Yet another health care battle.

Managed care organizations are fighting yet another court battle against state regulation. This time the arena is Arkansas and the contenders are Prudential Insurance Company vs. Governor Jim Guy Tucker, the attorney general, the insurance commissioner and the director of the Department of Health. The fight is over Arkansas' "any-willing-provider" legislation.

The governor reluctantly signed one of the nation's broadest any-willing-provider laws, the Patient Protection Act of 1995, on March 1. Overwhelmingly passed by Arkansas legislators (33-1 in the Senate and 88-1 in the House), it says health maintenance organizations (HMOs) may not limit the participation of qualified health care providers if they are willing to accept the plan's contracts and fee schedules.

The law, which went into effect .in July, was seen as a victory for provider organizations like the Arkansas Medical Society and a loss for the managed health care industry. Managed care constitutes about 22 percent of the Arkansas market.

Prudential and its co-plaintiffs, HMO Partners Inc., Tyson Foods, the Arkansas AFL-CIO and the United Paperworkers International Union, claim that the state law is preempted by the Employee Retirement Income Security Act of 1974 [ERISA], the federal Health Maintenance Organization Act and the federal Employee Health Benefit Act. They also contend that it violates the Commerce Clause of the U.S. Constitution. The Prudential Health Care System serves more than 8,000 HMO members in Arkansas and 4.5 million nationwide.

"We believe the legislation violates a number of federal statutes and interferes with our ability to work with employers to provide people with their choice of competing health plans," said Norine Yukon, executive director of Prudential Health Care System of Arkansas.

Arkansas Blue Cross/Blue Shield also filed a lawsuit against several doctors and hospitals who demanded entrance to their managed care networks under the provisions of the Patient Protection Act. "We want the courts to confirm what the law [ERISA] really says so we can conduct business accordingly without fear of the penalties imposed under the any-willing-provider law. By getting this question resolved now, we won't be subject to lawsuits on these issues in the future," said Robert D. Cabe, an executive with Arkansas BC/BS.

The federal government enacted ERISA to help establish uniform federal standards for the protection of private employee pension plans. ERISA affects state policymaking because its "preemption clause" makes void all state laws relating to self-insured employee health plans. Arkansas legislators addressed the ERISA conflict with follow-up HB 1826, which excludes from the Patient Protection Act self-funded or other health benefit plans that are exempt from state regulation by virtue of ERISA.

Louisiana and Virginia also had ERISA court challenges to their any-willing-provider legislation. Louisiana is appealing the federal district court decision that its law is preempted by ERISA. In Virginia, the Fourth Circuit ruled that ERISA did not preempt the state's law.

RELATED ARTICLE: States Work to Restore Balance

Meeting in late October in Cincinnati, state legislators and governors took an important step in their effort to restore balance in the federal system.

Convening as the "States' Federalism Summit," 120 representatives of five organizations - the National Conference of State Legislatures, the National Governors' Association, the Council of State Governments, the American Legislative Exchange Council and the State Legislative Leaders Foundation - agreed to explore four proposals that "would provide states greater authority and standing in their relations with the federal government."

These options, crafted initially by an advisory group of distinguished constitutional experts, advance several different ideas for solving problems in the way the federal system has evolved over the past 60 years.

The first proposal is a federalism statute that aims to reduce preemption of state laws by the national government. Similar to legislation introduced in Congress by Colorado Senator Hank Brown, it would require Congress to identify state laws that might be preempted by proposed legislation, and it would limit the power of the executive branch to preempt state laws.

Under the second option considered at the summit, states would acquire the ability to force Congress to reconsider laws and regulations.

This option was suggested initially by Massachusetts Senate President William Bulger as an alternative to proposals that would give states the right to veto federal legislation, but still would serve as a brake on congressional intrusions on state powers.

The third proposal debated at the summit would amend Article V of the Constitution to allow states to initiate amendments to the Constitution without having to call a constitutional convention. For example, three-fourths of the state legislatures could propose a constitutional amendment that would be valid if approved by two-thirds of both Houses of Congress.

The objective of the fourth option is to reduce Congress' regulatory control over the states. For example, it would, to paraphrase Justice Sandra Day O'Connor, limit the congressional tendency to commandeer state governments as administrative arms of the federal government.