In an effort to revive a 1995 law aimed at giving patients greater access to care, Arkansas' attorney general has accused the state's largest health plan of monopolizing the local health insurance market.
The state filed a motion in U.S. District Court in Little Rock last month accusing Arkansas Blue Cross and Blue Shield of abusing its market power by creating "closed networks and exclusive alliances" with providers that are based "not on quality of care but on economic considerations." With more than 898,000 members, the Little Rock-based Blues is by far the largest insurer in the state, which has a total population of 2.4 million.
The Dec. 15 filing is the latest salvo in a mounting legal battle over the fate of the state's controversial Patient Protection Act of 1995, which would have required insurers to open their networks to any doctor or hospital that agrees to abide by the plan's contract terms. The so-called "any willing provider" law was permanently blocked by the 8th Circuit Court of Appeals in St. Louis in 1998 after the Arkansas Blues and other insurers argued that it violated the federal Employee Retirement Income Security Act, which governs employer-sponsored benefits.
The case could hold serious implications for insurers, providers and regulators nationwide. At least 24 other states have passed similar any-willing-provider laws, but lower courts have issued mixed rulings on their legality.
The state's lawsuit claims the 1998 injunction has allowed the Blues to amass an 80% share of the commercial insurance market, leaving Arkansas' healthcare industry "seriously destabilized." According to the state's latest filing, the insurer is "arguing so vociferously against dissolution of the injunction since it is benefiting so greatly from it."
The Arkansas Blues, however, calls the state's allegations "highly inaccurate." In a response filed with the court Dec. 29, the insurer included an affidavit from state Deputy Insurance Commissioner John Hartnedy stating its share of the health and accident insurance market is about 47%. Hartnedy has said premiums written for health and accident coverage can't be separated and that both should be used to calculate market share.
The debate over Arkansas' 9-year-old statute was resurrected last April, when the U.S. Supreme Court upheld a similar any-willing-provider law in Kentucky, ruling that it did not run afoul of ERISA (April 7, 2003, p. 6).
Emboldened by the high court's unanimous decision, three Arkansas providers-four-hospital St. Vincent Health System, 125-bed Southwest Regional Medical Center and 12-physician Little Rock Cardiology Clinic-demanded immediate access to the Blues' PPO network, with St. Vincent threatening to sue if kept out. The Arkansas Blues fired back in August 2003 with a federal lawsuit seeking a "declaratory judgment" to confirm that the state's any-willing-provider law is not enforceable. It named the three providers and the state as defendants.
State Attorney General Mike Beebe countersued in October, arguing that the Kentucky and Arkansas laws are virtually identical and that the Supreme Court's decision puts the Blues "effectively on notice" that the 1998 injunction is "suspect." The three Little Rock-based providers filed their own motions, arguing that they were wrongly barred from the Blues' network and should be paid damages for lost profits and legal fees.
St. Vincent and Southwest Regional are among just six hospitals excluded from the Blues' network, according to the Arkansas Hospital Association. Both face stiff competition from crosstown rival Baptist Health, an in-network provider. Five-hospital Baptist and the Blues also co-own Health Advantage, the state's largest HMO. Officials at St. Vincent and Southwest Regional did not return phone calls seeking comment.
Dan Caldwell, executive director of Little Rock Cardiology, said his clinic has "had to work much, much harder" to maintain its referral network since being dropped from the Blue's PPO in 1997. The clinic was "deselected" for admitting patients to out-of-network providers shortly after it partnered with MedCath Corp. to open 84-bed Arkansas Heart Hospital, which now competes directly with Baptist for patients.
Caldwell added that the any-willing-provider law is critical to maintaining strong doctor-patient relationships. "Chronically ill patients, especially the elderly, who make up a large percentage of cardiology patients, develop strong emotional bonds with their physicians. It's very distressing for them to be forced to change providers," he said, adding that Little Rock Cardiology still sees about 2,000 Blues members who have opted to pay higher out-of-network costs to remain with the clinic. The injunction "is greatly to their detriment."
Insurers, however, argue that opening their networks to all providers defeats the purpose of managed care and would destroy their ability to contain costs. Traditionally, insurers have been able to secure lower reimbursement rates by assuring providers that their direct competitors would be excluded from the network, thereby guaranteeing them a larger stream of patients. But because any-willing-provider laws effectively prevent insurers from making these promises, providers have little incentive to accept substantially reduced rates.
District Court Judge Thomas Eisele is expected to make a bench ruling by the end of the year.