On October 9, 2007, the Ohio House of Representatives, by a vote of 95 to 5, passed House Bill 125 ("HB 125"), a "Healthcare Simplification Act " that legislators and the Ohio State Medical Association ("OSMA") claim will let providers focus on providing health care services and reduce time spent on administrative matters by setting standards for transparency in contracting with insurers, standardizing credentialing, and establishing web-based insurance-eligibility verification. This increased "simplification" will come at substantial costs to insurers (and perhaps employers), and what the OSMA and providers may truly be seeking is bargaining power over insurers in contract negotiations.

HB 125 seeks to enact a new Ohio Revised Insurance Code Chapter 3963, which will regulate health care contracts entered into by certain health care "participating providers" and "contracting entities". Both of these terms are defined very broadly by the bill. A "participating provider" is any provider that has a health care contract with a contracting entity and is entitled to reimbursement for health care services rendered to an enrollee under the health care contract. "Contracting entity" is any person that has a primary business purpose contracting with participating providers for the delivery of health care services (which arguably could include certain employer-sponsored health benefit plans covered by The Employee Retirement Income Security Act of 1974 "ERISA"). The provisions of HB 125 only apply to health care contracts that are delivered or issued for delivery in Ohio on or after the act's effective date, but also extend in certain respects to existing contracts that are modified on or after that date.

The OSMA and its members, believe that the passage of HB 125 will mark the end of certain common insurer "take-it or leave-it" predatory contract provisions that the OSMA calls "unfair" and that, historically, physicians have had little to no success in negotiating against. In this regard, the bill seeks to put a two year "freeze" (subject to extension) on "most favored nation" clauses which would impact both new agreements as well as agreements in effect prior to the bill's effective date. While the bill's language lays out the mechanics of this freeze in its uncodified provisions, it does not provide for a new statute in this respect and it is unclear how this prohibition would be enforced. In addition to this freeze on most favored nation clauses, the bill seeks to require insurers to disclose their compensation methodology (typically confidential) at the outset of provider contract negotiations, prohibits insurers from contractually limiting a provider's ability to contract with other payors, and requires insurers to negotiate with providers on a product-by-product basis. HB 125 also seeks to eliminate "economic profiling" in credentialing and to limit the common practice of selling or renting provider networks to other payors.

Employers have expressed concerns over the bill's broad definition of "contracting entity" and whether the bill's provisions will affect their self-insured ERISA plans. Causing more concern for employers, an attorney hired by the OSMA stated publicly that the bill does not relate to any ERISA plans and therefore would not be preempted by ERISA.

HB 125 was assigned to the Senate Judiciary-Civil Justice Committee on October 10, 2007 and will be scheduled for upcoming hearings soon. Sources report that efforts are being made to try to move HB 125 to a vote in the Senate by the end of the year. Health insurers and providers (of all types) will want to closely follow this legislation which, if enacted into law, promises to have a profound impact on their contractual relationships in Ohio.

Provider Contracting Changes

Under HB 125, a "health care contract" is a contract entered into, modified, or renewed between a contracting entity and a participating provider for the delivery of basic or supplemental health care services to enrollees. A contracting entity is prohibited from:

  • Selling, renting or giving the entity's rights to a participating provider's services pursuant to the contracting entity's health care contract (subject to some exceptions);
  • Requiring as a condition of entering into a health care contract that a participating provider provide services for more than one product;
  • Prohibiting a participating provider from entering into a health care contract with any other contracting entity or requiring that the participating provider waive any benefit that the provider may be entitled to under state or federal law; and
  • Including a "most favored nation" clause in any health care contract and no existing health care contract may be amended to include a most favored nation clause for a period of two years after the effective date of the act. The bill also creates a study commission to study the impact of most favored nation clauses and report its findings to the legislature prior to the end of the two-year freeze period. "Most favored nation" clauses typically require a provider to give an insurer the lowest rate it gave to any other insurer for the provision of the same service.

HB 125 also includes additional requirements for health care contracts:

  • Health care contracts must expressly state the reasons that may be used for termination for cause and such terms must be reasonable;
  • Health care contracts must include a binding arbitration clause for contract disputes related to statutory rights;
  • Health care contracts must include a summary disclosure form that includes information sufficient for the provider to determine the compensation or payment terms for health care services, the fee schedule of procedure codes and the methodology used to calculate any fee schedule and the term of the contract;
  • The contracting entity must identify any utilization management, quality improvement or similar programs used to review, monitor, evaluate or assess the services provided pursuant to the health care contract; and
  • Health care contracts must provide that any amendment to the health care contract requires written notice of the amendment to be delivered to the provider not later than 60 days prior to the effective date of the amendment. Within 30 days after receiving the amendment, if the provider objects and there is no resolution of the objection, either party may terminate the health care contract upon written notice to the other party given not later than 30 days prior to the effective date of the proposed amendment.

Standardized Credentialing; 90-Day Deadline

Under existing law, a health insuring corporation is permitted to use economic profiling as a factor in credentialing a provider. Economic profiling is a health insuring corporation's use of economic performance data and economic information in determining whether to contact with a provider. HB 125 eliminates economic profiling as a factor in credentialing providers. HB 125 also requires the Department of Insurance to adopt a form substantially similar to the credentialing form used by the Council for Affordable Quality Healthcare as the standard credentialing form for initial credentialing and recredentialing of physicians. Contracting entities must complete the credentialing process not later than 90 days after the contracting entity receives the credentialing form from the provider. A contracting entity that fails to complete the credentialing process within the 90-day period is liable for a civil penalty payable to the provider in the amount of $500 per day, including weekends, until the provider's application is approved or denied.

On-Line "Real-Time" Eligibility Information

Beginning January 1, 2009, changes proposed by HB 125 would require each contracting entity to establish and maintain a web-site to make available certain information maintained in the ordinary course of business sufficient for the participating provider to determine at the time of the a patient's visit:

  • The patient's identification number assigned by the contracting entity;
  • The birth date and gender of the patient;
  • The names, birth dates, and genders of all covered dependents;
  • The current enrollment and eligibility status of the patient;
  • Whether a specific type or category of service is a covered benefit for the patient;
  • The patient's excluded benefits or limitations;
  • The patient's co-payment requirements; and
  • The unmet amount of the patient's deductible or financial responsibility.