A federal judge in Little Rock has struck down Arkansas' controversial 2-year-old any-willing-provider law, saying it violated the federal Employment Retirement Income Security Act of 1974.
Managed-care companies and purchasers exhaled with relief at the ruling, while providers, particularly the Arkansas Medical Society, vowed to fight on in the appellate courts.
"The insurance industry has used a federal law known as ERISA to hijack the will of the people, even though ERISA was originally intended to protect patients, not insurance companies," said David Wroten, assistant executive vice president of the medical society. Noting that the law passed the state Senate 33-1 and the House 88-1, he said: "The people of Arkansas are the real losers."
Wroten said the Patient Protection Act Coalition, a provider group that pushed for the law, will appeal.
The case resonated ominously for health insurers. The American Association of Health Plans, a national managed-care lobby, considered the Arkansas law the most pernicious of its kind and filed an amicus brief.
"This was by far the broadest in terms of types of providers eligible to force their way into a health plan, and therefore the most important to have overturned," said Kathryn Wilber, AAHP assistant general counsel.
The law forces health insurers to accept all providers that meet their provider participation criteria, barring selective contracting with providers based on such factors as location.
The law specifically covered 27 varieties of providers, including physicians, chiropractors, licensed psychological examiners, hospitals and prosthetists.
Prudential Insurance Co. was the lead plaintiff in the case, which was filed in July 1995. The lead defendant was National Park Medical Center of Hot Springs, a for-profit hospital owned by Tenet Healthcare Corp.
The law's supporters argued that it was drafted so as not to conflict with ERISA. But in his 35-page decision rendered Jan. 31, U.S. District Judge James Moody said the state law nullified health plans' gatekeeper function, taking provider choice away from the plans and giving it to providers themselves.
"I am elated," said Norine Yukon, executive director of Prudential HealthCare-Arkansas. "If the law had gone into effect, it would have decreased the ability of a business to make an HMO choice. Two of the main features of an HMO are the gatekeeper and the limited provider panel. This law would have interfered with both of those."
The AAHP's Wilber added: "These kinds of laws make it very difficult for health plans to select only the highest quality providers" and to control costs.
Prohibiting selective contracting imposes a real burden, which in turn reduces health plan options, she said. "You end up with a situation where you are stifling innovation and hampering competition," Wilber said. "In the end the consumer has less choice."
The American Medical Association reports 31 states have any-willing-provider laws of various kinds.
"The AMA doesn't support any-willing-provider laws," a spokesman said, "but it does advocate legislation that allows patients the free choice of plans and the ability to see doctors."
The Arkansas Hospital Association was not a party to the lawsuit but gave money to the coalition defending the law. The association supported its passage in 1995.