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States can force open HMOs

©Associated Press

April 3, 2003

WASHINGTON -- The Supreme Court ruled Wednesday that states can pass laws forcing HMOs to open their networks to more health care providers, giving patients broader choices of doctors and hospitals but potentially boosting costs.

The unanimous ruling was a setback for the managed care industry, which argued that closed networks lower health care costs because providers agree to accept lower fees in return for a guaranteed stream of patients.

The decision also gives states more freedom to regulate insurance companies, another in a line of decisions from the court expanding states' rights.

About half the states have passed "any willing provider" laws in the past decade in response to complaints that HMOs and insurance companies sometimes block people from seeing the doctors of their choice.

The laws require managed care networks or insurance companies to accept out-of-network health care providers -- physicians, pharmacists, nurse practitioners or specialists. In return, the providers must agree to the insurer's reimbursement rates and contract terms.

Florida does not have such a statute, though that could change. A Senate bill being heard in committee this morning in Tallahassee is similar to the ones upheld by the Supreme Court. The Florida bill's supporters expect the court's decision to help their cause. Similar legislation failed to pass last year when it was part of a larger bill.

A spokesman for BlueCross BlueShield of Florida said the state's biggest insurer opposes the legislation. "We feel they would undermine our ability to adequately oversee and manage our provider networks in a way to assure high quality," said Bruce Middlebrooks of BlueCross. "They would also add to our administrative costs significantly, which would most likely be passed on to members."

The court ruled on a challenge to Kentucky's laws, considered the broadest in the country. The Bush administration had sided with Kentucky.

"It's a message to states that you can have consumer protection laws," Kentucky Insurance Commissioner Janie Miller said.

Donald Young, president of the Health Insurance Association of America, said the laws "are one more instance of government unnecessarily interfering in private relationships between doctors and health plans."

The Kentucky statutes were challenged by a group of HMOs and an industry trade association. The case turned on whether the laws regulate insurance, which states are allowed to police, or regulate employee benefits, an area reserved for Congress.

Justice Antonin Scalia wrote in the ruling that Kentucky residents may no longer "seek insurance from a closed network of health care providers in exchange for a lower premium."

The justices said nothing about any willing provider laws' potential benefits to patients, or whether they believe the statutes work as intended.

The Kentucky challenge is one of two major health care cases at the court this year. The justices will rule soon on the other, from Maine, that asks whether states can force drug companies to lower prices for the working poor, retirees and others who do not receive health coverage or drug benefits through their jobs.

-- Times staff writer Kris Hundley contributed to this report.

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