OLR Bill Analysis

sHB 6471 (as amended by House "A")*

AN ACT PROHIBITING MOST FAVORED NATION CLAUSES IN HEALTH CARE PROVIDER CONTRACTS.

SUMMARY:

This bill prohibits a contracting health organization (i. e. , managed care organization (MCO) or preferred provider network (PPN)) from including a “most favored nation” (MFN) clause in a contract with a health care provider, dentist, or hospital.

Specifically, it prohibits these contracts from including any provision that prohibits a provider, dentist, or hospital from contracting with another MCO or PPN at a lower payment or reimbursement rate. It also prohibits these contracts from (1) containing provisions requiring a provider, dentist, or hospital to disclose the payment or reimbursement rates of another MCO or PPN with which it contracts or (2) being renegotiated before renewal if a lower payment or reimbursement rate is agreed to between the provider, dentist, or hospital and another MCO or PPN.

The bill applies to contracts entered into, renewed, amended, or offered on or after October 1, 2011. Contracts in effect prior to this date that include a MFN clause are void and unenforceable on the contract renewal date or January 1, 2014, whichever is earlier. The bill specifies that its provisions do not affect the contracting health organization's rights to enforce the MFN clause before its invalidation.

By law, “providers” includes physicians, surgeons, chiropractors, podiatrists, psychologists, optometrists, naturopaths, and advanced practice registered nurses.

*House Amendment “A” specifies that (1) contracts in effect before October 1, 2011 that include a MFN clause are void and unenforceable on the earlier of either the contract renewal date or January 1, 2014 and (2) the contracting health organization has the right to enforce a MFN clause before its invalidation.

EFFECTIVE DATE: October 1, 2011

CONTRACT PROVISIONS

The bill prohibits a contracting health organization from including in any contract with a provider, dentist, or hospital, any clause, covenant, or agreement that:

1. requires the hospital, dentist, or provider to (a) disclose to the organization its payment or reimbursement rates from any other organization it contracts or may contract with; (b) provide services or procedures to the organization at a payment or reimbursement rate equal to or lower than the lowest rate the provider, dentist, or hospital contracts or may contract with another organization; or (c) certify to the organization that the provider, dentist, or hospital has not contracted with any other organization to provide services or procedures at a lower payment or reimbursement rate;

2. prohibits or limits the provider, dentist, or hospital from contracting with any other organization to provide services or procedures at a lower payment or reimbursement rate; or

3. allows the organization to terminate or renegotiate a contract with a provider, dentist, or hospital prior to renewal if the provider, dentist, or hospital contracts with another organization to provide services or procedures at a lower payment or reimbursement rate.

BACKGROUND

Most Favored Nation Clauses

A “most favored nation clause” is a provision in a contract between a health care provider and an insurer that prohibits the provider from charging the insurer a rate that is higher than the lowest reimbursement rate the provider accepts from any other insurer.

COMMITTEE ACTION

Insurance and Real Estate Committee

Joint Favorable Substitute

Yea

16

Nay

4

(03/08/2011)

Appropriations Committee

Joint Favorable

Yea

49

Nay

0

(04/25/2011)