Ohio mandates clarity in health plan contracts

A new law requires insurers to spell out what physicians will be paid. It also mandates other reforms, including notifying doctors of major changes.

By Emily Berry — Posted April 14, 2008

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Ohio recently enacted legislation that requires health plans to be much more clear and open about contract terms with physicians, including disclosing what insurers will pay for services and regulating the use of so-called silent PPOs.

The Healthcare Simplification Act, signed in late March by Ohio Gov. Ted Strickland, was the culmination of a 1½-year legislative fight between physician organizations that demanded health plans to be more transparent about contract terms, and insurers and corporate interests who viewed the law as cumbersome and not cost effective. But the bill passed overwhelmingly -- unanimously in the Senate March 11, and 91-5 in the House March 12.

The Ohio State Medical Assn., which drafted the original bill, in a statement called the new law "a terrific step toward eliminating some of the most bureaucratic, unfair and anti-competitive practices that have been imposed on physicians by Ohio's HMOs and other health insurers."

"The old quote, 'It levels the playing field,' is certainly true here," said OSMA President Craig W. Anderson, MD, a neonatologist in Columbus.

Individual pieces of Ohio's law have passed in other states. But few, if any, current or proposed bills are as wide-ranging as Ohio's, attacking multiple contracting issues at once.

Connecticut, Kentucky, New Jersey, New York and Tennessee are states where health plan contract-related rules have been introduced. But most address single issues: most-favored-nation clauses, silent PPOs or simplified fee schedules, all of which are covered in Ohio's law.

But even if the bills aren't identical, Ohio's law could help get other health plan contract reforms passed, said Yarnell Beatty, director of legal and government affairs for the Tennessee Medical Assn.

"One of the first questions we're asked in discussing bills with legislators is, 'What have other states done?' " Beatty said.

Ohio's new law requires:

  • Clearer statements of what the insurer will pay for services.
  • A contract "summary disclosure form" that clearly outlines the key parts of the agreement.
  • Notice of significant changes to contracts.
  • A uniform credentialing form.
  • Limits on "network rentals," or silent PPOs, a health plan practice of paying for access to other companies' network physicians, then reimbursing physicians at the lowest rate available.
  • A two-year moratorium on most-favored-nation clauses, which force physicians to guarantee an insurer the lowest price for its members. The law also establishes a study committee to research most-favored-nation clauses and advise the Legislature whether to ban them. The committee's report is due in January 2010, when the group could advise lawmakers to extend the moratorium.
  • A study to explore developing a Web-based eligibility verification system that would tell physicians if care is covered and what portion of the charges the patient will pay. The report is due back Jan 1, 2009.

Most of the new rules become effective June 25. The required uniform credentialing starts Sept. 25, and the provision involving silent PPOs becomes effective March 31, 2009.

The law specifies that a pattern of violations of the new rules will constitute unfair and deceptive trade practices. The law allows the state Dept. of Insurance to investigate and censure a plan if it breaks the rules.

American Medical Association Executive Vice President and CEO Michael D. Maves, MD, MBA, sent a letter in support of the bill to state Rep. Scott Oelslager, chair of the Ohio House Civil and Commercial Law Committee.

"We at the AMA believe that it is an important step in providing greater fairness and transparency in the contracting process, and ultimately benefiting the patient by ensuring that patient care, rather that administrative paperwork, serves as the top priority," Dr. Maves wrote. "It is important to remember that physicians play a critical role as patient advocates in an environment where health insurers have limited accountability for decisions that impact patients. This role has never been more important, and it is undermined when they are presented with one-sided take-it-or-leave-it managed care contracts."

The Ohio Assn. of Health Plans, which represents state-licensed health insurers, and the American Assn. of Preferred Provider Organizations, which represents third-party payers in the network rental business, issued a joint statement in response to the new law. The groups said the Healthcare Simplification Act won't simplify anything.

"While our industry group believes there are some elements of this legislation that will meet our goal of providing affordable, high-quality health care, there is concern about the additional administrative burdens that all parties will incur -- running counter to the intent of simplification," they said.

Linda Woggon, vice president of governmental affairs for the Ohio Chamber of Commerce, said her members were worried that the bill would increase costs and were concerned that companies with self-funded plans under the federal Employee Retirement Income Security Act would need to comply.

ERISA is not mentioned specifically in the bill. An analysis by the Columbus office of the law firm Baker & Hostetler said the term "contracting entity," used in the bill, "could be broadly interpreted to include these types of employer plans."

Meanwhile, physicians still will need to be cautious and educate themselves about contracting, said Joel Shalowitz, MD, an internist who is a professor and director for the health industry management program at Northwestern University's Kellogg School of Management, in Illinois.

"One of the things doctors have to understand is these contracts are written by the lawyers who work for the health plans, who write it in terms that are very skewed to be beneficial to the health plan," he said.

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