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Failed Bill to Open Health Insurance Networks Resurfaces as Initiative

Republicans hoot and holler about government invading your relationship with your doctor. How would you like to keep insurers from coming between you and your doctor?

The South Dakota Legislature almost took a step in this direction last winter with House Bill 1142, which would have opened health insurance networks to any willing provider. Essentially, health insurance networks would have been defined by physicians and hospitals deciding with which insurers they wanted to do business, not by the insurers themselves. That bill got through the House but not the Senate.

Drs. Peter Looby, Stephen Eckrich, and Paul Cink have decided to petition to put a version of HB 1142 to a public vote. Here's the text of the main section of their initiative:

Section 1. No health insurer, including the South Dakota Medicaid program, may obstruct patient choice by excluding a health care provider licensed under the laws of this state from participating on the health insurer's panel of providers if the provider is located within the geographic coverage area of the health benefit plan and is willing and fully qualified to meet the terms and conditions of participation as established by the health insurer.

Dr. Eckrich says the "any willing provider" initiative is about maintaining patient choice and good health care:

Dr. Stephen Eckrich, an orthopedic surgeon at Black Hills Orthopedic & Spine, is one of the three doctors sponsoring the effort. He predicts that voters will embrace the concept of patient choice.

“Who would be against patients allowing themselves to choose their own doctor?” he said.

The selective networks imposed by insurance companies, he said, disrupt longstanding patient-physician relationships. Eckrich said he’s lost two patients recently because they changed insurance companies and Eckrich wasn’t in their networks.

“To me, that’s going to be the end of good health care as we know it,” he said [Jonathan Ellis, "Insurer Networks on Ballot?" that Sioux Falls paper, 2013.09.02].

HB 1142 failed in the Senate largely on cost arguments: the big hospitals argued opening networks to the specialty hospitals backing the bill would raise costs for patients. The South Dakota Association of Healthcare Organizations opposes "any willing provider" laws because, they contend, limiting choice saves money:

Managed care (modified and improved over time) is the one approach to health care reform that has actually lowered health care costs. It provides better coordinated care among provider groups and presents the patient with a more understandable approach for accessing the myriad of health care services they might need. And health care plans that limit choice are typically less expensive than those that pay for a patient to go anywhere he or she wishes [SDAHO, "An 'Any Willing Provider' Refresher," published during 2013 Legislative session, downloaded 2013.09.02].

The South Dakota Association of Specialty Care Providers paid USD prof Mike Allgrunn $31,585 in 2011 to study "any willing provider" laws. Looking at data from 1983 to 2001, Professor Allgrunn found states with AWP laws had lower personal health care expenditures. He cautions Ellis and the rest of us that that's historical, not experimental data. A 2002 study helps Allgrunn out with a finding that AWP laws did not affect HMO profitability.

One wouldn't think that AWP laws would raise costs for insurers. After all, even if an out-network physician usually charges more for a procedure than in-network physicians, that physician would still have to accept the insurer's normal contracted rates. Nonetheless, a 2012 study by two legal scholars associates AWP laws with cost increases of 3%.

There is an argument that an "any willing provider" law reduces competition and would hinder the ability of the Affordable Care Act's insurance exchanges to steer customers toward higher-quality, more cost-effective providers. Drs. Looby and Eckrich are part of the South Dakota State Orthopaedic Society, which is based in Sioux City and which is fighting provisions of the PPACA that they think would inhibit the growth (read, profit margins) of specialty hospitals. Dr. Cink is a member of the Society of Physician Entrepreneurs (hey, doc, could you put down your stock ticker and check my chart?), which also appears inclined to throw monkey wrenches into ObamaCare.

It's hard to figure out if "any willing provider" is a free market innovation or a socialist intervention. AWP gives health care providers more choice, but it gives insurers less choice, forcing them to do business with providers with whom they may not want to do business. But AWP proponents and opponents appear to agree that health insurance is not a typical free-market product; to work effectively, it requires regulation to serve all consumers efficiently.

I look forward to hearing the petitioners' pitch, especially the part where they try to boil this complicated issue down to a 10-second "Knock-knock, please don't shut the door on me" opener. The key issue I need to hear before deciding on this initiative is how a "any willing provider" law will affect the typical patient. If AWP makes it easier for the average joe to get basic health care, Eckrich and friends may get my vote.

6 Comments

  1. Jerry 2013.09.02

    As they say, "The Devil is in the details" so we must wait and see how this further develops. At first look though, it does look promising.

  2. Porter Lansing 2013.09.02

    Here's my ten second pitch: AWP providers should be part of the selection of insurance providers when choosing bronze, silver or gold plans from Obamacare. If they cost more that will be the voters choice. Specialty physicians are opposed to PPO's because specialty physicians charge more than the going rate due mostly to arrogance and perceived elite status.

  3. Jerry 2013.09.02

    Excellent Porter Lansing, from the looks of your plan, the Platinum plan would not be gauged on this as it a 90% plan, correct?

  4. Bill Dithmer 2013.09.03

    Great post Porter Lansing

    The Blindman

  5. Poliglut 2013.09.05

    SD enacted similar laws for pharmacists with NO EFFECT on costs. And what does it matter if Insurance Companies (read "For-profit Insurance Companies held by South Dakota's 3 Major Health Systems") "negotiate lower rates" - like that's going to happen - with their own physicians if awp doctors meet their terms? The major health systems are SALIVATING over the young folk that Obamacare will by law bring into the marketplace. They'll low-ball their insurance rates to buy market share--losing money with their insurance fronts--and then over-charge the risk pool to make up the difference. What is the net result when the insurance companies whom we thought were watching over provider costs, are owned by the providers who benefit from higher risk-pool payouts? It's the fox watching the hen-house. The net result will be that they will continue to suck up small local clinics and doctors who aren't allowed in their exclusive little club.

  6. Walter Carlson 2014.01.19

    AWP seems to be alive and well for pharmacies in SD since 1990. Price seems competitive . Why shouldn't other healthcare providers have the same option for their patients.

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