.16 In contrast to Virginia are Alabama and Georgia. Federal district courts have used ERISA to invalidate laws in these states that regulated payer-provider contractual relationships. Both states required that reimbursement to participating pharmacies could be no less than the prevailing rates paid by consumers not enrolled in the payers’ health plans. This requirement restricted payers from obtaining better prices for their enrollees. In both states’ cases, the courts found that the laws clearly related to employee benefit plans.”
CONCLUSION Most states that protect freedom of choice or mandate contracting with providers do so
NOTES 1. T Wagner, ‘“Any willing provider’ laws,” Health Care Law Newsletter 9 (August 1994) 12. 2. P J Kenkel, “‘Any willing provider’ laws pose threat to reform-trade groups,” (Managed Care) Modern Healthcare 23 (Aug 9,1993) 100. 3. J Anderson, “Any willing provider battles heat up in states,”Faulkner & Gray’s Medicine and Health Perspectives 48 (May 2, 1994) 1. 4. Ihid, 2. 5. Ibid, 2-3. 6. E Weissenstein, “‘Any willing provider’ laws targeted,” (The Week in Healthcare) Modern Healthcare 24 (May 23, 1994) 10. 7. Anderson, “Any willing provider battles heat up in states,” 3. 8. Ihid, 2.
only in connection with certain designated providers (eg, optometrists, chiropractors, pharmacies); however, several bills that would include physicians and other health care providers are pending in state legislatures.lx Because the health care reform measures favored by Congress in the 103rd session relied heavily on managed care to restrain health care cost increases, Congress is not likely to enact a law that requires health care payers to contract with all providers willing to meet their criteria. If federal health care reform legislation prohibiting any willing provider laws is passed, it will preempt all state laws. Still, with the uncertain future of federal health care reform legislation, states will continue to address fairness issues in the form of any willing provider laws throughout 1995. LYNN HOLLADAY A V E R Y ASSOCIATEEDITOR
9. Ihid. 10. J Morrissey, “Any-willing-provider measure vetoed,” (The Week in Healthcare) Modern Healthcare 24 (July 25, 1994) 18. 1 1. Wagner, “‘Any willing provider’ laws,” 14. 12. Kenkel, “‘Any willing provider’ laws pose threat to reform-trade groups,” 102. 13. Atkinson & Co, “The cost of ‘any willing provider’ legislation,” Healthcare Trends Report 8 (August 1994) 7. 14. E Weissenstein, “Ways and Means passes measures despite opposition,” (Washington Report) Modern Healthcare 24 (July 4, 1994) 20. 15. Wagner, “‘Any willing provider’ laws,” 14. 16. Ihid, 15. 17. Ihid. 18. Ihid,13.
598 AORN JOURNAL
\ I I O N
Debate about “any willing provider“ laws continues in 7995 ith the proliferation of managed health care organizations and the continued struggle toward health care reform, many health care providers are contracting with third-party payers (eg, health maintenance organizations [HMOs], preferred provider organizations, insurance companies). These third-party payers are attempting to control health care costs by selectively contracting with health care providers (eg, physicians, independent pharmacists, dentists, other practitioners). Health care providers and small-supplier pharmacies without contracts are concerned that they will be denied access to federally funded programs, including Medicare and Medicaid, without “any willing provider” laws. Any willing provider laws compel insurers and managed care organizations to enroll any provider who is willing to accept the plan’s reimbursement and live by its credentialing and quality standards. Any willing provider proposals can be limited to physicians or extend to all health care providers. According to a December 1993 survey by the Group Health Association of America (GHAA), approximately 35 states currently have some form of any willing provider law in place.’ Some states require that HMOs open their networks to any pharmacy that is willing to meet the terms and conditions of the network. These “open pharmacy” laws, as they are known, take two forms:
they allow enrollees to select any local pharmacy of their choice (ie, “freedom of choice” laws) or they prevent HMOs from denying an out-of-network pharmacy from joining the HMO if the pharmacy is willing to accept the terms and conditions. Sometimes both provisions are contained in the same law.’ ORIGINATION OF THE LAWS Pharmacists traditionally have led efforts to enact any willing provider laws. As health care plans increasingly cover pharmaceutical services, the number of firms that manage prescription costs has increased.’ These pharmaceutical managers seek volume discounts from providers in exchange for the business of large numbers of patients. The discounters frequently decline to purchase the services of independent pharmacists because these pharmacists are unable to provide volume discounts. As a result, independent pharmacists are going out of business (ie, 5% per year).J Many health care providers are afraid of being left out of selective contracts (eg, contracts with HMOs), which are gaining popularity and locking up customers, and in some sparsely populated areas, health care providers see any willing provider laws as the only means of protecting their businesses. For example, if a large insurance pool selectively contracts with one provider in such an area, the other providers could easily be forced out of business. 594 AORN JOURNAL
Some patients would either have to travel long distances to obtain health care services or go without the services. The local economy of such areas also might suffer because businesses might be reluctant to locate in medically underserved areas.s PROPONENTS Congressional supporters of the legislation say that without any willing provider measures, “vast numbers of health professionals risk being locked out of the . . . managed-care market.”6These supporters contend the provisions would not have adverse effects because providers would have to abide by the payers’ reimbursement and quality rules. Many providers who have been excluded from managed care networks support any willing provider laws, saying they would be willing to adhere to the terms if given the opportunity. One state in which any willing provider laws are supported is Kentucky. Payers are prohibited from discriminating against any provider who is located within the geographic area of the health benefit plan and is willing to meet the terms and conditions for participation established by the health plan. Gov Brereton Jones (D) did not actively oppose the any willing provider provision because research by his staff members showed that other states that use the language “terms and conditions” in such laws did not experience rising health care costs. With
MARCH 1995, VOL 61, NO 3
such language, insurers are able to to negotiate favorably with providers, even though they are obligated to contract with any willing providers.’
OPPONENTS Major managed health care organizations contend that any willing provider legislation will inhibit health care reform by “saddling” them with unneeded providers, thus compromising their ability to effectively manage their services (ie, any willing provider laws would limit their ability to include only the most cost-efficient providers in their networks). They argue that the key to managed care savings is the substantial level of discount made possible by limiting the number of providers in the organizational network. The limited size of the payer organization ensures each provider a sufficient volume of patients to warrant the fee reductions. Insurance industry studies conclude that any willing provider laws force networks to become less efficient and increase enrollees’ costsX Providers who have already managed to contract with one or more managed care plans find the laws offensive because they potentially eliminate the benefits the providers expected to achieve through selective, sometimes exclusive contracts (ie, increased patient base). Opponents of the laws argue that the laws are not intended to affect providers in already underserved areas but rather to reduce overpopulation of providers in many areas. According to Henry Bachofer, Blue Cross and Blue Shield Association’s executive director of legislative policy and
research, an oversupply of professionals and facilities in some areas is one of the major causes of high health care costs. The oversupply means that some of these providers perform very few specialty procedures and are unable to
Any wi Iling provider laws may inhibit competition without providing any substantia I benefit. obtain expertise in these procedures. This lack of expertise results in poor outcome rates (eg, increased morbidity and mortality, high health care costs). The key is to match the number and types of providers to the needs of the patient population to improve quality and hold down costsy Insurers and third-party payers are opposed to the laws because they directly affect their business, but other groups oppose the laws as well. The National Governors’ Association (NGA) says that the any willing provider mandates, which are being brought before many state legislatures, would severely curtail the ability of managed care organizations to control costs through negotiating leverage and simplified administration. The NGA fears the laws would impede managed care plans’ ability to impose standards on providers as a condition of participation. l o Both the Clinton Administration and the Federal Trade Com597 AORN JOURNAL
mission (FTC), one of the federal agencies empowered to enforce antitrust laws, oppose any willing provider laws as anticompetitive and anticonsumer. The FT’Csays that any willing provider laws may inhibit competition among providers without providing any substantial public benefit. It says the laws may discourage providers from making attractive or innovative proposals to payers because there would be no assurance of a higher volume of patients in return. The effect of this reduced competition would be to deny consumers the cost-reducing benefits that often result from selective payer-provider contracting. The FTC did acknowledge the idea that any willing provider statutes are intended to give consumers greater freedom of provider choice; however, the FTC believes that any willing provider laws are likely to have the unintended effect of denying consumers access to lower priced health care.” COSTS ASSOCIATED WITH ANY WILLING PROVIDER LAWS According to one 1992 study, a typical managed care organization could lose as much as 16% in savings each year if forced to admit any willing pharmacy to its network of suppliers.’*Actuarial models show that any willing provider mandates could raise the administrative costs of HMOs by 43% (127% in the worst-case scenario).13Loss of savings and increased costs mean higher premiums and out-ofpocket expenses for plan enrollees. In fact, a 1994 study by the GHAA shows that insurance premiums could go up 9.1% to 28.7% if any willing provider laws are enacted.14
MARCH 1995, VOL 6 I , NO 3
LEGAL CHALLENGES Any willing provider laws have been challenged in court as being preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA, the federal government is responsible for establishing standards for and regulating the administration of employee benefit plans. The Act contains broad language that preempts all state laws that relate to employee benefits; however, there is an exemption for state laws that regulate insurance (ie, whether a state’s any willing provider law is preempted by ERISA depends on whether it relates to employee benefit plans but regulates insurance).I5 For example, Virginia’s any willing provider law was saved from preemption by ERISA because it regulates the business of insurance. The US Supreme Court reasoned that, by protecting an insured’s choice of provider, Virginia’s statute not only regulated
the type and cost of treatment, affecting both the relationship between insurer and insured and the type of policy that could be issued, but it also spread the cost component of a policyholder’s risk-hallmarks of laws that regulates the business of insurance.16 In contrast to Virginia are Alabama and Georgia. Federal district courts have used ERISA to invalidate laws in these states that regulated payer-provider contractual relationships. Both states required that reimbursement to participating pharmacies could be no less than the prevailing rates paid by consumers not enrolled in the payers’ health plans. This requirement restricted payers from obtaining better prices for their enrollees. In both states’ cases, the courts found that the laws clearly related to employee benefit plans.”
CONCLUSION Most states that protect freedom of choice or mandate contracting with providers do so
NOTES 1. T Wagner, ‘“Any willing provider’ laws,” Health Care Law Newsletter 9 (August 1994) 12. 2. P J Kenkel, “‘Any willing provider’ laws pose threat to reform-trade groups,” (Managed Care) Modern Healthcare 23 (Aug 9,1993) 100. 3. J Anderson, “Any willing provider battles heat up in states,”Faulkner & Gray’s Medicine and Health Perspectives 48 (May 2, 1994) 1. 4. Ihid, 2. 5. Ibid, 2-3. 6. E Weissenstein, “‘Any willing provider’ laws targeted,” (The Week in Healthcare) Modern Healthcare 24 (May 23, 1994) 10. 7. Anderson, “Any willing provider battles heat up in states,” 3. 8. Ihid, 2.
only in connection with certain designated providers (eg, optometrists, chiropractors, pharmacies); however, several bills that would include physicians and other health care providers are pending in state legislatures.lx Because the health care reform measures favored by Congress in the 103rd session relied heavily on managed care to restrain health care cost increases, Congress is not likely to enact a law that requires health care payers to contract with all providers willing to meet their criteria. If federal health care reform legislation prohibiting any willing provider laws is passed, it will preempt all state laws. Still, with the uncertain future of federal health care reform legislation, states will continue to address fairness issues in the form of any willing provider laws throughout 1995. LYNN HOLLADAY A V E R Y ASSOCIATEEDITOR
9. Ihid. 10. J Morrissey, “Any-willing-provider measure vetoed,” (The Week in Healthcare) Modern Healthcare 24 (July 25, 1994) 18. 1 1. Wagner, “‘Any willing provider’ laws,” 14. 12. Kenkel, “‘Any willing provider’ laws pose threat to reform-trade groups,” 102. 13. Atkinson & Co, “The cost of ‘any willing provider’ legislation,” Healthcare Trends Report 8 (August 1994) 7. 14. E Weissenstein, “Ways and Means passes measures despite opposition,” (Washington Report) Modern Healthcare 24 (July 4, 1994) 20. 15. Wagner, “‘Any willing provider’ laws,” 14. 16. Ihid, 15. 17. Ihid. 18. Ihid,13.
598 AORN JOURNAL