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Idaho recently became the first state in the nation to outlaw clauses in managed care contracts requiring providers to give health plans their lowest rates. The Idaho legislature passed the bill prohibiting the "most-favored-nation" (MFN) or "best-price" provisions in any form of insurance contract in March, thereby ensuring that physicians can give one payer a low rate without doing the same for all.
The new law resulted from the lobbying efforts of the Idaho Medical Association (IMA); individual physicians, including psychiatrists; insurance companies; employers; hospitals; and managed care organizations. Galvanized by a controversial contract amendment created by Blue Cross of Idaho, these groups argued that MFN clauses are anticompetitive and interfere with the right to contract. Blue Cross of Idaho, the largest insurance company in the state, tried to put a clause in its contracts allowing it to adjust providers' prices based on competition. Under the new legislation, Blue Cross will be able only to adjust providers' prices once a year.
If a physician signs a contract with a best-price clause, said Ron Hodge, associate executive director of IMA, the clause interferes with the ability to sign other contracts at lower prices without losing the price from the original contract. This same phenomenon deters providers from signing contracts with anyone but large insurance companies or HMO's and hinders competition.
Officials from the Federal Trade Commission and the Department of Justice have stated that clauses shut out competition and set a floor on prices under certain circumstances. IMA considered seeking the involvement of these two agencies but decided that the legislative approach might bring quicker results.
Other states such as Tennessee have attempted to ban the MFN clauses but have been unable to overcome the opposition, said Robert K. Seehusen, IMA's executive director. IMA, he said, was able to form a coalition of provider groups, insurance groups, and employer groups in lobbying for the legislation. The ability to get more laws on the books, he said, will depend on building such coalitions that are strong enough to challenge powerful managed care organizations and insurance companies.