Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, November 30, 1993 TAG: 9311300154
SECTION: NATIONAL/INTERNATIONAL PAGE: A-2 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The court, without comment, let stand a Virginia law that the insurance industry said is pre-empted by a federal law protecting employee benefits.
The Virginia law is aimed at regulating preferred-provider organizations - health-care systems in which more than 50 million Americans participate.
According to the American Council of Life Insurance, at least six states have similar laws - Georgia, Illinois, Indiana, Louisiana, Utah and Wyoming.
The state law likely would become irrelevant if President Clinton's health-care proposal became law, experts said.
A preferred-provider organization is a system under which employee benefit plans deliver health care at reduced costs.
An administrator of such a system, often an insurance company, contracts with hospitals, doctors and other health-care providers for reduced rates in exchange for ensured high-volume business.
Benefit-plan participants are given financial incentives to use preferred providers.
Some limit on the number of doctors and hospitals participating in a PPO is necessary to enable the preferred providers to get enough patient volume to justify the reduced fees being charged.
The challenged Virginia law states that a PPO "shall not discriminate unreasonably against or among such health providers." It adds: "No hospital, physician or type of provider willing to meet the terms and conditions offered to it or him shall be excluded."
Aetna Life Insurance Co. established a PPO in Richmond, Va., in 1987. Stuart Circle Hospital sued Aetna after being turned down as a PPO member. The hospital said Aetna had violated the state law.
A federal trial judge threw out the lawsuit, ruling that enforcement of the Virginia law is precluded by the federal Employee Retirement Income Security Act, which protects worker benefits.
The 4th U.S. Circuit Court of Appeals, however, reversed the judge's ruling and reinstated the hospital's lawsuit.
The appeals court ruled the Virginia law is not pre-empted by the U.S. law, because that law makes an exception for state laws regulating the insurance industry.
by CNB