The provisions of Texas silent PPO law were written to address the issue of healthcare providers not receiving the full amount billed for their services.
What is a PPO?
The term "PPO" refers to a preferred provider organization. It is commonly used to describe a situation where doctors, pharmacies, and hospitals agree to provide services at a discount. The advantage to the health care providers is that they are guaranteed a certain number of patients, and patients are encouraged to visit the providers who have signed up for the program.
Patients can still choose to consult with a healthcare provider who is not part of the network, but the portion of the cost they pay will be higher, since the services are not offered at a discount.
A silent PPO operates in one of the following manners:
- Physicians are encouraged to sign up for a plan that they understand is operating as a legitimate PPO, when patients pay the same rate whether they are treated by a participant in the plan or not. Physicians, hospitals, and pharmacies bill for their services at a discounted rates and the insurer retains the difference.
- A patient who is not enrolled in a PPO visits a physician who has signed up for one from another provider. When the bill is submitted to the patient's insurance company, a search is performed to confirm that the physician is involved in a PPO. The physician is then reimbursed at the discounted rate only. The discount is 'borrowed" from the PPO, even though the patient is not signed up for it.
Silent PPOs and Fraud
The American Medical Association takes the position that silent PPOs are fraudulent. This organization estimates that silent PPOs are responsible for taking up to $3 billion per year out of physician's pockets. Physicians rarely go after the insurer to recover the balance of their fees. They (and their medical billing personnel) simply don't have the time to try to recover a small amount of money owing. Billing staff are not able to find out which charges are legitimate and which ones are not. Rather than spend time trying to sort it out, it's easier for the doctor to write off these charges.
Health insurance companies may offer plans which are advertised as being PPOs, but which do not offer discounts when participants visit certain healthcare providers. This type of arrangement is not a PPO; it is an indemnity plan.
The Texas Silent PPO Law
§ 1301.056 of the Insurance Code addresses the issues of silent PPOs. It specifically states that insurance companies are barred from paying physicians, hospitals, or other healthcare providers at a discounted rate unless the company has entered into a contract with that doctor, institution, or healthcare provider. The healthcare provider (whether an individual or an institution) must have voluntarily entered into the contract and specifically agreed to the terms of the contract.
The legislation goes on to state that a preferred provider contract may not be sold, transferred, or leased to another party unless all parties to the contract give their consent. Any person or corporation who violates the provisions contained in this section will be subject to "administrative penalties" for making what is referred to as an "unfair claim settlement."
An insurer found to have participated in an unfair claim settlement will be subject to an increased level of scrutiny by the Texas Department of Insurance. The company may be asked to submit detailed reports to the Department on a regular basis listing:
- The number of claims filed
- Number of claims denied
- Number of claims settled and the amount of each claim paid
- Number of lawsuits filed against the company
- Total number of complaints filed against the company
The provisions of the Texas silent PPO law were written to make insurance companies accountable for their actions and to help ensure that physicians and other healthcare providers are paid the correct amount for their services.