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Analysis: How Any Willing Provider Makes Health Care More Expensive

posted by AHIP

on September 22, 2014

Key Takeaways

  • The preponderance of the evidence shows clearly that AWP laws lead to higher spending.
  • Rather than protect consumer choice, AWP laws interfere with meeting consumer and employer demand for lower-priced plans.
  • The potential for AWP laws to become more disruptive to health care financing in the future will likely spur greater efforts by providers to pass such laws to protect themselves from further competition. But if they succeed, the costs to consumers, employers and taxpayers could be even lager than we have seen in the past.

Overview

Any Willing Provider (AWP) laws began appearing in some states in the 1980s. The laws permit providers who are willing to agree to an insurer’s terms and condition for inclusion in a network to demand inclusion in that network. At present, 17 states have AWP laws that apply to either hospitals, physicians, or both. A larger number of states have laws that apply only to pharmacies. AWP laws have tended to be supported by physicians but opposed by the business community and health insurers due to their potential to lead to higher health spending and a corresponding increase in health insurance premiums.

This paper begins with an analysis of how AWP laws impact the financing and delivery of health services. It describes methods that health insurers use to achieve lower prices for services and foster higher quality of care and how AWP laws can undermine these activities. The analysis then focuses on the growing importance of narrower provider networks as a tool to contain costs and foster improved quality and their feasibility when AWP laws are present. Since physician-owned specialty hospitals are a significant part of the delivery system in South Dakota, the paper analyzes their impact on other hospitals and the role they play in provider networks and how this is impacted by AWP laws that apply to hospitals. Next, the paper reviews the empirical literature on how AWP laws affect health care spending. The preponderance of the evidence shows clearly that AWP laws lead to higher spending. A concluding section summarizes the case against AWP laws.