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Justices: States can force HMOs to open networks

Unanimous ruling is a blow to managed care

From Bill Mears
CNN Washington Bureau

Unanimous ruling is a blow to managed care

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WASHINGTON (CNN) -- A unanimous Supreme Court Wednesday upheld the power of states to regulate privately-run managed care plans, handing a defeat to the health insurance industry that had hoped a federal law would prevail.

Justices decided 9-0 that Kentucky can force health maintenance organizations (HMOs) to accept any qualified doctor who wants to join. About half the states have these so-called "any willing provider" (AWP) laws, and supporters say it gives patients greater choice and flexibility. The law was specifically designed to help low-income patients with limited health care options.

Writing for the Court, Justice Antonin Scalia said these laws were not overly burdensome to insurance companies. "Neither of Kentucky's AWP statutes, by its terms, imposes any prohibitions or requirements on health-care providers," he said.

Kentucky passed its health care reform bill in 1994, creating changes in the state's private insurance market, particularly in financing health care for the poor. The law states, "A health insurer shall not discriminate against any provider who is located within the geographical coverage area of the health benefit plan," so long as the provider "agrees to the terms and conditions of the HMO."

But a private group of seven Kentucky health plans filed a lawsuit, saying a 1974 federal law protects them from state regulations. Two lower courts disagreed, concluding the federal exemption did not apply to insurance plans. The case was then appealed to the Supreme Court.

Noting "the personal, unique relationship between patient and doctor," Elizabeth Johnson, the attorney representing Kentucky, said the state's law "puts more control into the hands of the insured and the [health care] provider to make decisions best suited" to the patient's health situation.

HMOs and other groups call the policy "Bolshevik" health care coverage, arguing it increases patient costs because health care companies are prevented from choosing providers based on quality, price and volume.

If HMOs "can no longer be selective, there will be cost and quality implications affecting the level of care" they can provide, said Robert Eccles, the attorney representing the health plans.

The cased provided another example of the Court's continuing interest in federalism, testing the often conflicting balance of power between the national government and the states.

In a similar case last fall, justices reviewed a Maine law designed to bring down spiraling prescription drug costs. That law forced drug manufacturers to negotiate discounts or face a loss of access to thousands of Medicaid patients. Drug companies sued, claiming the law violated the constitutional ban against state control of interstate commerce over out-of-state drug manufacturers and distributors.

The case announced Wednesday is Kentucky Association of Health Plans v. Miller (case number 00-1471).

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