Silent PPOs under scrutiny

There recently has been a national legislative trend to restrict or limit the use of “silent PPOs,” “non-directed PPOs,” “ghost PPOs,” or “blind PPOs,” all of which refer to the same thing. This has been a major legislative priority for the American Medical Assn, as well as state and local medical societies.

On November 23, 2008, the National Conference of Insurance Legislators (NCOIL) adopted model legislation aimed at regulating silent PPOs. Some states, such as Ohio and Florida, have already passed legislation restricting the use of silent PPOs and others may consider passing legislation similar to the model legislation in the next legislative session.

STATES NOT SILENT

For example, Texas recently considered, but did not ultimately pass, a silent PPO bill that would have strengthened the existing law. Texas has had a silent PPO law on the books since 1999, which provides that PPOs may not sell, lease or otherwise transfer data regarding the payment or reimbursement terms of the contract without the express authority of and prior adequate notification of the other contracting parties.

Texas may ultimately revisit the manner in which to regulate silent PPOs when the next legislative session convenes in 2011.

Because of increased regulatory attention in this area, contracting parties, including PPOs and providers, should consider monitoring any developments with respect to the regulation of silent PPOs.

Silent PPOs are many times described as arrangements whereby organizations access discounted rates for healthcare services from healthcare providers without contractual authorization from the providers.

LISTEN TO THE LEGISLATION

The model legislation adopted by NCOIL sets forth specific requirements for contracting parties, providing that a contracting entity may not grant access to a provider’s discount unless the provider network contract specifically states that the contracting entity may enter into an agreement with a third party. The legislation also provides that the third party accessing the provider network contract is contractually obligated to comply with the terms of the provider network contract.

Further, in an attempt to provide transparency, the model legislation contains certain disclosure requirements. For example, a contracting entity that grants access to a provider’s services and discounts must identify and provide to the provider, upon request, a list of all third parties to which the contracting entity has executed contracts or will grant access to the provider’s services and discounts, thereby allowing providers to determine if the networks and the discounts have been properly accessed.

Among other requirements, the model legislation also sets forth obligations for third parties that have been granted access to a provider’s healthcare services and discounts, and provides that unauthorized access to provider network contracts is an unfair insurance practice. Because the regulation of silent PPOs has received national attention as well as increased scrutiny in many states, contracting parties should continue to monitor any new developments.

This column is written for informational purposes only and should not be construed as legal advice.

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