THE RESURGENCE OF SELECTIVE CONTRACTING RESTRICTIONS

As managed care has spread, so has legislation to force plans to contr act with any willing provider (AWP) and give patients freedom of choic e (FOC). Managed care organizations' selective networks and provider i ntegration reduce patient access to providers, along with provider acc ess to paying patients, so many providers have lobbied for AWP-FOC law s. In opposition are managed care organizations (MCOs), which want ful l freedom to contract selectively to control prices and utilization. T his article comprehensively describes laws in all fifty-one jurisdicti ons, classifies their relative strength, and assesses the implications of the laws. Most are relatively weak forms and all are limited in ap plication by ERISA and the federal HMO Act. The article also uses an a ssociative multivariate analysis to relate the selective contracting e nvironments to HMO penetration rates, rural population, physician dens ity, and other variables. States with weak laws also have higher HMO p enetration and higher physician density, but smaller rural populations . We conclude that the strongest laws overly restrict the management o f care, to the likely detriment of cost control. But where market powe r is rapidly concentrating, not restricting selective contracting coul d diminish long-term competition and patient access to care. In the fa ce of uncertainty about the impact of these laws, an intermediate appr oach may be better than all or nothing. States should consider mandati ng 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.