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High Court Says HMO Networks Can Be Open to All Providers

  • April 3rd, 2003

The Supreme Court has ruled unanimously that states may force health maintenance organizations (HMOs) to accept any interested doctors, hospitals or other providers into their networks. according to an article in the Washington Post.

The ruling upheld Kentucky's "Any Willing Provider (AWP)" law, which prevents HMOs from excluding providers from their networks as long as the providers agree to abide by the HMO's terms and conditions. Several HMOs sued the state, charging that the state law interferes with their ability to provide low-cost care.

HMOs keep costs down by maintaining exclusive networks of doctors and other providers who agree to deliver services at discounted rates. In return, the network providers receive the benefit of many patients referred to them by the HMO. If they are forced to accept any willing provider into their networks, the HMOs contended, this will reduce the volume of patients going to any one provider and ultimately take away the incentive for physicians to accept discounted rates in return for higher patient volumes.

The HMOs tried to defeat the Kentucky law by arguing that it was preempted by the Employee Retirement Income Security Act of 1974 (ERISA). That federal law preempts all state laws that "relate to any employee benefit plan," but grants an exemption to state laws that "regulate insurance, banking or securities."

In a unanimous opinion written by Justice Antonin Scalia, the Supreme Court said the Kentucky statute regulates insurance and therefore is not preempted by ERISA.

But there was doubt over the practical effect the ruling would have on consumers and the health care system. In managed care's early days, provider networks were truly exclusive and many providers had difficulty getting in, prompting Kentucky and five other states to pass AWP laws that apply to doctors and other health care providers.

But in recent years, in part to make their services more appealing to consumers, HMO and other managed care provider networks have expanded, to the point that some are beating the bushes for providers willing to join.

Ron Pollack, executive director of Families USA, a consumer health care advocacy group, said the ruling would have little effect on health care consumers. "I think this is a tempest in a teapot from a consumer's perspective," he said.

To read the complete Washington Post article, click here. (Article may be only temporarily available.)

To download the Supreme Court opinion, Kentucky Association of Health Care Plans Inc. v. Miller, 538 U.S. ____ (2003), in PDF format, go to: http://www.supremecourtus.gov/opinions/02pdf/00-1471.pdf

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Last Modified: 04/03/2003
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