Any-Willing-Provider laws: their financial effect on HMOs

Any-Willing-Provider (AWP) legislation requires that health plans accept any health care provider who agrees to conform to the plan's conditions, terms, and reimbursement rates. Many states have adopted such legislation, raising questions about its effect on the managed care market. Those favoring this legislation argue that it will reduce restrictions on choice of provider, while opponents argue that it will reduce competition by increasing administrative and medical costs for managed care plans. Using cross-sectional time-series data for the period 1992-1995 (the period during which many of these laws were enacted), this study investigates the effect that these laws have on HMO financial performance. Our results show that "all-provider" AWP laws have a very limited effect on the financial performance measures we examine. "Pharmacy" AWP laws have a more significant effect, but neither type of law appears to affect the overall profitability of HMOs.