American Journal of Law & Medicine

Narrowing provider choice: any willing provider laws after New York Blue Cross v. Travelers.


Two competing public policies, an individual's right to choice of medical provider and the need to reduce health care costs, have collided as the federal government and the states implement health care reform. During his first year in office, President William J. Clinton focused on health care reform; however, Clinton was unsuccessful in implementing his "Health Security Act"(1) and national debate dissolved into partisan bickering.(2) With the failure to establish a coherent national policy on health care, the states and private and public health care entities are reshaping the market. Simultaneously, the courts and administrative agencies entertain public policy arguments favoring choice or cost reductions.

Fee-for-service (FFS) medical care allows individuals to receive medical care from their provider of choice.(3) under the FFS model, individuals chose their health care provider, receive care, and the provider bills an indemnity insurance plan on the basis of service provided.(4)The emergence of managed care organizations (MCOs) narrowed and, in some cases, eliminated this right to choose one's health care provider. MCOs entered the health care marketplace promising to reduce costs.(5) MCOs maintain that the primary way to cut costs is by purchasing medical care in bulk by creating panels of selected providers who are promised patient volume in return for reduced prices.(6)This attack on the traditional belief that individuals have a right to choose their health care provider affects: (1) consumers, who often report less confidence in providers who are chosen for them; (2) providers, who find their livelihoods diminished; and (3) politicians, who promise reduced health care costs without reduced quality of care.

Health care is the largest single industry in the United States today, accounting for fifteen percent of the gross domestic product.(7) Nevertheless, in 1991 35.4 million Americans lacked health insurance.(8) With the federal government's failure to establish a coherent national health care policy, states and private health care entities stepped in to reshape the health care market.(9) Private MCOs manage the delivery of health care in the public sector through contracts with states, and in the private sector, where they emerged as Health Maintenance Organizations (HMOs) and later as Preferred Provider Organizations (PPOs).(10)

MCOs manage costs by implementing cost-control mechanisms, such as utilization review.(11) Central to the concept is a limited and highly managed provider panel, composed of selected providers willing to accept reduced fees and utilization controls in return for a promised volume of patients.(12) MCOs see a limited panel as imperative to managing care and thereby to reducing costs.(13) This underlying philosophy emphasizing limiting providers thereby reducing health care costs, and thereby controlling consumer choice, remains an unchallenged assumption in the contemporary re-orgartization of health care.

"Any Willing Provider" laws require MCOs to admit onto their panels any provider willing to accept their terms and conditions.(14) MCOs, viewing "Any Willing Provider" laws as a threat to their ability to manage costs, have vigorously challenged these statutes in court.(15) MCOs have founded their challenges in the Employment Retirement Income Security Act of 1974 (ERISA), a comprehensive federal statute designed to create a uniform, national system of regulation for employee benefit plans.(16) ERISA preempts any state law that relates to an employee benefit plan.(17)

This Note argues that ERISA does not proeempt "Any Willing Provider" Laws. With the emergence of "Any Willing Provider" laws, MCOs, the federal and state governments must confront the public policy dilemma of choice versus cost control in health care. This Note provides a legal framework for this debate. Part II describes current "Any Willing Provider" laws and the requisite analysis required to determine ERISA preemption. Part III argues that, based on the recently decided New York Blue Cross Plans v. Travelers Insurance Co.(18) case, "Any Willing Provider" laws should easily survive a challenge founded on ERISA. This Note further argues that many courts have inaccurately analyzed "Any Willing Provider" cases based on an overly narrow interpretation of related U.S. Supreme Court cases. Part IV discusses the public policy implications of "Any Willing Provider" laws and compares the arguments of this Note with a previously published Note analyzing ERISA preemption of "Any Willing Provider" laws.(19) Part V discusses the public sector's response to freedom of choice issues. Part VI concludes by suggesting that the public policies of freedom of choice and decreased health care cost need not collide as competing policies; rather, they should co-exist within managed care to offer individuals less expensive health care without sacrificing quality.


Twenty-four states have enacted "Any Willing Provider" statutes, ten of them since 1993.(20) These statutes require an MCO to accept onto its panel any provider who will accept the MCO's terms.(21) The states have taken various approaches in enacting "Any Willing Provider" laws. Twelve of the twenty-four have enacted statutes that apply only to pharmacies,(22) nine have general provider provisions,(23) and three have a limited list of providers to whom the statute applies.(24) In those states that have enacted general provider provisions, the terse provider is usually defined broadly to include "an individual or entity licensed or legally authorized to provide health care services."(25) The language of these statutes also varies. Some are directed at the insured, stating that the MCO may not prevent a person "from selecting the pharmacy or pharmacist of his choice."(26) Others are directed at the provider.(27) Some of the statutes are relatively brief and simply state that providers "willing and able to meet terms and conditions established by insurer" must be admitted onto the panel.(28) Others include a list of conditions the MCO may set for the provider to join,(29) while others are far more detailed In their provisions.(30)


MCO-filed lawsuits challenging these statutes have entered the court system.(31) MCOs maintain that section 514(a) of ERISA preempts "Any Willing Provider" statutes.(32) Section 514(a) provides that ERISA supersedes any state law that relates to any employee benefit.(33) However, ERISA [sections] 514(b)(2)(A) limits this preemption by saving any state law that regulates insurance.(34) When evaluating ERISA preemption, the following two-step analysis is required: (1) whether the state statute relates to employee benefits; and, if so, (2) whether the statute regulates insurance.

Using the ERISA analysis presented by the U.S. Supreme Court in Ingersoll-Rand Co. v. McClendon(35) and Shaw v. Delta Air Lines, Inc.,(36) courts have allowed broad ERISA preemption, determining that state law may relate to employee benefits even if the law has an indirect effect.(37) This analysis led courts to conclude that "Any Willing Provider" laws relate to employee benefits plans.(38) Therefore, the courts' analysis shifted to a more detailed discussion of whether the laws regulate insurance.(39) ERISA lacks preemptive power if "Any Willing Provider" laws regulate insurance; if they do not regulate insurance, ERISA preempts these laws.

The courts' cursory analysis of whether the laws relate to employee benefits was, however, incorrect. Even if courts correctly dismissed the first step of the analysis, they inconsistently interpreted the second step (whether the laws regulate insurance), leading to conflicting results across the country.(40) "Any Willing Provider" laws can, and should, defeat an ERISA challenge based on the first level of analysis, i.e., whether the statute "relates to" an employee benefit plan.

1. ERISA [sections] 514(a) Analysis

ERISA, a comprehensive statute, subjects employee benefit plans (pension plans as well as programs providing benefits for illness, accident, disability, death or unemployment) to federal regulation.(41) Congress designed ERISA to promote the interests of employees and their beneficiaries by creating a uniform, national system of regulation.(42) ERISA extends to those plans provided through an employer's selfinsured program; it does not encompass plans that are purchased through an insurance company.(43) However, ERISA plays a large role in the legal analysis of health insurance plans because seventy percent of all plans are self-insured.(44)

In the 1983 case Shaw v. Delta Air Lines, the U.S. Supreme Court examined the plain language of ERISA [sections] 514(a) and Congress's intent in passing the legislation.(45) The Court determined that "a law 'relates to' an employee benefit plan if it has a connection with or reference to such a plan."(46) An analysis of the bill's legislative history led the Court to determine that Congress used "relate to" in its broadest sense.(47)

In the 1990 case Ingersoll-Rand Co. v. McClendon, the U.S. Supreme Court revisited the definition of "relates to" and further refined its holding in Shaw.(48) The McClendon Court stated that [sections] 514(a) was intended to ensure that plans . …

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