California regulators halt plan's confidentiality agreements

California insurance regulators ordered the state Blues to stop using "confidentiality agreements" they said deprive physicians and hospitals of their rights to fair representation during contract negotiations. But doctors worry the cease-and-desist order the state Dept. of Managed Health Care issued Nov. 1 does not go far enough.

The mandatory agreements had given Blue Cross of California "sole and absolute discretion" as to whether doctors could use an attorney or consultant during contract discussions. Doctors and their representatives had to sign the document before negotiations began. The provisions also required that "any confidential information" generated during the process be returned to Blue Cross.

The California Medical Assn. reported the issue to the state in February, as did the California Hospital Assn. Doctors said the unprecedented tactic violates state laws governing attorney-client privilege and fair business practices.

Regulators agreed.

"The agreement is permeated with Blue Cross' interference with the [physician-consultant and physician-attorney] relationship," the order reads. "A physician or hospital's freedom to choose their negotiating representatives is a critical facet of fair and reasonable negotiations and, thus, of fair and reasonable contracts."

The insurance department also found that Blue Cross' definition of confidential materials was "overbroad" and "ambiguous," keeping doctors from bargaining effectively.

Echoing concerns from the medical community, agency spokeswoman Lynne Randolph said the Blue Cross "take-it-or-leave-it" approach could compromise access to care.

The decision states that "Blue Cross' market share in California is sufficiently large that the threat of not contracting with physicians and hospitals who refuse to sign the agreement presents an unjustifiable risk of insufficient provider networks and lack of access to health care."

Blue Cross disputes the reality of that threat, as well as any limitation of doctors' rights to counsel under the agreement.

Peggy Hinz, a spokeswoman for WellPoint, Blue Cross' parent company, said the document in dispute had been intended to "[provide] protection of confidential [company] information and [barred] consultants from sharing Blue Cross data with other providers and competitors."

Medical society officials are reviewing the order to see if further legal action is warranted.

Though the mandate prohibits Blue Cross from continuing to use the covenants in question, it fails to nullify contracts containing secrecy provisions already signed by doctors, said Karen Nikos, a spokeswoman for the California Medical Assn.

Doctors worry it can happen again.

"[The order] does not address the underlying behaviors, and as far as we can tell, it does not prevent Blue Cross from revising the language" and creating another version of the confidentiality agreement, Nikos said.

The CMA believes this particular tactic is unique to Blue Cross.

"But there is always a concern that if [Blue Cross] can get by with this behavior, [other insurers] will follow suit."

Anecdotally, Nikos said a number of state doctors have cancelled their Blue Cross contracts as a result of the confidentiality agreements, in addition to what doctors say are other unreasonable practices by the insurer.

Meanwhile, Blue Cross maintains the privacy requirement is necessary to keep health care costs affordable for patients. The insurer said it will work with the Dept. of Managed Health Care to address the agency's concerns and revamp the document.

Hinz said Blue Cross had used the agreements since 2002, and that other health plans in the state had similar policies.

But Randolph said the DMHC has received no such reports.