SD23 - Study of the Impact of Subsection B of Section 38.2-3407 of the Code of Virginia on the Commonwealth's Health Care Market Statute Pursuant to SJR 158 of 1994

Executive Summary:

Senate Joint Resolution (SJR) 158 of the 1994 Session requested the Joint Commission on Health Care to study the impact of subsection B of § 38.2-3407 of the Code of Virginia on the Commonwealth's health care market.

Subsection B, commonly referred to as the "any willing provider" statute, states that health care providers (e.g. hospitals, physicians, and others) willing to meet the terms and conditions of a preferred provider network cannot be excluded from the network. Proponents of this law, mostly provider groups, state that it has little or no impact on cost; protects consumers' choice of providers; and enhances quality of care. Opponents, primarily insurers and the business community, contend that the law unnecessarily limits the ability of preferred provider network managers to negotiate discounted fees, and provides no corresponding increase in quality of care.

A total of 24 states have "any willing provider" laws. Virginia is one of only seven states whose "any willing provider" law applies to a broad range of providers. Fifteen states' laws apply only to pharmacists, while two other states apply to other specific types of providers.

Three studies, two of which were sponsored by the insurance industry, have concluded that "any willing provider" laws increase health care costs. One study conducted by Arthur Andersen & Co. for the Florida legislature concluded that an "any willing provider" law would increase costs significantly. Proponents of "any willing provider" laws question the validity of these studies' findings, and state that any increase in cost is justified by enhanced patient choice of providers.

The Federal Trade Commission has advised several states that "any willing provider" laws "may discourage competition among providers," and "may limit firms' ability to reduce the cost of delivering health care without providing any substantial public benefit." The National Governors' Association adopted a policy opposing "overly restrictive" any willing provider laws.

Little research has been done on the impact that "any willing provider" laws have on the quality of health care. However, proponents argue that preferred provider networks often sacrifice quality of care for lower costs, and that any willing provider laws enhance quality of care by including more "quality" providers. Opponents state that "any willing provider" laws force network managers to accept providers who normally would not be asked to participate. Moreover, they contend that market forces will continue to push preferred provider organizations to include high quality providers in their networks, and that without quality providers, the networks Will not be successful in the marketplace.

The study offers five policy options for consideration. Option I would maintain the status quo. Option II would repeal the "any willing provider" provision. Option III would repeal the "any willing provider" provision, but require insurers to adhere to certain requirements when forming networks. Option IV would limit the application of the law to areas with limited provider competition. Option V would amend the law to clarify some areas of confusion.

Our review process on this topic included an initial staff briefing which you will find in the body of this report followed by a public comment period during which time interested parties forwarded written comments to us on the report. In many cases, the public comments, which are provided at the end of this report, provided additional insight into the various topics covered in this study.