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The Daily News of Los Angeles

The Supreme Court ruled unanimously Wednesday that states can force HMOs to open up their doctor networks, upholding a practice used in about half the states to give patients broader health care choices.

Under such rules or laws, managed-care or insurance companies must accept health-care providers – physicians, pharmacists or specialists like nurse practitioners. Providers have to agree to the insurer’s reimbursement rates and contract terms.

The ruling is a blow to health maintenance organizations, which argued that networks are more cost-effective because doctors and hospitals agree to accept lower fees in return for a guaranteed stream of patients.

Two 1994 Kentucky laws were challenged by a group of HMOs and a managed-care trade association. Kentucky’s statutes are known as “any willing provider” laws.

Some states have laws that affect only hospitals or pharmacies, and some have such laws that apply to all health care professionals.

The Supreme Court’s ruling will have very little pull on managed-care companies in California because most insurers already work from a large pool of doctor networks.

“This ruling certainly sets a good precedent for the nation. But California would have to create a new law to enact the Supreme Court’s ruling. And that’s not likely right now,” said Jamie Court, executive director with The Foundation For Taxpayer & Consumer Rights in Santa Monica.

Health Net Inc., a Woodland Hills-based company that has approximately 49,000 medical professionals in its database, is not concerned about the ruling. David Olson, a spokesman for the company, said changes would be minimal, if noticeable at all.

“Although one possible concern is what happens when we want to exclude a provider for quality reasons? I don’t have the answer, but overall I’d probably say this ruling is a moot issue for us,” Olson said.

Industry lawyers had argued that such laws increase administrative costs, make it harder for HMOs to monitor quality, and jeopardize deals that health plans have made with providers.

But Russell Korobkin, a UCLA law professor, said allowing states to have more control over HMOs is probably better for patients and doctors.

“This opens the door to states so they can intervene when there is less competition among insurers,” Korobkin said.

In upholding two Kentucky statutes, justices said nothing about any willing provider laws’ potential benefits to patients, or whether they work as intended.

“The jury’s still out as to whether the laws are good, bad or indifferent,” said Steven Goldblatt, a Georgetown University professor. “That will continue to play out in the states. They will continue to make the determination of how it works.”

The case turned on whether the Kentucky HMO laws regulate insurance, as states are allowed to, or regulating employee benefits, which is an area reserved for Congress.

Justice Antonin Scalia said such regulation was permissible under the law.

“By expanding the number of providers from whom an insured may receive health services, AWP (any willing provider) laws alter the scope of permissible bargains between insurers and insureds in a manner similar to the mandated-benefit laws we upheld” before, Scalia wrote. He said “no longer may Kentucky insureds seek insurance from a closed network of health-care providers in exchange for a lower premium.”

The Bush administration had asked the court to uphold the Kentucky laws. The case brought up a common complaint about managed-care plans: People want to be able to see their favorite physicians even if they are not in their network.

During the argument in the case in January, justices talked about pregnant women forced to see a different in-network physician because of a health plan change and the limited choices of people who want to see a chiropractor rather than a doctor. Several HMOs, including units of Aetna Inc. and Humana Inc., challenged the Kentucky law in 1997. A separate suit was brought by companies that build health care networks for HMOs.

The Sixth U.S. Circuit Court of Appeals in Cincinnati ruled against the industry in September 2000 in a split decision. The Supreme Court took up the case last June.

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