The resurgence of selective contracting restrictions

As managed care has spread, so has legislation to force plans to contract with any willing provider (AWP) and give patients freedom of choice (FOC). Managed care organizations' selective networks and provider integration reduce patient access to providers, along with provider access to paying patients, so many providers have lobbied for AWP-FOC laws. In opposition are managed care organizations (MCOs), which want full freedom to contract selectively to control prices and utilization. This article comprehensively describes laws in all fifty-one jurisdictions, classifies their relative strength, and assesses the implications of the laws. Most are relatively weak forms and all are limited in application by ERISA and the federal HMO Act. The article also uses an associative multivariate analysis to relate the selective contracting environments to HMO penetration rates, rural population, physician density, and other variables. States with weak laws also have higher HMO penetration and higher physician density, but smaller rural populations. We conclude that the strongest laws overly restrict the management of care, to the likely detriment of cost control. But where market power is rapidly concentrating, not restricting selective contracting could diminish long-term competition and patient access to care. In the face of uncertainty about the impact of these laws, an intermediate approach may be better than all or nothing. States should consider mandating that plans offer point-of-service options, for a separate premium. This option expands patient choice of plans at the time of enrollment and of providers at the time of care, yet maintains plans' ability to control core providers.