Model law banning silent PPOs could serve as draft for state legislatures

State lawmakers considering a ban on physician network rentals, sometimes known to doctors as "silent PPOs," now have a starting point from which to draft legislation -- one that requires transparency and sets boundaries for when buying access to a doctor's discounted rate is allowed.

After three years of lobbying, debate and discussion, the National Conference of Insurance Legislators at its annual meeting on Nov. 23, 2008, adopted a model law governing network rentals. It was supported by the American Medical Association.

Susan Nolan, NCOIL executive director, said many states are set to consider network rental rules in 2009. "We felt like we really provided a model when folks needed it."

Jordan Estey, NCOIL director of legislative affairs & education, said five states -- Connecticut, Colorado, Florida, Indiana and Ohio -- over the past two years have passed laws governing third-party network access that are similar to the model adopted by NCOIL.

The model requires that insurers disclose to doctors accurate information when a contract is accessed by a third party and bars unauthorized use of network discounts.

Under the model law, the third party renting a network must abide by the terms of the original contract, and physicians have a right to deny discounts to insurers who don't follow those rules. That means that a third-party insurer who gets access to a network discount for a physician must also direct patients to the physician as if he or she were in-network and generally grant him the benefits of a network physician.

"I think this is a very big deal, and assuming this will provide a basis for states that have not passed laws similar to this already, if then those laws are passed it will provide physicians the ability to have transparency in the contracts they sign," said Jeremy A. Lazarus, MD, a psychiatrist from Greenwood Village, Colo., and speaker of the AMA House of Delegates.

"This national group put together a bill they think is reasonable, that has already been vetted, and I think that will make it easier for other states to pass these bills," he said.

The discussion of network rentals and silent PPOs began with a request from the AMA, Estey said, which brought the issue to NCOIL in 2005. An effort to pass an AMA-authored model stalled, as did efforts for more than a year to try to get doctors and insurers to come together to draft a jointly proposed model law, he said.

The final version is a blend of proposals from the AMA and trade groups America's Health Insurance Plans and the American Assn. of Preferred Provider Organizations, Estey said. An NCOIL committee held nine conference calls between its summer 2008 meeting and its November 2008 meeting to hammer out each part of the model it ultimately adopted, Estey said.

The final version includes some key items that the AMA requested:

• Rather than granting an exemption for self-insured plans, each state is directed to decide whether its law will apply to plans that are funded by employers and administered by health plans.
• Insurance companies can't share network discounts with their subsidiaries and affiliates without following the network rental rules.

The model legislation does not keep plans from re-renting rental networks, a practice that creates the potential for a tangle of network rentals that would be difficult for a physician to unravel.

At least one legislator plans to bring the NCOIL model in hand as a proposed law for colleagues to consider in 2009 -- state representative Charlie Curtiss, a Democrat from Sparta, Tenn. Curtiss is chair of the Tennessee House commerce committee, which considers insurance legislation.

He said he began drafting a bill for his state in December 2008, based on the NCOIL model, and plans to introduce it when the Legislature reconvenes in January.

Curtiss is a member of NCOIL. During the debate over the model law, he argued for physicians' rights to know who is accessing network discounts.

"A health care provider, a doctor, should have just as much right to be in control of their business as anyone else," he said. "I describe [a silent PPO] as a 'discount ambush,' " he said.

Robert Zirkelbach, spokesman for America's Health Insurance Plans, said it wouldn't be surprising to see five or more states take up the issue in 2009. He said AHIP will be taking its own model to legislators in 2009, since it wasn't altogether satisfied with the one NCOIL adopted.

"NCOIL should be applauded for addressing this issue," he said, "We do have some concerns with the final NCOIL results adopted."

He said AHIP specifically objects to the model law's prohibition against insurers using one set of network discounts across all affiliates and subsidiaries, and wanted NCOIL to specify that none of the law's rules should apply to self-funded plans, in which the employer bears risk and hires a health plan simply for administrative work. AAPPO did not return phone calls seeking comment.

Courts have recently begun allowing some state regulation of those types of plans, though they have historically been governed by the federal Employee Retirement Income Security Act.

The print version of this content appeared in the Jan. 5, 2009 issue of American Medical News.

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