NU Online News Service, April 2, 2003, 5:23 p.m. EST – Washington
The U.S. Supreme Court has handed down a unanimous ruling that upholds Kentucky’s “any willing provider” statute.
The statute prohibits health insurers from discriminating against any qualified doctor or other qualified health care provider who is willing to meet the terms and conditions for participation in the plan’s provider network.
Today, many health insurers limit participation in their networks in an effort to keep out bad doctors and hospitals and ensure that network providers get enough patients to offer significant volume discounts. But some states have enacted AWP laws to give consumers more flexibility and help doctors who feel shut out get into the provider networks.
Many groups representing providers are applauding the new ruling, on Kentucky Association of Health Plans v. Miller, but health insurers say the ruling will increase health insurance premiums and may even hurt the quality of care.
“Ultimately, it is the American worker who will bear the brunt of this decision,” says Dr. Donald Young, president of the Health Insurance Association of America, Washington.
AWP laws lead to unnecessary government interference in private relationships between doctors and health plans, Young says.
The Kentucky Association of Health Plans, Frankfort, Ky., sued to prevent enforcement of the Kentucky AWP law, arguing that it is preempted by the Employee Retirement Income Security Act of 1974.
ERISA preempts state laws that relate to employee benefit plans, but state laws that regulate the business of insurance are saved from preemption.
The Kentucky association argued that the AWP law does not regulate the business of insurance and thus is not saved from preemption.
Both a U.S. district court and the 6th Circuit Court of Appeals ruled against the Kentucky association and upheld the AWP law.
The Supreme Court agreed, in an opinion written by Justice Antonin Scalia.
In the first part of the opinion, the court rejected the Kentucky Association’s argument that the AWP law is not “specifically directed” toward the insurance industry.
The Kentucky association had argued that the law regulates not only insurers, but also providers, and thus is not specifically directed toward insurers.
But the court said that while it is true that, as a consequence of the AWP law, providers will be unable to enter into certain agreements with insurers, it does not necessarily follow that the AWP law is not specifically directed at the insurance industry.
“Regulations ?directed toward’ certain entities will almost always disable other entities from doing, with the regulated entities, what the regulations forbid; this does not suffice to place such regulation outside the scope of ERISA’s savings clause,” the court said.
The Kentucky association also argued that AWP laws do not regulate the business of insurance because they do not control the actual terms of insurance policies. Rather, the association said, they focus on the relationship between insurers and third-party providers.
But the court rejected this argument as well. The Kentucky’s AWP law regulates insurance by imposing conditions on the right to engage in the business of insurance, the court said.
This means that the law substantially affects the risk-pooling arrangement between the insurer and the insured, the court added.
“No longer may Kentucky insureds seek insurance from a closed network of health care providers in exchange for a lower premium,” the court said.
“The AWP prohibition substantially affects the type of risk-pooling arrangements that insurers may offer,” the court said.
The court added that its decision, in effect, establishes a new two-part test for determining whether a state law regulates the business of insurance.
The first part of the test is that the law must be specifically directed toward entities engaged in insurance. The second part is that the law must substantially affect the risk-pooling arrangement between the insurer and the insured.
The Kentucky AWP law satisfies both parts of the test, the court said.
The full text of the opinion is available at http://www.supremecourtus.gov/opinions/02slipopinion.html