New Ohio law requires clarity in health plan contracts

June 16, 2008

Under Ohio’s Healthcare Simplification Act, which goes into effect on June 25, health care plans are required to be clearer and more open about contract terms with physicians than they have been in the past, disclosing what insurers will pay for services, and notifying doctors of significant changes to the contract. The law also places limits on so-called silent PPOs: the health plan practice of paying for access to other companies’ network physicians, then reimbursing physicians at the lowest available rate.

Under Ohio’s Healthcare Simplification Act, which goes into effect on June 25, health care plans are required to be clearer and more open about contract terms with physicians than they have been in the past, disclosing what insurers will pay for services, and notifying doctors of significant changes to the contract. The law also places limits on so-called silent PPOs: the health plan practice of paying for access to other companies’ network physicians, then reimbursing physicians at the lowest available rate.

The legislation is the culmination of a 1.5-year legislative fight between physician organizations demanding that health plans be more transparent about contract terms and insurers and corporate interests, which viewed the law as cumbersome and not cost effective, according to American Medical News (4/14/08). The bill passed overwhelmingly in both legislative houses.

In a letter supporting the new law, American Medical Association Executive Vice President Michael D. Maves, MD, described the legislation as “an important step in providing greater fairness and transparency in the contracting process and ultimately benefiting the patient by ensuring that patient care, rather than administrative paperwork, serves as the top priority.” But the bill won’t simplify anything, said the Ohio Association of Health Plans, which represents state-licensed insurers. The group claims that though “some elements of this legislation…will meet our goal of providing affordable, high-quality health care,” all parties will incur “additional administrative burdens.”

Health plan contract-related rules also have been introduced in other states, such as Connecticut, Kentucky, New Jersey, New York, and Tennessee. Unlike the comprehensive legislation in Ohio, however, these bills generally address single issues.