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Issue: September 2003
ByJeanne Gonzalez
ByTammy Dotts
September 01, 2003
4 min read
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Supreme Court rules in favor of ‘any willing provider’ state laws

Issue: September 2003
ByJeanne Gonzalez
ByTammy Dotts

Kentucky

Case notes

In April 1997, Kentucky Association of Health Plans Inc., et al. vs. Miller, Commissioner, Kentucky Department of Insurance was filed. The state’s insurers challenged Kentucky’s “any willing provider” law because they said it would increase insurance costs for consumers. They cited the ERISA, which they said preempted the state law.

The Supreme Court ruling affirms Kentucky’s open-network policy, which was intended to give patients greater access to physicians. The ruling gives the go-ahead to states that have resisted passing or enforcing similar statutes because of possible ERISA preemption issues and the extensive litigation required to resolve them.

The ruling enables physicians, pharmacists and other health providers to join an HMO network as long as they are willing to comply with the company’s qualifications. The court delivered its decision in early April.

The opinion

In its unanimous decision written by Associate Justice Antonin Scalia, the Court found the AWP laws did regulate insurance.

“Those who wish to provide health insurance in Kentucky may not discriminate against any willing provider,” Mr. Scalia wrote. “This ‘regulates’ insurance by imposing conditions on the right to engage in the business of insurance.”

The decision represented what Justice Scalia called a break from previous decisions. It sets a precedent that a law that regulates insurance must satisfy two requirements. “It must be specifically directed toward entities engaged in insurance, and it must substantially affect the risk pooling arrangement between the insurer and the insured,” he wrote.

The AMA cited Karen Ignagni, president and CEO of the American Association of Health Plans, who recommended that states implement review commissions to ensure that AWP laws are in the best interest of consumers.

WASHINGTON — States can require managed care organizations to accept any physician who wants to participate in their networks, according to a recent U.S. Supreme Court ruling. The ruling does not, however, stop health maintenance organizations from establishing more stringent membership qualifications that might still keep some physicians out of their networks.

The ruling affirms a Kentucky law that requires health insurers to include any physician who wants to participate in their plans. The Kentucky law, usually called an “any willing provider” (AWP) law, was challenged by health plans in the state of Kentucky, who said the federal Employee Retirement Income Security Act of 1974 (ERISA) overrides the Kentucky law’s open-network policy.

HMOs have argued that state AWP regulations will increase insurance costs.

The ruling makes clear that, in the opinion of the court, ERISA does not override the state law.

The decision in Kentucky Association of Health Plans Inc. vs. Miller was hailed as a victory by the American Medical Association.

Depending on how it is enforced, however, the ruling could hurt practices that have invested in relationships with HMOs, according to Ron Castle, JD, an attorney specializing in insurance law for Arent Fox in Washington. Mr. Castle said he believes the ruling is the court’s way of developing a policy to avoid the conflicts that literal readings of ERISA have caused.

Other experts have called this the first decision allowing government to regulate HMOs, Mr. Castle said, but HMOs are still capable of setting rules by which network physicians must abide.

“The ERISA preemption provision has probably been to the Supreme Court more times than any other federal statutory provision in the past 30 years. Essentially, it’s been up on an annual basis about 25 times. This is the latest of many pronouncements that the court has had,” Mr. Castle said.

The ruling

The ruling applies to physicians, pharmacists and other health professionals who want to participate in HMO networks.

According to the AMA, the ruling enables Kentucky to keep its open-network policy, which was intended to give patients greater access to physicians. The ruling means that other states can now enforce similar laws.

Donald Palmisano, MD, president-elect of the AMA, said the ruling clarifies patient protections established by the states against the abuses of managed care.

The AMA also said the ruling would allow the Kentucky law to protect a qualified physician’s practice if a health plan refused to allow him or her into its network.

“Doctors will now be able to work within the preferred provider organizations they were previously excluded from. States that previously did not have ‘any willing provider’ laws can now weigh in and enforce them,” Mr. Castle said.

He said, however, that the ruling may not be a victory for all physicians. He said large practices that have developed exclusive relationships with managed care plans could see these relationships undermined by the ruling, since now any physician can join the network.

HMOs still in charge

HMOs are still capable of setting their own policies, Mr. Castle said.

“If an HMO wants to control both quality and cost because it’s important to their clients, they have three avenues to do that. They can have cost, quality and procedural controls. This decision does not change the HMO’s ability to have those rules in any way,” Mr. Castle said.

HMOs can implement limitations to reimbursement fees, utilization review mechanisms and peer procedural hurdles, in which patients would need preapproved referrals, he said.

Discrepancies may still exist following the ruling, Mr. Castle said. HMOs could keep a physician out of a network by stating he or she does not comply with their policies. Mr. Castle said he suspects conflicts like this may start to occur.

“A physician will say he or she wanted to comply, and the HMO will say he or she didn’t, so the qualifications that HMOs establish as the preconditions for participation will become the subjects of litigation. Whether a physician has complied will be something, depending on the state, that either a court or an insurance commissioner will have to resolve,” Mr. Castle said.

For Your Information:
  • Ron Castle, JD, can be reached at Arent Fox Kintner Plotkin & Kahn, PLLC, 1050 Connecticut Ave., NW, Washington, DC 20036-5339; (202) 857-6188; fax: (202) 857-6395; e-mail: Castle.Ronald@arentfox.com.

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