Supreme Court decision gives states more power over HMOs

Laws can force companies to let patient use doctors, hospitals outside network

April 03, 2003|By David G. Savage | David G. Savage,SPECIAL TO THE SUN

WASHINGTON - In a victory for patients and their doctors, the Supreme Court ruled yesterday that health maintenance organizations can be forced by state law to open their networks to outside doctors and hospitals.

The decision upholds so-called "any willing provider" laws in half the states.

These pro-consumer laws permit patients enrolled in an HMO to see a favorite doctor or specialist, even if the physician is not part of the network.

So long as the medical provider abides by the network's rules, the HMO may not "discriminate against" the doctor or hospital.

Health insurers have opposed such state measures and contend they will increase costs and lower quality.

They say HMOs are able to bargain for low rates from their participating doctors and hospitals by promising them a large volume of business. If the HMO cannot limit its list of providers, it cannot promise a high volume of business to its participating doctors.

"The unavoidable consequences of these laws is to drive up the costs of health care services," lawyers for the health insurance industry told the Supreme Court.

But the justices were not deciding whether the laws were wise. Instead, the key issue was whether these state regulations violated the federal law that governs employee benefits.

While states can regulate insurance, federal law regulates anything that "relates to" a pension or employee benefits. The line between these two is unclear and has resulted in much litigation.

The difference can be crucial for the rights of patients. Under state law, people who are injured can sue for damages. However, the federal law on employee benefits does not allow general damage suits.

This legal shield for employer-sponsored HMOs has prompted Congress to take up a national "Patients' Bill of Rights." That measure would have removed the legal shield for HMOs, but it stalled last year and is not likely to be revived soon.

However, yesterday's decision is the second in two years from the Supreme Court that has given states more power to regulate HMOs.

Last year in an Illinois case, the court said states can give patients the right to a second opinion from outside experts if their HMO refuses to pay for a benefit or treatment. If the outside reviewers say it is needed, the HMO must pay for it.

Yesterday, the court ruled unanimously that an "any willing provider" law is a state insurance regulation.

This measure "regulates insurance by imposing conditions on the right to engage in the business of insurance," said Justice Antonin Scalia in the case of Kentucky Association of Health Plans vs. Miller.

"We're extremely disappointed," said Dr. Donald Young, president of the Health Insurance Association of America. "The requirement for health plans to open their provider networks will result in higher health insurance premiums."

Maryland never passed "any willing provider" legislation. But a law with similar effect - broader choice of physicians for people covered by employer health plans - went into effect in the state in October 1995, according to the Maryland Health Care Commission.

As a result, in-state employers offering an HMO now offer at least one other plan that allows employees to go to a doctor of their choice.

Market forces drove health plans to offer more choices - and drove legislators to require that they do so.

"One of the reasons the significance of this is diminished is because health plans evolved, because not only physicians did not like them, but consumers and employers didn't either," said T. Michael Preston, executive director of MedChi, Maryland's medical society.

Still, Preston said the Supreme Court ruling is significant because it upholds the power of states to regulate insurers.

David G. Savage writes for the Los Angeles Times, a Tribune Publishing newspaper. Sun staff writer Julie Bell contributed to this article.

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