Insurer Relationships Insurer Relationships with Third Parties – with Third Parties – Agents, Brokers and Agents, Brokers and

ProvidersProviders

The Antitrust IssuesThe Antitrust Issues

James M. BurnsJames M. BurnsABA Antitrust Section Insurance ABA Antitrust Section Insurance Industry ProgramIndustry ProgramMay 17, 2006 May 17, 2006

Relationships with Relationships with AgentsAgents

Horizontal IssuesHorizontal IssuesAgreements on CommissionsAgreements on Commissions

Insurer AgreementsInsurer Agreements Agreements among competing Agreements among competing

insurers to fix agent commissions insurers to fix agent commissions would be would be per se per se unlawful absent unlawful absent McCarran.McCarran.

In In California League of Independent California League of Independent Insurance Products v. Aetna Insurance Products v. Aetna (N.D. (N.D. Cal. 1959), the court held that Cal. 1959), the court held that McCarran exempted such McCarran exempted such agreements from potential antitrust agreements from potential antitrust liability, but this result is somewhat liability, but this result is somewhat less certain after the Supreme less certain after the Supreme Court’s 1979 ruling in Court’s 1979 ruling in Royal Drug. Royal Drug. 440 US 205, n. 32 440 US 205, n. 32 (“It is clear that (“It is clear that the fixing of rates is the business of the fixing of rates is the business of insurance. The same conclusion insurance. The same conclusion does not so clearly emerge with does not so clearly emerge with respect to fixing agent respect to fixing agent commissions”).commissions”).

Agent AgreementsAgent Agreements Agreements among agents regarding the Agreements among agents regarding the

commissions they will accept from commissions they will accept from insurers are similarly insurers are similarly per se per se unlawful unlawful absent McCarran.absent McCarran.

However, unlike the circumstance with However, unlike the circumstance with respect to insurer agreements, no case respect to insurer agreements, no case has found an agreement among agents has found an agreement among agents regarding the commission levels they regarding the commission levels they would accept from insurers to be would accept from insurers to be McCarran-exempt conduct. Moreover, McCarran-exempt conduct. Moreover, the likelihood that such an argument the likelihood that such an argument would be accepted -- given that the would be accepted -- given that the requirements of the “business of requirements of the “business of insurance” test set forth in insurance” test set forth in Royal DrugRoyal Drug require that the conduct be “an integral require that the conduct be “an integral part of the policy relationship between the part of the policy relationship between the insurer and the insured” -- seems highly insurer and the insured” -- seems highly unlikely. unlikely.

Enforcement ActionsEnforcement Actions

The California Attorney General’s The California Attorney General’s Office has expressly declared that Office has expressly declared that “Agents may not agree to fix “Agents may not agree to fix commission rates. Such commission rates. Such agreements are price fixing agreements are price fixing agreements, and are agreements, and are per seper se illegal.” illegal.” Antitrust Guidelines for the Antitrust Guidelines for the Insurance Industry, Cal. Attorney Insurance Industry, Cal. Attorney General’s Office 1990General’s Office 1990

The FTC has taken action The FTC has taken action against an independent agent against an independent agent association that proposed that association that proposed that all member agents boycott an all member agents boycott an insurer that announced it would insurer that announced it would adopt a direct-to-consumers adopt a direct-to-consumers marketing program, which marketing program, which would adversely effect, if not would adversely effect, if not eliminate, agent commissions. eliminate, agent commissions. Independent Insurance Agents Independent Insurance Agents of America, Inc.of America, Inc., 108 F.T.C. 87 , 108 F.T.C. 87 (1986)(1986)

Agreements to Allocate Agreements to Allocate Insurance MarketsInsurance Markets

Agreements among competing Agreements among competing insurers or agents to allocate insurers or agents to allocate customers along territorial or customers along territorial or product lines are product lines are notnot McCarran McCarran exempt and have been held to exempt and have been held to constitute constitute per seper se unlawful unlawful conduct. conduct. Garot Anderson Mktg, Garot Anderson Mktg, Inc. v. Blue Cross of Wisconsin Inc. v. Blue Cross of Wisconsin (N.D. Ill. 1990) (insurer (N.D. Ill. 1990) (insurer agreement to allocate insurance agreement to allocate insurance lines); lines); Maryland v. Blue Cross & Maryland v. Blue Cross & Blue Shield AssociationBlue Shield Association (D. Md. (D. Md. 1985) (agreement among 1985) (agreement among insurers regarding territories of insurers regarding territories of operation)operation)

Vertical IssuesVertical IssuesAgreements on the Rebating of Agreements on the Rebating of

CommissionsCommissions

The antitrust issue raised by rebating The antitrust issue raised by rebating is whether an insurer’s prohibition on is whether an insurer’s prohibition on agent rebating, absent a state law agent rebating, absent a state law prohibition on the practice, constitutes prohibition on the practice, constitutes an unlawful vertical restraint on an unlawful vertical restraint on competition.competition.

Rebating is a form of price Rebating is a form of price discounting by agents used to discounting by agents used to compete for business. Rebating compete for business. Rebating effectively lowers the price paid by effectively lowers the price paid by policyholders because the agent does policyholders because the agent does not collect from the insured a portion not collect from the insured a portion of the stated premium that would be of the stated premium that would be provided to the agent in the form of a provided to the agent in the form of a commission. commission.

Anti-Rebate StatutesAnti-Rebate Statutes Rebating has traditionally been unlawful by statute in many states. Rebating has traditionally been unlawful by statute in many states.

The stated rationale for such statutes is that rebating can lead to The stated rationale for such statutes is that rebating can lead to “insurer insolvencies, unfair discrimination between insureds, and “insurer insolvencies, unfair discrimination between insureds, and decreased service to insurance customers.” The states that prohibit decreased service to insurance customers.” The states that prohibit rebating of any portion of an agent commission include the rebating of any portion of an agent commission include the following:following:

AlabamaAlabama North CarolinaNorth Carolina GeorgiaGeorgia New YorkNew York IllinoisIllinois OhioOhio MichiganMichigan VirginiaVirginia

State law penalties for the violation of anti-rebating statutes vary State law penalties for the violation of anti-rebating statutes vary by state, and include the loss of an agent’s license, a fine, or a by state, and include the loss of an agent’s license, a fine, or a criminal misdemeanor. criminal misdemeanor. Wacaser v. Insurance CommissionerWacaser v. Insurance Commissioner (Ark. 1995) (loss of license for rebating).(Ark. 1995) (loss of license for rebating).

California Law on California Law on RebatingRebating

California, however, takes a California, however, takes a decidedly different position on decidedly different position on the issue.the issue.

California law permits rebating (Cal. Ins. California law permits rebating (Cal. Ins. Code Code §750), and t§750), and the California Antitrust he California Antitrust Guidelines for the Insurance Industry come Guidelines for the Insurance Industry come close to characterizing close to characterizing prohibitionsprohibitions on on rebating as rebating as per seper se unlawful. They state: unlawful. They state:

““An insurer may lawfully set only the price at An insurer may lawfully set only the price at which to sell, and coercive arrangements to which to sell, and coercive arrangements to prohibit agents from granting or advertising prohibit agents from granting or advertising rebates are unlawful.”rebates are unlawful.”

Despite this strong Despite this strong pronouncement, the California pronouncement, the California A.G. Office has not aggressively A.G. Office has not aggressively enforced these principles in any enforced these principles in any reported decision. reported decision.

Florida Law on RebatingFlorida Law on Rebating

Department of Insurance v. Dade County Department of Insurance v. Dade County Consumer’s Advocate OfficeConsumer’s Advocate Office (Florida Supreme (Florida Supreme Court, 1986). “Insurance agents’ commissions do Court, 1986). “Insurance agents’ commissions do not affect the net written premium and are not affect the net written premium and are unrelated to the actuarial soundness of insurance unrelated to the actuarial soundness of insurance policies. We find [the Florida anti-rebating statute] policies. We find [the Florida anti-rebating statute] unconstitutional under Article 1, Section 9 of the unconstitutional under Article 1, Section 9 of the Florida Constitution.” Florida Constitution.”

Florida Stat. 626.572 (1994)Florida Stat. 626.572 (1994) Rebating, when allowedRebating, when allowed

where the rebate is available to all insureds in the where the rebate is available to all insureds in the same actuarial classsame actuarial class

where the rebate is offered pursuant to a schedule where the rebate is offered pursuant to a schedule provided to the insurer issuing the policyprovided to the insurer issuing the policy

the rebating schedule is uniformly appliedthe rebating schedule is uniformly applied rebates shall not be given to an insured with respect rebates shall not be given to an insured with respect

to a policy purchased from an insurer that prohibits to a policy purchased from an insurer that prohibits rebatesrebates

Florida law on rebating also differs from that in Florida law on rebating also differs from that in most other states, thus also presenting potential most other states, thus also presenting potential compliance issues.compliance issues.

Recent Florida Rebate Recent Florida Rebate CaseCase

In 2000, in In 2000, in Chicago Title Insurance v. Chicago Title Insurance v. Butler, Butler, the Florida Supreme Court the Florida Supreme Court reconfirmed that agent rebating of reconfirmed that agent rebating of commissions is permitted under Florida commissions is permitted under Florida law, and extended that principle to title law, and extended that principle to title insurance. The Court held:insurance. The Court held:

“ “While we acknowledge the While we acknowledge the Legislature’s interest in protecting title Legislature’s interest in protecting title insurers and agents from insolvency, insurers and agents from insolvency, such purpose is not furthered by an such purpose is not furthered by an anti-rebating provision.”anti-rebating provision.”

Other Vertical IssuesOther Vertical IssuesExclusive Agency Exclusive Agency AgreementsAgreements

Exclusive Agency Agreements can Exclusive Agency Agreements can violate the antitrust laws if they violate the antitrust laws if they significantly limit the opportunities significantly limit the opportunities of competing insurers to enter or of competing insurers to enter or remain in the market. However, the remain in the market. However, the right of an insurer to insist that an right of an insurer to insist that an agent enter into a exclusive agent enter into a exclusive relationship with the insurer has relationship with the insurer has been held to be the “business of been held to be the “business of insurance,” and McCarran exempt. insurance,” and McCarran exempt. Black v. Nationwide Mutual Black v. Nationwide Mutual (3(3rdrd Cir. Cir. 1978).1978).

Nevertheless, antitrust issues can Nevertheless, antitrust issues can arise where an insurer’s arise where an insurer’s distribution system includes a distribution system includes a system of agents and subagents, system of agents and subagents, and restrictions are imposed upon and restrictions are imposed upon the ability of subagents to transfer the ability of subagents to transfer between supervising agents.between supervising agents.

Recent Exclusive Agency Recent Exclusive Agency Antitrust CasesAntitrust Cases

Notably, however, the Court rejected the insurer’s initial Notably, however, the Court rejected the insurer’s initial contention that the conduct was McCarran exempt, requiring that the case contention that the conduct was McCarran exempt, requiring that the case proceed into discovery before ultimately granting Northwestern Mutual’s proceed into discovery before ultimately granting Northwestern Mutual’s motion for summary judgment.motion for summary judgment.

In In Bogan v. Northwestern Mutual Life Insurance CompanyBogan v. Northwestern Mutual Life Insurance Company (2nd Cir. (2nd Cir. 1999), the Second Circuit analyzed a Northwestern Mutual policy that 1999), the Second Circuit analyzed a Northwestern Mutual policy that prohibited low level “district agents” from transferring from one prohibited low level “district agents” from transferring from one “supervising general agent” to another without the approval of both “supervising general agent” to another without the approval of both supervising general agents. When a district agent’s transfer request was supervising general agents. When a district agent’s transfer request was denied, he sued, claiming that the restriction violated the federal antitrust denied, he sued, claiming that the restriction violated the federal antitrust laws.laws. In rejecting the agent’s claim, the Court concluded that the In rejecting the agent’s claim, the Court concluded that the applicable market was not a market limited to the sale of Northwestern applicable market was not a market limited to the sale of Northwestern Mutual policies (as plaintiff maintained), but was instead the broader market Mutual policies (as plaintiff maintained), but was instead the broader market for life insurance products. Accordingly, because the plaintiff could not for life insurance products. Accordingly, because the plaintiff could not demonstrate that Northwestern Mutual’s policy on agent transfers had an demonstrate that Northwestern Mutual’s policy on agent transfers had an adverse impact on the market for life insurance, plaintiff’s claims failed.adverse impact on the market for life insurance, plaintiff’s claims failed.

Other Vertical IssuesOther Vertical IssuesAgent TerminationsAgent Terminations

An agreement between an An agreement between an insurer and an agent to insurer and an agent to terminate another agent can terminate another agent can be unlawful if it can be shown be unlawful if it can be shown to have a significantly to have a significantly adverse effect on adverse effect on competition, and if it is not competition, and if it is not outweighed by pro-outweighed by pro-competitive effects.competitive effects.

Are Vertical Agreements Are Vertical Agreements with Agents McCarran with Agents McCarran

Protected?Protected? Traditionally the termination of an Traditionally the termination of an

insurance agent has been held to insurance agent has been held to be protected under the McCarran-be protected under the McCarran-Ferguson ActFerguson Act Card v. National Life Insurance Card v. National Life Insurance

Co.Co. (10th Cir. 1979) (10th Cir. 1979) Black v. Nationwide Mutual Black v. Nationwide Mutual

Insurance Co.Insurance Co. (W.D. Pa. 1977) (W.D. Pa. 1977) Gribbin v. Southern Farm Gribbin v. Southern Farm

Bureau Life Insurance Co. Bureau Life Insurance Co. (W.D. (W.D. La 1984)La 1984)

Blackley v. Farmers Insurance Blackley v. Farmers Insurance GroupGroup (D. Utah 1976) (D. Utah 1976)

However, the some recent However, the some recent cases indicate the issue is cases indicate the issue is

not free from doubtnot free from doubt° In In Noack v. Blue Cross and Blue Noack v. Blue Cross and Blue

Shield of FloridaShield of Florida (Fla. App. 1999) a (Fla. App. 1999) a Florida appellate court concluded Florida appellate court concluded that McCarran is inapplicable to that McCarran is inapplicable to agent terminations because a agent terminations because a decision to terminate an agent has decision to terminate an agent has “nothing to do with the spreading “nothing to do with the spreading of insurance risks or the issuance of insurance risks or the issuance of insurance policies,” and thus is of insurance policies,” and thus is not “the business of insurance.”not “the business of insurance.”

Other Recent Insurance Other Recent Insurance Agent Termination CasesAgent Termination Cases

Agency Development, Inc. v. Med-Agency Development, Inc. v. Med-America Insurance Company America Insurance Company (W.D. (W.D. N.Y. 2004) (Summary Judgment N.Y. 2004) (Summary Judgment entered for insurer on terminated entered for insurer on terminated agent’s Section 1 and 2 antitrust agent’s Section 1 and 2 antitrust claims, not based upon McCarran, but claims, not based upon McCarran, but because the agent could not because the agent could not demonstrate harm to competition).demonstrate harm to competition).

Charts v. Nationwide Mutual Charts v. Nationwide Mutual Insurance Insurance (D. Conn. 2005) (D. Conn. 2005) (Terminated agent recovered over (Terminated agent recovered over $2 million for termination “without $2 million for termination “without cause” under the Connecticut cause” under the Connecticut Franchise Act, notwithstanding that Franchise Act, notwithstanding that no “for cause” termination no “for cause” termination requirement exists under the requirement exists under the Connecticut Insurance Code).Connecticut Insurance Code).

Enforcement of Non-Compete Enforcement of Non-Compete Clauses in Agent AgreementsClauses in Agent Agreements

THE TEST TYPICALLY APPLIED FOR THE TEST TYPICALLY APPLIED FOR ASSESSING THE ENFORCEABILITY OF ASSESSING THE ENFORCEABILITY OF NON-COMPETE PROVISIONS IS THE NON-COMPETE PROVISIONS IS THE REASONABLENESS OF THE REASONABLENESS OF THE RESTRICTION IN TERMS OF SCOPE RESTRICTION IN TERMS OF SCOPE AND DURATIONAND DURATION

Wood v. Accordia of West Virginia Wood v. Accordia of West Virginia (W.Va. (W.Va. 2005) (upholding an insurer’s restriction on 2005) (upholding an insurer’s restriction on a terminated agent’s future employment, a terminated agent’s future employment, finding that the restriction would have a finding that the restriction would have a “very limited effect” on the plaintiff’s ability “very limited effect” on the plaintiff’s ability to continue to work in the insurance to continue to work in the insurance industry and that the insurer’s interest in industry and that the insurer’s interest in restricting the agent’s activities was restricting the agent’s activities was legitimate)legitimate)

Hamilton Insurance Services v. Nationwide Hamilton Insurance Services v. Nationwide Insurance Co.Insurance Co. (Ohio, 1999) (Prohibition in (Ohio, 1999) (Prohibition in agent agreement barring him from agent agreement barring him from competing with the insurer with a twenty competing with the insurer with a twenty five mile radius, for a period of one year five mile radius, for a period of one year after termination, held to be reasonable after termination, held to be reasonable and enforceable) and enforceable)

However, The Enforcement of However, The Enforcement of Such Clauses is Not Without Such Clauses is Not Without

RiskRisk Under California law, non-Under California law, non-

compete clauses are against compete clauses are against public policy. In 1999, in public policy. In 1999, in Walia Walia v. Aetna, v. Aetna, a San Francisco jury a San Francisco jury awarded a terminated agent awarded a terminated agent $1.2 million in compensatory $1.2 million in compensatory and punitive damages based and punitive damages based upon Aetna’s insistence that the upon Aetna’s insistence that the agent execute a non-compete agent execute a non-compete agreement as a condition of agreement as a condition of employment.employment.

Under Oklahoma law, only the Under Oklahoma law, only the active solicitation active solicitation of former of former customers can be barred by an customers can be barred by an agent non-compete clause. It is agent non-compete clause. It is unlawful for an insurer to try to unlawful for an insurer to try to prohibit terminated agents from prohibit terminated agents from dealing with former customers dealing with former customers that contact them. that contact them. Blacksten v. Blacksten v. Federated Mutual Insurance Co.Federated Mutual Insurance Co. (10(10thth Cir. 2000) Cir. 2000)

Relationships with Relationships with BrokersBrokers

Broker IssuesBroker Issues The antitrust issues raised with The antitrust issues raised with respect to brokers are largely the respect to brokers are largely the same as those found with agents. same as those found with agents. However, because the broker’s However, because the broker’s relationship to the insurer is clearly relationship to the insurer is clearly not one of principal/agent (the not one of principal/agent (the broker’s duty is to the insured, not broker’s duty is to the insured, not the insurer), an agreement between the insurer), an agreement between an insurer and a broker is likely to be an insurer and a broker is likely to be viewed as an agreement between viewed as an agreement between two independent entities – providing two independent entities – providing the necessary predicate for a the necessary predicate for a Section 1 violation that can be Section 1 violation that can be

missing in the insurer/agent context.missing in the insurer/agent context.

State EnforcementState Enforcement NY Attorney General Broker NY Attorney General Broker

InvestigationInvestigation Alleged a “Hub and Spoke” Alleged a “Hub and Spoke”

Conspiracy between various brokers Conspiracy between various brokers and the insurers they did business and the insurers they did business with under the Donnelly Act, New with under the Donnelly Act, New York’s Antitrust LawYork’s Antitrust Law

Several brokers and insurers have Several brokers and insurers have reached settlements with regulators, reached settlements with regulators, both in New York and in other states.both in New York and in other states.

In March of this year, the Florida In March of this year, the Florida AG commenced its own action AG commenced its own action directed at the same activities directed at the same activities

Private ActionsPrivate Actions A number of private party class action proceedings have been filed A number of private party class action proceedings have been filed

based upon the conduct investigated by the New York Attorney based upon the conduct investigated by the New York Attorney General’s Office. In 2005, many of these actions were General’s Office. In 2005, many of these actions were consolidated in an MDL proceeding in the District of New Jersey consolidated in an MDL proceeding in the District of New Jersey as as In Re Insurance Brokerage Antitrust LitigationIn Re Insurance Brokerage Antitrust Litigation. Private party . Private party litigation was subsequently commenced in the Northern District of litigation was subsequently commenced in the Northern District of Georgia, although defendants have moved to have the case Georgia, although defendants have moved to have the case consolidated with the MDL proceeding in the District Court in New consolidated with the MDL proceeding in the District Court in New Jersey.Jersey.

In March of 2006, Zurich American became the first defendant to In March of 2006, Zurich American became the first defendant to settle the claims against it in the MDL proceeding, including it settle the claims against it in the MDL proceeding, including it within the scope of a $171 million settlement with 9 states (Texas, within the scope of a $171 million settlement with 9 states (Texas, California, Florida, Hawaii, Maryland, Massachusetts, Oregon, California, Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania and West Virginia). The private plaintiff share of the Pennsylvania and West Virginia). The private plaintiff share of the settlement is reportedly $100 million.settlement is reportedly $100 million.

Does McCarran Provide any Does McCarran Provide any Defense to Insurer/Broker Defense to Insurer/Broker

Interactions?Interactions? The NY AG office, in comments to the Antitrust Modernization The NY AG office, in comments to the Antitrust Modernization

Commission in support of a request to repeal McCarran, Commission in support of a request to repeal McCarran, suggested that the protections afforded by the McCarran-suggested that the protections afforded by the McCarran-Ferguson Act precluded it from taking action under the federal Ferguson Act precluded it from taking action under the federal antitrust laws to address conduct uncovered in the broker antitrust laws to address conduct uncovered in the broker investigation investigation

Whether the NY AG office is correct – that McCarran exempts Whether the NY AG office is correct – that McCarran exempts such conduct from the federal antitrust laws – will be decided by such conduct from the federal antitrust laws – will be decided by the Court in the the Court in the In re Brokerage Antitrust Litigation. In re Brokerage Antitrust Litigation. The parties The parties have fully briefed the issue for decision by Judge Faith Hochberg. have fully briefed the issue for decision by Judge Faith Hochberg. When decided, the issue will likely be appealed to the 3rd Circuit, When decided, the issue will likely be appealed to the 3rd Circuit, if not the Supreme Court.if not the Supreme Court.

Legislative Issues Legislative Issues Concerning Agents and Concerning Agents and

BrokersBrokers

Optional Federal CharteringOptional Federal Chartering In early April, Senate Bill 2509, the In early April, Senate Bill 2509, the

National Insurance Act of 2006, was National Insurance Act of 2006, was introduced by Senators Sununu and introduced by Senators Sununu and Johnson. The bill would permit life Johnson. The bill would permit life and p&c insurers to obtain a federal and p&c insurers to obtain a federal charter and avoid state licensing. charter and avoid state licensing. Federally-chartered insurers would Federally-chartered insurers would not be subject to most state not be subject to most state regulation, but would lose the regulation, but would lose the protections of the McCarran-protections of the McCarran-Ferguson Act for all conduct except Ferguson Act for all conduct except the development of policy forms.the development of policy forms.

The legislation is opposed by the The legislation is opposed by the “Big I” (the Independent Insurance “Big I” (the Independent Insurance Agents and Brokers Association), Agents and Brokers Association), which prefers the SMART Act, which which prefers the SMART Act, which would instead attempt to harmonize would instead attempt to harmonize state-based regulation and would not state-based regulation and would not eliminate McCarran.eliminate McCarran.

Relationships with Relationships with Providers Providers

Recurring Horizontal Recurring Horizontal IssuesIssues

Insurer Agreements Insurer Agreements regarding how to deal with regarding how to deal with ProvidersProviders

Provider Agreements Provider Agreements regarding how to deal with regarding how to deal with InsurersInsurers

Agreements on the Fees Agreements on the Fees Paid for Products or Paid for Products or ServicesServices

Agreements not to do business Agreements not to do business with a particular provider or class with a particular provider or class of providers (Boycott claims)of providers (Boycott claims)

Agreements on the Fees Agreements on the Fees Charged for Products or Charged for Products or Services Services

Agreements not to do business Agreements not to do business with a particular insurer or class with a particular insurer or class of insurers (Boycott claims)of insurers (Boycott claims)

Horizontal AgreementsHorizontal AgreementsInsurer Agreements on How to Treat ProvidersInsurer Agreements on How to Treat Providers

Academy of Medicine v. Aetna HealthAcademy of Medicine v. Aetna Health (Ohio (Ohio 2005) (alleged conspiracy of Cincinnati-area 2005) (alleged conspiracy of Cincinnati-area insurers to restrain provider fees; challenged insurers to restrain provider fees; challenged under the Valentine Act, Ohio’s antitrust law)under the Valentine Act, Ohio’s antitrust law)

After defendants’ motions to dismiss the Complaint on the grounds that After defendants’ motions to dismiss the Complaint on the grounds that the Valentine Act does not apply to insurers failed, as did the argument that the Valentine Act does not apply to insurers failed, as did the argument that the claims were required to be arbitrated pursuant to arbitration clauses in the claims were required to be arbitrated pursuant to arbitration clauses in each doctor/insurer agreement, several insurer defendants settled the claims each doctor/insurer agreement, several insurer defendants settled the claims against them for several hundred million dollars in reimbursement increases.against them for several hundred million dollars in reimbursement increases.

Horizontal AgreementsHorizontal AgreementsProvider Agreements on How to Treat Insurers Provider Agreements on How to Treat Insurers

UnitedHealth v. Advocate HealthCare UnitedHealth v. Advocate HealthCare (Arbitration, 2005) (arbitrators applied the rule of (Arbitration, 2005) (arbitrators applied the rule of reason to an insurer claim that a provider group had misused the “Messenger Model,” and reason to an insurer claim that a provider group had misused the “Messenger Model,” and held that because the provider group had no more than a 15% market share, and the held that because the provider group had no more than a 15% market share, and the insurer had encouraged joint negotiations, the insurer’s claim for $250 million in damages insurer had encouraged joint negotiations, the insurer’s claim for $250 million in damages failed)failed)

Medical Savings Insurance v. HCAMedical Savings Insurance v. HCA (M.D. Fla. 2005) (Insurer claim that area hospitals (M.D. Fla. 2005) (Insurer claim that area hospitals conspired to increase charges to insurer and/or boycott the insurer failed to state a claim conspired to increase charges to insurer and/or boycott the insurer failed to state a claim on standing grounds, because the insurer was neither a customer nor competitor with the on standing grounds, because the insurer was neither a customer nor competitor with the providers)providers)

HealthAmerica v. Susquehanna Health SystemHealthAmerica v. Susquehanna Health System (M.D.Pa. 2003) (“Virtual merger” of hospital (M.D.Pa. 2003) (“Virtual merger” of hospital systems held sufficient to constitute one entity, incapable of conspiracy under systems held sufficient to constitute one entity, incapable of conspiracy under CopperweldCopperweld, and thus joint contracting by the systems with insurers was lawful; summary , and thus joint contracting by the systems with insurers was lawful; summary judgment to health system)judgment to health system)

International Healthcare Management v. Hawaii Coalition for Health International Healthcare Management v. Hawaii Coalition for Health (9(9thth Cir. 2003) (joint Cir. 2003) (joint negotiations with insurer by medical association and IPA not unlawful where no negotiations with insurer by medical association and IPA not unlawful where no agreement existed on provider prices and no threat to boycott the insurer was agreement existed on provider prices and no threat to boycott the insurer was demonstrated, distinguishing demonstrated, distinguishing Pennsylvania Dental Ass’n v. Medical Serv. Ass’n of Pennsylvania Dental Ass’n v. Medical Serv. Ass’n of PennsylvaniaPennsylvania (3d Cir. 1987)) (3d Cir. 1987))

Recurring Vertical IssuesRecurring Vertical Issues Insurer/Provider Agreements on Insurer/Provider Agreements on

Reimbursement Levels – Most Favored Reimbursement Levels – Most Favored Nations ClausesNations Clauses

Insurer/Provider Exclusive Dealing Insurer/Provider Exclusive Dealing RelationshipsRelationships

Insurer/Provider Agreements to Exclude Insurer/Provider Agreements to Exclude or Terminate other Providers from or Terminate other Providers from NetworksNetworks

““All Products” ClausesAll Products” Clauses

Does the McCarran-Does the McCarran-Ferguson Act provide Ferguson Act provide protection for these protection for these

insurer/provider insurer/provider practices?practices?

Clearly No!Clearly No!

Vertical Agreements with Vertical Agreements with Providers are not considered to Providers are not considered to be “The business of insurance”be “The business of insurance” Podiatrists Association v. La Cruz Azul de Puerto Rico Podiatrists Association v. La Cruz Azul de Puerto Rico (1(1stst

Cir. 2003) (an alleged insurer agreement to exclude Cir. 2003) (an alleged insurer agreement to exclude podiatrists from a plan network does not constitute the podiatrists from a plan network does not constitute the business of insurance) business of insurance)

Pritt v. Blue CrossPritt v. Blue Cross (S.D. W.Va. 1988) (termination of (S.D. W.Va. 1988) (termination of physician’s provider agreement was not the business of physician’s provider agreement was not the business of insurance)insurance)

Proctor v. State Farm Mutual Automobile Insurance Proctor v. State Farm Mutual Automobile Insurance (D.C. (D.C. Cir. 1982) (arrangements between insurers and repair shops Cir. 1982) (arrangements between insurers and repair shops are not the business of insurance)are not the business of insurance)

Liberty Glass Co v. Allstate InsuranceLiberty Glass Co v. Allstate Insurance (5 (5thth Cir. 1979) (insurer Cir. 1979) (insurer agreements with glass shops are not the business of agreements with glass shops are not the business of insurance)insurance)

Most Favored Nations ClausesMost Favored Nations Clauses MFN clauses assure an insurer that it will receive the benefit of any price concessions MFN clauses assure an insurer that it will receive the benefit of any price concessions that a provider extends to other insurers that a provider extends to other insurers

Traditionally, such agreements have been upheld by the Courts on the grounds that Traditionally, such agreements have been upheld by the Courts on the grounds that they reduce consumer coststhey reduce consumer costs

Ocean States Physicians Health Plan v. Blue Cross & Blue ShieldOcean States Physicians Health Plan v. Blue Cross & Blue Shield (1 (1stst Cir. 1989) Cir. 1989) (upholding insurer use of MFN clause)(upholding insurer use of MFN clause)

Kartell v. Blue Shield of MassachusettsKartell v. Blue Shield of Massachusetts (1 (1stst Cir. 1984) (Upholding insurer MFN Cir. 1984) (Upholding insurer MFN clause because it reduced health care costs and thus enhanced consumer welfare; clause because it reduced health care costs and thus enhanced consumer welfare; “courts should be cautious – reluctant to condemn too speedily – an arrangement “courts should be cautious – reluctant to condemn too speedily – an arrangement that, on its face, appears to bring low price benefits to the consumer”)that, on its face, appears to bring low price benefits to the consumer”)

However, more recently, MFN clauses have increasingly come under attack, particularly However, more recently, MFN clauses have increasingly come under attack, particularly where the insurer is alleged to have market power. The DOJ has successfully challenged where the insurer is alleged to have market power. The DOJ has successfully challenged some insurer MFN clauses.some insurer MFN clauses.

United States v. Medical Mutual of OhioUnited States v. Medical Mutual of Ohio (N.D. Ohio 1999) (consent decree entered barring (N.D. Ohio 1999) (consent decree entered barring Ohio’s largest health insurer from enforcement of MFN)Ohio’s largest health insurer from enforcement of MFN)

United States v. Delta DentalUnited States v. Delta Dental (D.R.I. 1997) (after failing to prevail on a motion to dismiss (D.R.I. 1997) (after failing to prevail on a motion to dismiss the complaint, the insurer agreed to a consent decree barring enforcement of the MFN)the complaint, the insurer agreed to a consent decree barring enforcement of the MFN)

More Recent ChallengesMore Recent Challenges

Private LitigationPrivate Litigation Rocky Mountain Medical Rocky Mountain Medical

Center Case – in Center Case – in January 2004, a Utah January 2004, a Utah State Court rejected State Court rejected plaintiff’s claim that a plaintiff’s claim that a rival hospital’s contract rival hospital’s contract with insurers, which with insurers, which allegedly required them allegedly required them to pay higher fees if they to pay higher fees if they also contracted with also contracted with Rocky Mountain, was Rocky Mountain, was anti-competitiveanti-competitive

DOJ InvestigationsDOJ Investigations The Antitrust Division The Antitrust Division

has acknowledged that has acknowledged that it has conducted it has conducted investigations into MFN investigations into MFN clauses implemented by clauses implemented by the Alabama and the Alabama and Western Pennsylvania Western Pennsylvania Blues; each insurer Blues; each insurer terminated enforcement terminated enforcement of such provisions in its of such provisions in its contracts upon contracts upon commencement of the commencement of the DOJ investigationDOJ investigation

Exclusive Dealing Exclusive Dealing ArrangementsArrangements

US Healthcare v. US Healthcare v. Healthsource Healthsource (1(1stst Cir. Cir. 1993) (Agreement 1993) (Agreement effecting 25% of market effecting 25% of market not unlawful)not unlawful)

Blue Cross of Washington & Blue Cross of Washington & Alaska v. Kitsap Physicians Alaska v. Kitsap Physicians Service Service (W.D. Wash. 1981) (W.D. Wash. 1981) (HMO bylaw precluding (HMO bylaw precluding physicians from participating physicians from participating in rival HMOs unlawful where in rival HMOs unlawful where all but three doctors in area all but three doctors in area were HMO members) were HMO members)

The lawfulness of these agreements typically The lawfulness of these agreements typically turns on whether they foreclose a “substantial turns on whether they foreclose a “substantial

share” of the relevant marketshare” of the relevant market

Other Recent Exclusive Dealing Other Recent Exclusive Dealing CasesCases

Insurer DefendantInsurer Defendant

Stop & Shop Supermarket v. Blue Cross Stop & Shop Supermarket v. Blue Cross & Blue Shield of Rhode Island& Blue Shield of Rhode Island (1 (1stst Cir. Cir. 2004) (The District Court denied 2004) (The District Court denied summary judgment to an insurer with a summary judgment to an insurer with a 60% market share that was alleged to 60% market share that was alleged to have agreed to an exclusive agreement have agreed to an exclusive agreement with Rhode Island’s largest pharmacy; with Rhode Island’s largest pharmacy; however, at trial the District Court however, at trial the District Court found that the plaintiff had not found that the plaintiff had not presented adequate evidence to presented adequate evidence to demonstrate that the agreement had demonstrate that the agreement had anticompetitive effects, and therefore anticompetitive effects, and therefore granted the insurer a directed verdict at granted the insurer a directed verdict at the conclusion of plaintiff’s case. The the conclusion of plaintiff’s case. The First Circuit subsequently affirmed the First Circuit subsequently affirmed the District Court’s ruling).District Court’s ruling).

Provider DefendantProvider Defendant

McKenzie-Willamette Hosp. v. McKenzie-Willamette Hosp. v. PeaceHealthPeaceHealth (D. Or. 2003) (Provider (D. Or. 2003) (Provider exclusive with insurer led to jury exclusive with insurer led to jury finding of attempted monopolization finding of attempted monopolization and $16 million judgment)and $16 million judgment)

Woman’s Clinic v. St. John’s Health Woman’s Clinic v. St. John’s Health SystemSystem (W.D. Mo. 2002) (summary (W.D. Mo. 2002) (summary judgment for defendant hospital and judgment for defendant hospital and insurer; exclusive agreement insurer; exclusive agreement between defendants was terminable between defendants was terminable on short notice, and thus did not on short notice, and thus did not adversely effect competition)adversely effect competition)

Surgical Care Center of Hammond v. Surgical Care Center of Hammond v. Hospital Service District Hospital Service District (5(5thth Cir. Cir. 2002) (exclusive contract with 2002) (exclusive contract with insurer did not violate the antitrust insurer did not violate the antitrust laws)laws)

Exclusion/Termination of ProvidersExclusion/Termination of Providers

American Chiropractic Association v. Trigon American Chiropractic Association v. Trigon HealthcareHealthcare (4 (4thth Cir. 2005) (summary judgment Cir. 2005) (summary judgment for insurer; no evidence existed that the insurer for insurer; no evidence existed that the insurer had conspired with its medical board to cause had conspired with its medical board to cause anticompetitive harm to plaintiff chiropractors)anticompetitive harm to plaintiff chiropractors)

Podiatrist Ass’n v. La Cruz Azul De Puerto RicoPodiatrist Ass’n v. La Cruz Azul De Puerto Rico (1 (1stst Cir. 2003) (affirmed dismissal of claim that Puerto Cir. 2003) (affirmed dismissal of claim that Puerto Rico insurers had excluded podiatrists from inclusion Rico insurers had excluded podiatrists from inclusion in basic health care plans pursuant to conspiracy in basic health care plans pursuant to conspiracy between insurers and the physicians on the insurers’ between insurers and the physicians on the insurers’ medical boards; no evidence that insurers were medical boards; no evidence that insurers were controlled by the physicians or acted outside their controlled by the physicians or acted outside their self-interests)self-interests)

Griffiths v. Blue Cross/Blue ShieldGriffiths v. Blue Cross/Blue Shield (N.D. Ala. (N.D. Ala. 2001) (chiropractor claim of exclusion survived 2001) (chiropractor claim of exclusion survived dismissal where plaintiffs alleged conspiracy dismissal where plaintiffs alleged conspiracy included payments by physical therapists to included payments by physical therapists to insurer to disadvantage chiropractors) insurer to disadvantage chiropractors)

Termination/Nonrenewal of a ProviderTermination/Nonrenewal of a Provider

CALIFORNIA LAW LIMITS AN INSURER’S RIGHT TO TERMINATE A CALIFORNIA LAW LIMITS AN INSURER’S RIGHT TO TERMINATE A PROVIDERPROVIDER

Potvin v. Metropolitan Life InsurancePotvin v. Metropolitan Life Insurance (Cal. 2000) (physician removed from (Cal. 2000) (physician removed from PPO plan has a “due process” right to a hearing to challenge the decision PPO plan has a “due process” right to a hearing to challenge the decision if the insurer has market power)if the insurer has market power)

Palm Medical Group v. State Compensation Insurance FundPalm Medical Group v. State Compensation Insurance Fund (San Fran. (San Fran. Sup. Ct., 2006) ($1.13 million judgment for wrongfully excluded provider) Sup. Ct., 2006) ($1.13 million judgment for wrongfully excluded provider)

BUT BUT OTHER STATES HAVE REFUSED TO GRANT PROVIDERS SIMILAR RIGHTSOTHER STATES HAVE REFUSED TO GRANT PROVIDERS SIMILAR RIGHTS

Pannozzo v. Anthem Blue CrossPannozzo v. Anthem Blue Cross (Oh. App. 2003); (Oh. App. 2003); Oh v. Anthem Blue CrossOh v. Anthem Blue Cross (Oh. App. 2004) (Ohio (Oh. App. 2004) (Ohio courts have refused to create a “due process” right to a hearing on nonrenewal or to adopt courts have refused to create a “due process” right to a hearing on nonrenewal or to adopt Potvin Potvin as as the law in Ohio)the law in Ohio)

Mendez v. Blue Cross of FloridaMendez v. Blue Cross of Florida (Fla. App. 2001) (rejecting “due process” right set forth in (Fla. App. 2001) (rejecting “due process” right set forth in Potvin)Potvin)

Grossman v. Columbine Medical Group Grossman v. Columbine Medical Group (Colo. App. 2000) (rejecting (Colo. App. 2000) (rejecting PotvinPotvin))

Singh v. Blue Cross/Blue Shield of Massachusetts Singh v. Blue Cross/Blue Shield of Massachusetts (1st Cir. 2002) (physician claims arising from (1st Cir. 2002) (physician claims arising from nonrenewal barred by the 1986 Health Care Quality Improvements Act) nonrenewal barred by the 1986 Health Care Quality Improvements Act)

All Products ClausesAll Products Clauses In the late 1990s, providers began to complain about “all products” clauses in In the late 1990s, providers began to complain about “all products” clauses in

health insurer contracts, claiming they were anticompetitive.health insurer contracts, claiming they were anticompetitive.

In 1998, the Nevada Insurance Commissioner declared all products clauses to be In 1998, the Nevada Insurance Commissioner declared all products clauses to be a violation of the state Unfair Trade Practices Act, and in the same year the Texas a violation of the state Unfair Trade Practices Act, and in the same year the Texas AG settled an action against Aetna by restricting Aetna’s ability to utilize all AG settled an action against Aetna by restricting Aetna’s ability to utilize all products clauses in the state. Some other states, including North Dakota and products clauses in the state. Some other states, including North Dakota and Virginia, passed legislation barring insurers from implementing all products Virginia, passed legislation barring insurers from implementing all products clauses.clauses.

However, in a recent twist on the use of such clauses, in March of this year an However, in a recent twist on the use of such clauses, in March of this year an insurerinsurer complained about the use of an all products clause imposed by a health complained about the use of an all products clause imposed by a health provider. Wisconsin Physicians Insurance alleged that Aurora Health Care’s provider. Wisconsin Physicians Insurance alleged that Aurora Health Care’s insistence on an “all products” clause in its agreements with insurers is insistence on an “all products” clause in its agreements with insurers is anticompetitive. The case is currently pending in the Federal District Court in anticompetitive. The case is currently pending in the Federal District Court in Wisconsin. Wisconsin.

In all such matters, the key issue is whether the entity insisting on the use of an In all such matters, the key issue is whether the entity insisting on the use of an all products clause has market power. Absent market power, the likelihood that all products clause has market power. Absent market power, the likelihood that anticompetitive effects can be demonstrated is remote.anticompetitive effects can be demonstrated is remote.

Alternate Legal TheoriesAlternate Legal TheoriesRICO ClaimsRICO Claims

In re Managed Care Litigation In re Managed Care Litigation (S.D. Fla. 2002). A RICO (S.D. Fla. 2002). A RICO class action complaint brought on behalf of over 700,000 class action complaint brought on behalf of over 700,000 physicians, alleging that several health insurers unlawfully physicians, alleging that several health insurers unlawfully conspired to reduce physician reimbursement rates. conspired to reduce physician reimbursement rates. District Judge Moreno certified a physician class (while District Judge Moreno certified a physician class (while denying a consumer class in a companion case). That denying a consumer class in a companion case). That ruling was subsequently affirmed on appeal to the 11ruling was subsequently affirmed on appeal to the 11thth Circuit and certiorari was not granted by the Supreme Circuit and certiorari was not granted by the Supreme Court. Several insurer defendants subsequently settled, Court. Several insurer defendants subsequently settled, with the total value of all settlements reported to be close with the total value of all settlements reported to be close to $1 billion, with well over $100 million in attorneys fees, to $1 billion, with well over $100 million in attorneys fees, the case continues against the remaining defendant. the case continues against the remaining defendant.

FEDERAL AGENCY FEDERAL AGENCY ACTIONSACTIONS

DOJ and FTCDOJ and FTC

ACTIONS INSTITUTED BYACTIONS INSTITUTED BYTHE ANTITRUST DIVISIONTHE ANTITRUST DIVISION

AGAINST PROVIDERSAGAINST PROVIDERS(for anticompetitive action effecting insurers)(for anticompetitive action effecting insurers)

U.S. v. Federation of Physicians and Dentists U.S. v. Federation of Physicians and Dentists (S.D. (S.D. Ohio 2005) (contending that the doctors had Ohio 2005) (contending that the doctors had unlawfully coordinated their negotiation of fees with unlawfully coordinated their negotiation of fees with Cincinnati health insurers; consent judgment Cincinnati health insurers; consent judgment required a modification in negotiating practices)required a modification in negotiating practices)

U.S. v. Mountain Health Care U.S. v. Mountain Health Care (W.D. N.C. 2002) (W.D. N.C. 2002) (challenging joint negotiations by provider network; (challenging joint negotiations by provider network; required the network to disband as a condition to required the network to disband as a condition to settlement)settlement)

U.S. v. Federation of Physicians and DentistsU.S. v. Federation of Physicians and Dentists (Del. (Del.

2002) (challenging provider joint negotiations with 2002) (challenging provider joint negotiations with insurers; consent decree required change in manner insurers; consent decree required change in manner of negotiations)of negotiations)

U.S. v. Federation of Certified Surgeons and U.S. v. Federation of Certified Surgeons and SpecialistsSpecialists (M.D. Fla. 1999) (challenging provider (M.D. Fla. 1999) (challenging provider joint negotiations with insurers; consent settlement joint negotiations with insurers; consent settlement required change in manner of negotiations)required change in manner of negotiations)

U.S. v. Healthcare PartnersU.S. v. Healthcare Partners (D. Conn. 1996) (D. Conn. 1996) (challenging joint negotiations with insurers by IPA; (challenging joint negotiations with insurers by IPA; consent settlement barring practice entered)consent settlement barring practice entered)

ACTIONS BY THE FTCACTIONS BY THE FTC Over 30 Actions Have Been Commenced By the FTC Over 30 Actions Have Been Commenced By the FTC Against Doctor/Hospital Groups for Unlawful Collective Against Doctor/Hospital Groups for Unlawful Collective Bargaining with Insurers, most typically concluding in Bargaining with Insurers, most typically concluding in a Consent Decree barring continued collective actiona Consent Decree barring continued collective action

Partners Health Network Partners Health Network (Aug. 2005) (South Carolina PHO (Aug. 2005) (South Carolina PHO was alleged to have violated Section 5 of the FTC Act by was alleged to have violated Section 5 of the FTC Act by misusing the Messenger Model in negotiations with misusing the Messenger Model in negotiations with insurers; consent decree entered requiring a change in insurers; consent decree entered requiring a change in practices)practices)

San Juan IPA San Juan IPA (May 2005) (New Mexico IPA was alleged to (May 2005) (New Mexico IPA was alleged to have violated Section 5 by dissuading physicians from have violated Section 5 by dissuading physicians from accepting individual offers from insurers; consent decree accepting individual offers from insurers; consent decree entered)entered)

Evanston Northwestern Healthcare Evanston Northwestern Healthcare (April 2005) (Chicago-(April 2005) (Chicago-area doctors were alleged to have violated Section 5 by area doctors were alleged to have violated Section 5 by refusing to negotiate individually, where their was no refusing to negotiate individually, where their was no integration of services or risk sharing; consent decree integration of services or risk sharing; consent decree entered)entered)

Preferred Health Services Preferred Health Services (March 2005) (South Carolina (March 2005) (South Carolina PHO was alleged to have violated Section 5 by misusing PHO was alleged to have violated Section 5 by misusing the Messenger Model; consent decree entered) the Messenger Model; consent decree entered)

Only one physician group has litigated an FTC action Only one physician group has litigated an FTC action to trial within the last twenty years. In 2005, in to trial within the last twenty years. In 2005, in North North Texas Specialty PhysiciansTexas Specialty Physicians, the FTC held that the , the FTC held that the doctors collective bargaining practices did not comply doctors collective bargaining practices did not comply with the “Messenger Model” requirements of the Health with the “Messenger Model” requirements of the Health Care Guidelines, and were unlawful. The doctors have Care Guidelines, and were unlawful. The doctors have appealed the decision to the 5appealed the decision to the 5thth Circuit Court of Circuit Court of Appeals. Appeals.

LEGISLATIVELEGISLATIVEISSUES INVOLVING ISSUES INVOLVING

PROVIDERSPROVIDERS

Federal LegislationFederal Legislation Doctor Collective Doctor Collective

Bargaining LegislationBargaining Legislation

Federal legislation has Federal legislation has repeatedly been introduced in repeatedly been introduced in the last few years that would the last few years that would permit physicians to negotiate permit physicians to negotiate collectively with insurers collectively with insurers concerning rates. The concerning rates. The American Medical Association American Medical Association maintains that collective action maintains that collective action on fee negotiation is necessary on fee negotiation is necessary to “level the playing field.”to “level the playing field.” Most recently, in 2005 the Most recently, in 2005 the “Quality Health Care Coalition “Quality Health Care Coalition Act of 2005,” H.R. 3074, was Act of 2005,” H.R. 3074, was introduced by Representative introduced by Representative Ron Paul of Texas.Ron Paul of Texas.

State Legislation State Legislation PHYSICIAN COLLECTIVE BARGAINING PHYSICIAN COLLECTIVE BARGAINING

LEGISLATIONLEGISLATION

Legislation EnactedLegislation Enacted Texas; Texas Insurance Article 29.01 Texas; Texas Insurance Article 29.01 et et

seq.seq. New Jersey; N.J.S.A. 52:17B-196 New Jersey; N.J.S.A. 52:17B-196 et seq.et seq. In 2005, similar legislation was introduced In 2005, similar legislation was introduced

in Rhode Island, Massachusetts, in Rhode Island, Massachusetts, Pennsylvania and Connecticut, and was Pennsylvania and Connecticut, and was recently reintroduced in 2006 in recently reintroduced in 2006 in Connecticut (SB 670). Connecticut (SB 670).

THE FTC IS VEHEMENTLY OPPOSED THE FTC IS VEHEMENTLY OPPOSED TO ALL SUCH LEGISLATION AS TO ALL SUCH LEGISLATION AS “UNNECESSARY SPECIAL “UNNECESSARY SPECIAL TREATMENT” FOR PHYSICIANS THAT TREATMENT” FOR PHYSICIANS THAT CONSTITUTES “CONSTITUTES “PER SEPER SE PRICE FIXING PRICE FIXING UNDER THE FEDERAL ANTITRUST UNDER THE FEDERAL ANTITRUST LAWS.”LAWS.”

““ANY WILLING PROVIDER” ANY WILLING PROVIDER” LEGISLATIONLEGISLATION

Enacted in approximately 20 Enacted in approximately 20 states; requires health plans to states; requires health plans to admit any provider willing to admit any provider willing to abide by the plan’s requirementsabide by the plan’s requirements

In Kentucky, the law extends to In Kentucky, the law extends to doctors (in most other states, the doctors (in most other states, the law only applies to pharmacists)law only applies to pharmacists)

In 2003, the Supreme Court In 2003, the Supreme Court resolved a split in the circuits resolved a split in the circuits regarding whether “Any Willing regarding whether “Any Willing Provider” laws were preempted Provider” laws were preempted by ERISA, finding they were NOT by ERISA, finding they were NOT preempted. preempted. Kentucky Kentucky Association of Health Plans v. Association of Health Plans v. MillerMiller (U.S. 2003) (U.S. 2003)

The FTC opposes this The FTC opposes this Legislation as wellLegislation as well

THE ENDTHE END