THE CASE FOR STATE MANDATORY AsSIGNMENT OF 
BENEFITS LEGISLATION 

Elliott McKinnis • 

I. INTRODUCTION •..•••.••...........•••..••..•................•.••...........•••....••....••..• 172 
II. BACKGROUND: HISTORY OF HEAL Til CARE PLANS AND AOB ....•• 173 

A. Managed Care and the Alphabet Soup ..................................... 173 
B. The Development of Managed Care Plans ............................... 175 
C. Health Insurance Contracts ...................................................... 176 
D. Legal Challenges to Anti-Assignment Provisions ..................... 177 
E. AOB Laws around the Country ................................................. 178 

1. Overview of AOB Laws Around the Country ...................... 178 
2. Florida's Recent AOB Law ................................................. 179 
3. Indiana's Efforts to Pass an AOB Law ............................... 180 

III. ARGUMENTS IN FAVOR OF STATES MANDATED AOB ................... 181 
A. Mandatory AOB Would Provide Fairness to Providers ........... 181 
B. Mandatory AOB Would Eliminate Many Administrative 

Problems Associated with Payments and Billing ..................... 183 
C. Mandatory AOB Would Reduce the Amount of Litigation 

between Insurers and Providers .............................................. 184 
D. Mandatory AOB Would Reduce the Amount of 

Out-of-Network Providers Who Require Full Payment 
Up Front ................................................................................... 185 

N. ARGUMENTS AGAINST STATES MANDATING AOB ....................... 186 
A. Mandatory AOB Would Weaken Insurers' Health Care 

Networks .................................................................................... 186 
B. MandatoryAOB Would Increase Health Care Costs ............... 187 
C. Mandatory AOB Would Inteifere with an Insurer's Ability 

to Manage Quality ofCare ....................................................... 189 
V. WHYTIIEARGUMENTSINFAVOROFMANDATORYAOB 

PREY AIL AND HOW LEGISLATION SHOULD BE STRUCTURED ........ 190 
A. Why Indiana Should Mandate AOB .......................................... 190 

1. How the Refusal of Insurers to Honor AOB Harms 
the Health Care System ........................................................ 190 

2. The Evidence Fails to Show That Mandatory AOB 
Weaken Networks ................................................................. 191 

3. The Evidence Fails to Show That Mandatory AOB 
Increases Health Care Costs Generally ............................... 192 

B. Structure of the Legislation ....................................................... 193 
1. Indiana Legislators Should Consider a Conditional 

* J.D., 2010, Indiana University School of Law-Indianapolis; B.A., 2002, Ball 
State University. 



172 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

Sunset Provision .................................................................. 193 
2. Indiana Legislators Should Consider Imposing 

Requirements on Reimbursement Amount ........................... 194 
3. Indiana Legislators Should Consider Prohibiting 

Out-of-Network Providers from Balance Billing ................. 195 
4. Indiana Legislators Should Consider Repealing the 

State's AWP Law .................................................................. 197 
VI. CONCLUSION .................................................................................. 197 

I. INTRODUCTION 

After visiting a non-network urologist, a Virginia woman's insurer 
sent her a check to cover a portion of the expenses incurred. Around the 
same time she received the check, her son's college tuition also came due. 
The woman used the money from her health insurance check to pay the 
university. She still owed her urologist, however, and when the urologist 
tried to collect from her sometime later, he was unable to do so because she 
had declared bankruptcy. 1 This story is not unique. In fact, some doctors 
say it occurs often enough that it threatens their ability to provide health 
care services.2 A potential solution is to require insurance companies to 
honor an individual's wish to send payments directly to her provider, even 
if the provider is not in the insurer's network. In other words, an individual 
should have the power to assign her benefits to an out-of-network provider. 

Some states have passed mandatory assignment of benefits ("AOB") 
legislation.3 A mandatory AOB law requires insurers to send payments di­
rectly to out-of-network providers who have executed an AOB agreement 
with the covered individual. Proponents of mandatory AOB legislation 
suggest there are other important advantages to AOB beyond making it eas-

1. Tammie Smith, Va. Doctors Make Their Case They Are Lobbying Legislators For 
Changes in How Benefits, Reimbursements Are Handled, RICHMOND TIMES DISPATCH, Jan. 
24, 2005, at Al. 

2. See, e.g., id, Smith supra note 1. 
3. See ALA. CODE § 27-1-19 {2010); ALAsKA STAT. § 21.51.120 {2010); CAL. 

HEALTH & SAFETY CODE§ 1371.4 {Deering 2010); Cow. REv. STAT.§ 10-16-317.5 {2010); 
CONN. GEN. STAT. 38A-472 (2010); FLA. STAT.§ 627.638 {2009); GA. CODE ANN. § 33-24-54 
(2010); IDAHO CODE ANN. § 34-3417(3) (2010); 215 ILL. CoMP. STAT. ANN. 5/370a (Lex­
isNexis 2010); LA. REv. STAT. ANN.§ 40:2010 (2010); ME. REv. STAT. ANN. tit. 24, § 2332-H 
(2010); Mo. REv. STAT. § 376.427 (2010); NEV. REv. STAT. ANN. § 689A.l35 (LexisNexis 
2010); N.H. REv. STAT. ANN. § 420-B:8-n (LexisNexis 2010); N.C. GEN. STAT. § 58-3-225 
(2010); Omo REv. CODE ANN.§ 3901.386 (LexisNexis 2008); R.I. GEN. LAWS§ 27-18-63 
(2010); S.D. CODIFIED LAWS§ 58-17-61 (2010); TENN. CoDE ANN.§ 56-7-120 (2010); TEx. 
INs. CODE ANN.§ 1204.053 (West 2009); VA. CoDE ANN. § 38.2-3407.13 (2010); WYO. 
STAT. ANN.§ 26-15-136 (2010); see also OR.. REv. STAT.§ 743-531 (2009) (allowing but not 
requiring insurers to honor AOB); WASH. REv. CoDE§ 48.44.026 (West 2010) (generally 
requiring the signature of the out-of-network provider in order to deposit a check from an 
insurer). 



2011] STATE MANDATORY AsSIGNMENT OF BENEFITS LEGISLATION 173 

ier for health care providers to collect payments.4 However, critics contend 
that mandatory AOB would have negative effects on the health care sys­
tem. 5 Section II of this note presents background information on the history 
of the AOB issue. Section m examines the arguments in favor of mandato­
ry AOB legislation, and Section IV explores the arguments against manda­
tory AOB. Finally, Section V explains why the arguments in favor of 
mandatory AOB prevail and how Indiana should structure mandatory AOB 
legislation. 

II. BACKGROUND: HISTORY OF HEALTH CARE PLANS AND AOB 

A briefhistory of the development of the health care industry provides 
a helpful basis on which to analyze the AOB issue. The most basic reason 
for the existence of health insurance plans is that people want to share the 
risk of financial loss due to illness or injury.6 A health insurance plan gen­
erally includes four parties: consumers, providers, sponsors, and intermedi­
aries.' Consumers, often referred to as ''insureds," "patients" and 
"subscribers," are those who receive care from providers. 8 Sponsors in­
clude employers who offer a group health benefit plan to their employees 
and pay a majority of the plan's expenses.9 In the case of Medicare and 
Medicaid, the government plays the role of sponsor.10 Intermediaries pro­
vide an administrative framework, which includes the bill paying process 
(i.e., payers, insurers, health plans, etc.).11 

A. Managed Care and the Alphabet Soup 

Many health plans today fall under the label of ''managed care."12 

Definitions of managed care vary.13 However, a common definition de­
scribes it as a system that attempts to control health care cost, access, and 

4. See, e.g., Steven R. West, Fla. Med. Ass'n President. Op-Ed., More Choices, Ac­
cess Needed for Patients, SUN SENTINEL (Fort Lauderdale), June 4, 2009, at 12A. 

5. See, e.g., Catherine Dolinski, Gaetz Says Health Bill Is Good for Workers, TAMPA 
TRIBUNE, May 22, 2009, at 10. 

6. PETER R. KONGSTVEDT, MANAGED CARE: WHAT IT IS AND How IT WORKS 21 (3rd 
ed. 2009); Jonathan P. Weiner & Gregory de Lissovoy, Razing a Tower of Babel: A Taxon­
omy for Managed Care and Health Insurance Plans, 1S J. HEALTH POL. PoL'Y & L. 75, S1 
(1993). 

7. Weiner & de Lissovoy, supra note 6, at So-St. 
S. Id 
9. Id. at SO. 

10. Id. at so-st. 
11. Id. at Sl. 
12. See generally KONGSTVEDT, supra note 6, at 17-53 (describes the types of managed 

care plans in existence today); WILLIAM N. TINDALL ET AL., A GUIDE TO MANAGED CARE 
MED. S-14 (2000) (describes the types of managed care plans in existence today). 

13. KONGSTVEDT, supra note 6, at230. 



174 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

quality. 14 Defining the separate classes of managed care. health plans is also 
a difficult task. 15 Some analysts describe the health care system as an ''un­
intelligible alphabet soup of three-letter health plans."16 Examples of the 
three-letter health plans include health maintenance organizations 
("HMOs"), preferred provider organizations (''PPOs"), and point-of-service 
plans ("POSs"). 17 

At one time, the individual models included unique features that dis­
tinguished them from each other. 18 HMOs, in their purest form, involve 
prepaid arrangements where the payer offers subscribers health care ser­
vices in exchange for a monthly fee.19 HMO models attempt to control 
health utilization and quality more than other plans.2° HMOs are designed 
to include a primary care physician .who operates as a gatekeeper by over­
seeing the patient's care and provirung referrals to specialists.21 Except un­
der limited circumstances, a subscriber is responsible for the total health 
care costs when visiting a provider outside of the HM0.22 

The PPO design involves less control of health care cost and quality 
than HMO plans, but generally gives the patient more freedom in choosing 
providers.23 PPOs contain a network of physicians who bill for each service 
at a discounted rate.24 A subscriber may have a deductible, which is a fixed 
out-of-pocket amount the consumer is required to pay before the health 
plan will cover any fees.25 After the deductible is met, the subscriber then 
may pay a coinsurance amount, which is a small percentage of each service 
he receives.26 

Some providers, specialists in particular, are often outside of PPO 
networks.27 If the patient wants to use an out-of-network provider, the 
health plan will reimburse the subscriber, usually at a rate that is reduced by 
a difference of twenty percent.28 For example, if a health plan pays eighty 

14. Seeid. 
15. Id. at 17. 
16. Weiner & de Lissovoy, supra note 6, at 75. 
17. See generally KONGSTVEDT, supra note 6, at 17-53; TINDALL ET AL., supra note 12, 

at 8-14; Carol K. Lucas & Michelle A. Williams, The Rights of Nonparticipating Providers 
in a Managed Care World: Navigating the Minefields of Balance Billing and Reasonable 
and Customary Payments, 3 J. HEALTH & LIFE SCI. L. 132, 135 (2009). 

18. See KONGSTVEDT,supra note 6, at 17-18. 
19. Id at226. 
20. /dat32. 
21. Lucas & Williams, supra note 17, at 135. 
22. KONGSTVEDT, supra note 6, at 32. 
23. Seeid. at30-31;seealsoLucas&Williams,supranote 17,at 135. 
24. KONGSTVEDT, supra note 6, at 30-31. 
25. /d. 
26. Id at 30-31,213. 
27. MANDATED HEALTH BENEFIT TASK FORCE, REPoRT OF THE MANDATED BENEFIT 

TASK FORCE 5 (2008), available at http://www.in.gov/legislativeligareports/agency/ re­
ports/100137 .pdf. 

28. KoNGSTVEDT, supra note 6, at 31. 



2011] STATE MANDATORY AsSIGNMENT OF BENEFITS LEGISLATION 175 

percent of the cost of a certain service offered by an in-network provider, 
the plan would pay sixty percent for that same service when offered by an 
out-of-network provider. 29 

A POS plan is a hybrid of plans similar to HMOs and PPOs?0 POS 
plans operate similar to HMOs when the consumer follows HMO proce­
dures?1 When the subscriber wants to use an out-of-network provider, the 
POS operates more like a PP0.32 

B. The Development of Managed Care Plans 

Researchers assert that managed care originated in 1910, when a 
group of providers in Washington began offering a broad range of services 
to Tacoma lumber mill workers for a monthly premium of $0.50 per mem­
ber.33 This concept evolved during the Great Depression when physician 
groups and hospitals established health plans to maintain or increase patient 
revenue.l4 By World War II, employers began creating HMOs as a benefit 
for employees and other consumers demanding greater access to less expen­
sive health care. 35 

In the 1960s, the cost ofhealth care skyrocketed.36 In an effort to sup­
port the development of more private sector health plans, Congress passed 
the HMO Assistance Act of 1973.37 Meanwhile, in the 1970s the health 
care system saw the creation of PP0s.38 Despite this growth in managed 
care, by 1980 approximately ninety percent of employed Americans re­
ceived health coverage from indemnity insurance.39 However, in the 1980s 
traditional indemnity plans began to decline, while the prevalence ofHMOs 
and other managed care entities grew.40 By 1990, indemnity plans covered 

29. See generally Peter R. Kongstvedt. Compensation of Primary Care Physicians in 
Managed Health Care, in THE MANAGED HEAL1H CARE HANDBOOK 132 (Peter R. 
Kongstvedt ed., 4th ed. 2001) (describing out-of-network fees). 

30. KONGSTVEDT, supra note 6, at 31-32; see also Lucas & Williams, supra note 17, at 
135. 

31. KONGSTVEDT, supra note 6, at 31-32. 
32. !d. at 31. 
33. Id at 1; see also TINDALL ET AL., supra note 12, at 4-6 (describing the evolution of 

managed care). 
34. KONGSTVEDT, supra note 6, at 2. 
35. !d. at2-3. 
36. TINDALLET AL.,supranote 12, at5. 
37. Health Maintenance Organization Act of 1973, Pub. L. No. 93-222, 87 Stat. 914 

(codified as amended at 42 U.S.C: §§ 300e- 300e-17 (2010)); see also KoNGSTVEDT, supra 
note 6, at 2; TINDALL ET AL., supra note 12, at 5. 

38. KONGSTVEDT, supra note 6, at 6. 
39. Weiner & de Lissovoy, supra note 6, at 76. See generally KONGSTVEDT, supra 

note 6, at 29 (noting that indemnity plans traditionally did not include networks and made 
little or no attempt to control health care costs). 

40. KONGSTVEDT, supra note 6, at 9 (stating that "[i]n the mid-1980s, HMOs grew 
fastest, but by the early 1990s, PPOs began to grow even faster"); see also Weiner & de 
Lissovoy, supra note 6, at 77 ("By the end of the 1980s traditional insurance plans and estab-



176 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

less than half of all Americans.41 
Another spike in health care costs over the past decade led to an in­

crease in the consumer's responsibility to pay for care.42 Today, the distinc­
tions among the numerous types of health care plans have been blurred.43 

Plans identified as HMOs, for example, are adopting some characteristics of 
PPOs and vice versa.44 

C. Health Insurance Contracts 

Regardless of the label used, the health insurance industry utilizes 
contracts as the basis for the rights and responsibilities that one party owes 
another.45 The features of the contract include agreements on the services a 
plan provides, the process consumers must use to access those services, and 
the manner of reimbursement.46 Contracts that include networks generally 
require the payers to reimburse the in-network providers directly for the 
services that those providers render to their patients who are consumers un­
der the plan.47 However, an insurance company has no contractual obliga­
tion to directly reimburse out-of-network providers because those providers 
do not share a contractual relationship with the plan.48 Even though con­
tracts specifY duties, laws, and regulations, courts also govern the relation­
ships among the parties.49 

A modem view of courts interpreting contracts is that parties generally 
can assign, or in other words transfer, their contractual rights to a third par­
ty.50 Receiving health insurance benefits is a right a policyholder has from 
a contract with the insurer, assuming that the policyholder does not violate 
any of the terms.51 Therefore, under this modem approach to contract law, 
a covered individual could transfer the right to health insurance benefits to a 

lished HMOs were joined by a stunning array of new health care financing .and delivery 
entities."). 

41. Weiner & de Lissovoy, supra note 6, at 77 (citing Elizabeth W. Hoy et al., Change 
and Growth in Managed Care, 10 HEALTHAFF. 18 (1991)). 

42. KONGSTVEDT, supra note 6, at 15. 
43. Jd. at 17-18; see also Weiner & de Lissovoy, supra note 6, at 75 ("There is little 

agreement about which characteristics distinguished one type of plan from another."). 
44. KoNGSTVEDT, supra note 6, at 10-11. 
45. Lucas & Williams, supra note 17, at 136; see also Weiner & de Lissovoy, supra 

note 6, at 81. 
46. Lucas & Williams, supra note 17, at 136-37. 
47. See KoNGSTVEDT, supra note 6, at29. 
48. Lawrence Foust, A Proposal for Resolving Differences in Managed Care Contract 

Negotiations Between Providers and Payers, in HEALTH LAW HANDBOOK§ 3:3 (Alice G. 
Gosfield ed., 2006). 

49. Lucas & Williams, supra note 17, at 13 7. 
50. Somerset Orthopedic Assocs., P.A. v. Horizon Blue Cross and Blue Shield of N.J., 

785 A.2d 457, 460(N.J. Sup. Ct. App. Div. 2001) (citing Rumbin v. Utica Mut. Ins. Co., 757 
A.2d 526, 531 (Conn. 2000)); see also RESTATEMENT (SECOND) OF CONTRACTS§ 317 cmt. c 
(1981) (stating that "the historic common-law rule that a chose of action could not be as­
signed has largely disappeared."). 

51. See Lucas & Williams, supra note 17, at 136-37. 



2011] STATE MANDATORY AsSIGNMENT OF BENEFITS LEGISLATION 177 

third party, such as an out-of-network provider. Under this scheme, the in­
surer would send reimbursement directly to the out-of-network provider. 

D. Legal Challenges to Anti-Assignment Provisions 

Before the last decade, insurers in Indiana generally allowed policy­
holders to assign benefits to out-of-network providers.52 Currently, some 
health plans have contractual provisions with policyholders that prohibit the 
covered individual from assigning benefits to out-of-network providers.53 

Courts usually do not allow parties to assign their rights when the contract 
includes provisions that explicitly prohibit assignment.54 When consumers 
have challenged prohibitions on assignment, courts have generally upheld 
the provision by reasoning that assigning benefits is against public policy. 55 

Nonetheless, there is at least one outlier decision in which the court used 
public policy considerations to actually require an insurer to honor AOB.56 

52. Interview with Michael Rinebold, Dir. ofGov't Relations, Ind. State Med. Ass'n, 
in Indianapolis, Ind. (Nov. 24, 2009) [hereinafter Interview with Rinebold]; see also, e.g., 
Letter from Stacey Breidenstein, Director, Provider Contracting & Institutional Relations, 
CareFirst BlueChoice, Inc., to Providers (Aug. 8, 2005}, available at 
http://www.bmbassoc.com/issues/aob/docs/BCBS_2008o/n20CareFirstO/o20Reimbursement% 
20for%20Non-Par%20Svcs.pdf (explaining that the insurer would stop sending reimburse­
ments directly to out-of-network providers). 

53. Interview with Rinebold, supra note 52; see, e.g., Parrish v. Rocky Mountain 
Hosp. & Med. Servs. Co., 754 P.2d 1180, ll8l-82 (Colo. Ct. App. 1988) (quoting a Blue 
Cross Blue Shield ("BCBS") of Colorado contract provision that read: "All benefits stated in 
the Contract are personal to the Employee or Dependent. Neither those benefits nor [BCBS] 
of Colorado's payments to the covered individual may be assigned to any person, corpora­
tion or entity: Any attempted assignment shall be void. The only exception to this provision 
is [BCBS] of Colorado's right to pay Participating Facility and Professional Providers direct­
ly."); see also KoNGSTVEDT, supra note 6, at 2. 

54. Somerset Orthopedic Assocs., 785 A.2d at 460 (citing Owen v. CAN Insur­
ance/Continental Cas. Co., 771 A.2d 1208, 1213-14 (N.J. 2001)); see RESTATEMENT 
(SECOND) OF CONTRACTS § 317(2) ("A contractual right can be assigned unless ... assign­
ment is validly precluded by contract."). 

55. See, e.g., St. Francis Reg'l Med. Ctr. v. Blue Cross Blue Shield ofKan. Inc., 810 
F. Supp. 1209 (D. Kan. 1992), aff'd, 49 F.3d 1460 (loth Cir. 1995); Parrish, 754 P.2d at 
1182 ("[N]on-assignment clauses in this type of contract are valuable tools in persuading 
health providers to keep their health care costs down .... "); Kent General Hosp., Inc. v. 
Blue Cross and Blue Shield of Del., Inc., 442 A.2d 1368 (Del. 1982); Augusta Med. Com­
plex, Inc. v. Blue Cross of Kan., Inc., 634 P.2d 1123 (Kan. 1981); Obstetricians­
Gynecologists, P.C. v. Blue Cross and Blue Shield ofNeb., 361 N.W.2d 550 (Neb. 1985); 
Somerset Orthopedic Assocs., 785 A.2d at 464 ("[T]he anti-assignment clause is a critical 
tool to [the insurer's] efficient and effective functioning .... ");Kassab v. Med. Serv. Ass'n. 
ofPa., Inc., 39 Pa. D. & C.2d 723, 725 (1966) (holding that the anti-assignment clause was 
valid and essential to the continued success of the insurer's plan), aff'd per curiam, 230 A.2d 
205 (Pa. 1967); see infra Part N (discussing why courts have found assignment of benefits 
to out-of-network providers against public policy). 

56. Am. Med. Int'l, Inc. v. Ark. Blue Cross and Blue Shield, 773 S.W.2d 831, 832 
(Ark. 1989) (noting that an insured has an "interest in freely assigning the right to payment . 
. . . ");see also St. Francis Reg'l Med. Ctr., v. Blue Cross and Blue Shield ofKan., 49 F.3d 
1460, 1468-70 (loth Cir. 1995) (Ebel, J., dissenting) (explaining that the district court's de-



178 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

E. AOB Laws around the Country 

1. Overview of AOB Laws Around the Country 

Because the position of the majority of courts is to enforce anti­
assignment provisions when they exist in health insurance contracts, some 
states have enacted laws to force insurers to accept a patient's request for 
AOB.57 As of January, 2010, approximately two dozen states had enacted 
mandatory AOB laws. 58 Approximately half of those states have AOB laws 
that cover many types of providers.59 The AOB laws of the remaining 
states only apply to certain categories like dental or emergency care. 60 

Further, some people who participate in the AOB debate believe that 
whether a state has an Any-Willing-Provider ("A WP") law is relevant to the 
question of whether AOB legislation is appropriate.61 A WP laws require 
insurers to accept into their networks any provider that meets the general 
standards set by the insurer.62 Nearly half of the states in the nation have 
A WP laws, most of which are limited to dental and pharmacy services. 63 

Fewer than ten states apply their A WP laws to health care providers beyond 
dental services.64 Indiana's A WP law, for example, establishes that "[n]o 
hospital, physician, pharmacist, or other provider . . . willing to meet the 
terms and conditions of [a network agreement] may be denied the right to 
enter into a [network].'.65 

cision to dismiss the hospital's claim that BCBS of Kansas's nonassignability clause violates 
public policy should be reversed). 

57. Foust, supra note 48. 
58. See supra note 48; see also AM. DENTAL Ass'N, AsSIGNMENT OF BENEFITS (201 0), 

available at http://www.ada.org/sections/advocacy/pdfs/thirdparty _assignment_ benefits. pdf; 
MANDATED HEALTHBENEFITTASKFORCE,supranote 27, at 4. 

59. MANDATED HEALTH BENEFIT TASK FORCE, supra note 27, at 2 (states with broad 
AOB laws as of July 2008, are Alabama, Alaska, Colorado, Georgia, IUinois, Maine, Mis­
souri, Nevada, Tennessee and Texas); see also AM. MED. AsS'N, MODEL AsSIGNMENT OF 
BENEFITS LEGIS. (2004), available at 
http://www.bmbassoc.com/issues/aob/docs/AMA_2004-AOB%20model%20legislation.pdf. 

60. MANDATED HEALTH BENEFIT TASK FORCE, supra note 27, at 3 (states with limited 
AOB laws as of July 2008, are Connecticut, Idaho, Louisiana, Massachusetts, Ohio, Rhode 
Island, South Dakota, Wyoming and Virginia). See, e.g., OHio REv. CoDE ANN. § 3901.386 
(LexisNexis 2008) (applying only to "hospital services provided on an emergency basis"); 
R.I. GEN. LAws§ 27-18-63 (2010) (applying only to dental care providers). 

61. See infra Part V.B.4. 
62. MANDATED HEALTH BENEFIT TASK FORCE, supra note 27, at 3; see, e.g., IND. CoDE 

ANN. § 27-8-ll-3 (West 2003). See generally Richard I. Smith & Kristin Stewart, State 
Regulation of Managed Care, in THE MANAGED HEALTH CARE HANDBOOK 1332, 1334-5 
(Peter R. Kongstvedt ed., 4th ed. 2001) (describing state regulatory structures for managed 

. care organizations). 
63. MANDATED HEALTH BENEm TASK FORCE, supra note 27, at 4; see, e.g., IND. CODE 

ANN.§ 27-8-ll-3 (West 2003). 
64. MANDATED HEALTH BENEFIT TASK FORCE, supra note 27, at 4. 
65. IND. CODE ANN.§ 27-8-11-J(c) (West 2003); see also VA. CODE ANN.§ 38.2-3407 

(2008) (''No hospital, physician or a type of provider [as defined by a separate statute] will­
ing to meet the terms and conditions offered to it or him shall be excluded (from a net-



2011] STATE MANDATORY ASSIGNMENT OF BENEFITS LEGISLATION 179 

States have many different combinations of AOB and A WP laws.66 

Some states have a broad AOB law and a limited A WP law or vice versa.67 

However, only Georgia has both a broadly applied AOB law and a broadly 
applied AWP law.68 

2. Florida's Recent AOB Law 

In 2009, Florida joined the ranks of states with mandatory AOB.69 

Despite strong opposition from Blue Cross Blue Shield ("BCBS") of Flori­
da and from consumer groups, the Florida Legislature passed a mandatory 
AOB bill.70 The bill, which took effect July 1, 2009, amended Florida's 
statutes to require mandatory AOB to all providers.71 Florida's AOB statute 
now reads as follows: 

work]."). 

Whenever, in any health insurance claim form, an in­
sured specifically authorizes payment of benefits di­
rectly to any recognized hospital, licensed ambulance 
provider, physician, dentist, or other person who pro­
vided the services in accordance with the provisions 
of the policy, the insurer shall make such payment to 
the designated provider of such services. The insur­
ance contract may not prohibit, and claims forms 
must provide an option for, the payment of benefits 
directly to a licensed hospital, licensed ambulance 
provider, physician, dentist, or other person who pro­
vided the services in accordance with the provisions 
of the policy for care provided. The insurer may re­
quire written attestation of assignment of benefits. 

66. MANDATED HEALTH BENEFIT TASKFORCE, supra note 27, at 4. 
67. Id. 
68. Id.; see, e.g., Ga. Code Ann. § 33-24-54 (requiring insurers that pay benefits di­

rectly to network providers to also pay benefits directly to: "any similarly licensed nonpartic­
ipating or nonpreferred provider who has rendered such services, has a written assignment of 
benefits, and has caused written notice of such assignment to be given to the person licensed 
under this title or jointly to such nonparticipating or nonpreferred provider and to the in­
sured, subscriber, or other covered person; provided, however, that in either case the person 
licensed under this title shall be required to send such benefit payments directly to the pro­
vider who has the written assignment."); GA. CODE ANN.§ 33-20-16 (2006) (requiring 
"[ e ]very doctor of medicine, every doctor of dental surgery, every podiatrist, and every 
health care provider within a class approved by the health care corporation who is appropri­
ately licensed to practice and who is reputable and in g<XJ<l standing shall have the right to 
become a participating physician or approved health care provider for medical or surgical 
care, or both, as the case may be, under such terms or conditions as are imposed on other 
participating physicians or approved health care providers within such approved class under 
similar circumstances in accordance with this chapter. "). 

69. See 2009 Fla. Laws. 2009-124 (codified at FLA. STAT.§ 627.638 (2009)). 
70. Dolinski, supra note 5. 
71. FLA. STAT.§ 627.638(2) (2009). 



180 INDIANA HEAL Til LAW REVIEW 

Payment to the provider from the insurer may not be 
more than the amount that the insurer would other­
wise have paid without the assignment. 72 

3. Indiana's Efforts to Pass an AOB Law 

[Vol. 8:171 

Between 2005 and 2010, Indiana legislators worked to enact broadly 
applied, mandatory AOB legislation.73 As ofthe end of the 2010 session, 
the furthest point an AOB bill reached in the legislative process in Indiana 
was a vote in the chamber where it originated.74 In February, 2009, twenty­
five members of the Indiana Senate voted in favor of a mandatory AOB 
bill, twenty-four members voted against it, and one member was excused 
from the vote.75 Even though the bill received more votes in its favor, it 
failed because it lacked a constitutional majority.76 The bill would have 
required insurers to send benefit payments directly to all out-of-network 
providers when the provider and the consumer have an assignment of bene­
fits agreement. 77 

Legislators have continued their efforts beyond the 2009 session. 78 In 
the 2010 session, three senators introduced a bill similar to those introduced 
in previous years that would require broadly applied, mandatory AOB. 79 

However, this Senate bill was never voted on during the short legislative 
session.80 

In addition to working on AOB legislation during sessions of the Indi­
ana General Assembly, state lawmakers and an independent state govern­
ment commission have analyzed the issue between sessions.81 In October 

72. Id 
73. Telephone Interview with Patricia Miller, Ind. State Senator, Ind. State Senate, in 

Indianapolis, Ind. (Dec. 10, 2009). 
74. See S.B. 75, 116th Gen. Assemb., 1st Reg. Sess. (Ind. 2009), available at 

http:/ /www.in.gov/apps!lsa/sessionlbillwatchlbillinfo?year-=2009&session= 1&request=getBi 
ll&docno=0075&doctype=SB. 

75. Roll Call Vote on S.B. 75, IND. GEN. AssEM., http://www.in.gov/legislativelbills 
/2009/PDF/Srollcal/0168.PDF.pdf(last visited Sep. 7, 2010). 

76. See Ind. Const. art. N, § 25 (requiring a majority of the Senate's fifty members to 
pass a bill in the Indiana Senate). 

77. S.B. 75, 116th Gen. Assemb., 1st Reg. Sess. (Ind. 2009), available at 
http://www.in.gov/apps!lsa/sessionlbillwatchlbillinfo?year-=2009&session=l&request=getBi 
ll&docno=0075&doctype=SB. See generally IND. CODE§ 27-8-11-1 (2009) (defining pro­
vider as "an individual or entity duly licensed or legally authorized to provide health care 
services."). 

78. See S.B. 326, 116th Gen. Assemb., 2d Reg. Sess. (Ind. 2010), available at 
http://www.in.gov/apps!lsa/sessionlbillwatchlbillinfo?year-=2010&session=l&request=getBi 
ll&docno=326). 

79. Seeid. 
80. Seeid. 
81. See generally MANDATED HEALTH BENEFIT TASK FORCE, supra note 27; IND. 

HEALTH; FIN. CoMM'N,INTERIM SlUDY CoMMITTEE MEETING MINuTEs OF SEP. 1, 3-4 (2009), 
availableathttp:l/www.in.gov/legislative!interimlcommitteelminutes/HFCOC91.pdf. 



2011] STATE MANDATORY ASSIGNMENT OF BENEFITS LEGISLATION 181 

2008, the Mandated Benefits Task Force82 issued findings and recommen­
dations regarding AOB proposals.83 The report suggested that a mandatory 
AOB law in Indiana should only apply to situations where health care con­
sumers "have no choice in the selection of provider.',s4 As the report elabo­
rated, those situations could include providers who are emergency room 
physicians, anesthesiologists, radiologists, or pathologists.85 The task force 
further recommended that a mandatory AOB law may need to include pro­
visions to protect consumers from receiving a bill for unreimbursed services 
after their providers receive payment directly from their insurers.86 

Ill. ARGUMENTS IN FAVOR OF STATES MANDATED AOB 

As the Indiana General Assembly and other state legislatures debate 
the issue of whether to require insurers to honor AOB agreements, many 
different interest groups have visited statehouses around the country. 87 The 
primary proponents of broadly applied, mandatory AOB legislation include 
different groups ofproviders.88 For example, representatives from the Indi­
ana State Medical Association ("ISMA") and from individual associations 
of chiropractors, psychologists, and dentists have appeared before state 
lawmakers in Indiana to present their case as to why the state should have a 
mandatory AOB law.89 

A. Mandatory AOB Would Provide Fairness to Providers 

Proponents of mandatory AOB legislation argue it would provide fair­
ness to providers by ensuring that they would receive compensation for the 
services they offer.90 The Indiana Psychological Association ("IPA'') says 
denying patients the right to assign benefits to their out-of-network provid­
ers "often prevents the Psychologist's [sic] office from ever receiving pay­
ment."91 An association of Maryland medical group administrators 
conducted a survey revealing that eighty-four percent of respondents indi­
cated that patients frequently fail to pay their medical bills after receiving 

82. The governor appoints a ten-member task force with representatives from insur­
ance companies, consumers, health care providers, employers, and independent actuaries. 
IND. CODE ANN. § 27-1-3-30 (West 2003). 

83. See MANDATED HEALTH BENEFIT TASKFORCE, supra note 27. 
84. ld. at 5. 
85. !d. 
86. ld. 
87. See, e.g., Dolinski, supra note 5; IND. HEALTH FIN. CoMM'N, supra note 81, at 3-4. 
88. See, e.g., IND. HEALTH FIN. CoMM'N, supra note 81, at 3-4. 
89. See, e.g., id at 4. 
90. Id. 
91. IND. PSYCHOL. AsS'N, AOB PosmoN PAPER (2009) (on file with Ind. Legis. Servs. 

Agency and with author). 



182 INDIANA HEALTII LAW REVIEW [Vol. 8:171 

reimbursements.92 

The IP A explains that when patients receive reimbursement from their 
insurer, they often think that they no longer have a debt to their health care 
provider.93 Meanwhile, the patients may use the reimbursements to cover 
other outstanding debts like a child's college tuition, resulting in an inabil­
ity to pay their medical provider.94 Some medical group administrators and 
doctors note that collection problems involving patients who have received 
reimbursements are becoming an increasingly common occurrence.95 

Also, these situations are not limited to people who use their reim­
bursement checks for reasons as noble as paying a child's college tuition 
bill.96 In a newspaper opinion piece, the chief executive officer of a Florida 
addiction-treatment program described the story of a man whose health in­
surance company sent him a reimbursement check.97 The man, who had 
received treatment for a drug addiction, did not pay his provider, but rather 
used the money to buy drugs off the street.98 The executive also described 
another man who received reimbursement of more than $1,000 and used it 
to take a trip, where he committed suicide.99 

Regardless of the reasons why patients fail to pay their providers after 
receiving a reimbursement check, the result is that at least some providers 
accumulate a significant amount of charges that must be written off as a 
loss and re-classified as an expense because it is unable to be collected (i.e., 
bad debt).100 The Indiana Dental Association ("IDA") compiled anecdotal 
data to show how collection issues are affecting providers.101 A survey of 
dentist offices in central and northern Indiana showed that each accumulat-

92. Letter from Kern Tolliver, Gov't Affairs Chair, Md. Med. Grp. Mgmt. Ass'n, to 
Thomas Middleton, State Senator, Comm. Chairman, Md. S. Fin. Comm. (Mar. 17, 2009) 
[hereinafter Letter from Tolliver], available at http://www.bmbassoc.com/ is­
sues/aob/docs!MD_2009%20MGMA%20Letter%20to%20Middleton.pdf. 

93. IND. PSYCHOL. Ass 'N, supra note 91. 
94. Smith, supra note 1. 
95. Hearing on S.B. 852 before the Senate Finance Committee, 2010 Leg., 426th Sess. 

(Md. 1999) (written testimony of the Hosp. Based Physician Coal. in support of S.B. 852), 
available at http://www.bmbassoc.com/issues/aob/docs/ 
MD_ 2009%20SB%20852%20AOB%20Testimony.pdf; Letter from Tolliver, supra note 92 
("With the current state of our economy, it is highly improbable that the patient would turn 
over the payment to pay the provider for their services."). 

96. See IND. HEALTH FIN. COMM'N, supra note 81, at 3 (representative of the Indiana 
Dental Association stating states generally that people do not always have noble reasons for 
their alternative uses of their reimbursement checks). 

97. Chris Crosby, The Watershed Addiction Treatment Programs President, Op-Ed., 
Paying Mental Health Facilities Directly Saves Lives, PALM BEACH POST, June 2, 2009, at 
8A. 

98. !d. 
99. !d. 

100. See IND. DENTAL Ass'N, 2008/2009 AOB EXPERIENCE (on file with Ind. Legis. 
Servs. Agency and with author). 

101. See id. 



2011] STATE MANDATORY ASSIGNMENT OF BENEFITS LEGISLATION 183 

ed $8,000 to $13,000 of bad debt in six months,102 or roughly ten percent of 
the revenues an average dentist office would receive after overhead expens­
es are subtracted. 103 One dentist stated that his billing staff spends forty 
percent of its time trying to locate money from patients who have received 
reimbursement from their insurers but have yet to pay their debt with their 
dentist. 104 Providers who experience collection problems may incur bad 
debt and subsequently raise rates. 105 

Proponents further argue that insurers may deny AOB as a way to 
force providers into a network that has low reimbursement rates. 106 Some 
providers say allowing health insurance companies to reject AOB presents 
them with the undesirable choice of either entering a network and accepting 
lower reimbursement rates or staying outside the network and chasing pay­
ments that the insurer sends to their patients.107 Therefore, some providers 
suggest that using the direct payment incentive as leverage is an unfair 
business practice.108 Some doctors say this is especially unfair in the cur­
rent health insurance system because providers have a decreasing amount of 
bargaining power in negotiations with health plans.109 While insurance 
companies acknowledge that direct payments are used to attract providers to 
their networks, they argue that the direct payment incentive is justified be­
cause it helps them build or maintain strong networks, which leads to a re­
duction ofhealth care costs. 110 

B. Mandatory AOB Would Eliminate Many Administrative 
Problems Associated with Payments and Billing 

AOB proponents also assert that the process of insurers reimbursing 
patients for out-of-network medical services is cumbersome without 

102. ld. 
103. Interview with Ed Popcheff, Director of Gov't Relations, Ind. Dental Ass'n, in 

Indianapolis, Ind. (Dec. 10, 2009). 
104. IND. DENTALAss'N, supra note 100. 
105. See IND. HEALTH FIN. COMM'N, supra note 81, at 3; see also Smith, supra note 1 

(quoting an internist who said that "[y]ou can't run a practice with thousands of dollars not 
corning in."). 

106. IND. HEALTH FIN. COMM'N, supra note 81, at 3; see also Lucas & Williams, supra 
note 17, at 143; IND. PSYCHOL. Ass'N, supra note 91 ("Some insurers pressure Psychologists 
[sic] into signing their PPO contract by refusing to honor assignment of benefits for non­
PPO patients."). 

107. IND. HEALTH FIN. CoMM'N, supra note 81, at 3. 
108. See, e.g., id. (stating that rejecting AOB to force dentist to join networks is "simply 

wrong"). 
109. Smith, supra note 1 (describing the struggles some providers have during negotia­

tions with health plans); AM. MED. Ass'N, AOB LEGISLATION TALKING POINTS (2004), avail­
able at http://www.bmbassoc.com/issues/aob/docs/AMA_2004- AOB%20Talking%20 
Pionts.pdf (describing that the "playing field" is becoming more unbalanced in favor of the 
insurers over the providers). 

110. See infra Part. IV.A-B. 



184 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

AOB. 1 11 The IPA says that barring an individual from assigning benefits to 
a provider "disrupts payments to the Psychologist's [sic] office [and] cre­
ates confusion .... "112 The IPA explains that the provider's office may not 
be informed that the patient received compensation, which could cause 
weeks of delay in the billing process. 113 This confusion, caused by the ina­
bility to assign benefits, may be compounded when the patient has coverage 
by more than one insurer.114 Finally, the IPA asserts that in some cases in­
volving dual coverage, these administrative complications result in a patient 
failing to receive all of the benefits to which he or she is entitled.115 

There is also concern that the effects of administrative billing difficul­
ties may discourage patients from visiting out-of-network providers, and 
thereby decrease patient access.116 The IDA contends that AOB would 
eliminate many of the administrative problems associated with payments 
and billing.117 Even if a provider eventually receives payment, some note 
that the provider might experience delays and cash flow disruptions if it 
cannot receive payments directly from the insurer.118 Some say that these 
delays harm patients because they reduce the time that providers can spend 
focusing on actual health care. 119 

C. Mandatory AOB Would Reduce the Amount of Litigation 
between Insurers and Providers 

It is also argued that mandatory AOB laws would provide efficiency, 
consistency, and predictability.120 Many times when there are issues re-

111. IND. HEALTH FIN. COMM'N, supra note 81, at 3; see also Mark R. Stetzel & Bob 
Ketcham, Dentists Split about States Benefit Bill: Pro, JOURNAL J. GAZETIE (Fort Wayne, 
Ind.), Jan. 30, 2009, at l3A ("For patients not expecting an insurance check, it's confusing 
when it arrives in the mail .... For those who do forward the check to their dentist, it's just 
another hassle they don't need."); AM. MED. Ass'N, supra note 109. 

112. IND. PSYCHOL. Ass'N, supra note 91. 
113. Id. 
114. Id. ("If the patient is covered by more than one insurance company or by Medicaid 

(dual coverage) the Psychologist [sic] cannot file for secondary benefits on behalf of the 
patient until an explanation of benefits (EOB) is received from the first carrier."). 

115. Id. 
116. DIANE D. ANDERSON, HEALTHCARE CONSULTANTS, LLC, AOB LEGIS. FOR 

HEALTHCARE PROVIDERS 7 (2005), available at http://www.bmbassoc.com/issues/aob 
/docs/FINALReport.doc (prepared for Virginians for Fairness in Healthcare). 

117. IND. HEALTH FIN. COMM'N, supra note 81, at 3 (A representative of the Indiana 
Dental Association states that "the current process is a hassle to the patient and intrusive on 
administering a dental practice."); see also MD. GEN. ASSEM. DEP'T OF LEGIS. SERVS., H.B. 
594 FISCAL AND PoL'Y NoTE 1 (2010), available at http://mlis.state.md.us/2010rs/fnotes/ 
bil_ 0004/hb0594.pdf 

118. Karin Bierstein, Rejecting a Bad Payer Contract, AM. Soc'y OF 
ANESTHESIOLOGISTS NEWSLETTER, June 2005, available at http://www.asahq.org/ News1et­
ters/2005/06 _ 05/pracMgmt06 _ 05.html. 

119. See, e.g., Steven West, supra note 4. 
120. Foust, supra note 48. 



2011] STATE MANDATORY AsSIGNMENT OF BENEFITS LEGISLATION 185 

garding payments between insurers and out-of-network providers, the end 
result is litigation. 121 This creates significant transactional costs. 122 The 
ISMA fears that those transactional costs may negatively affect the cost of 
health care in general. 123 The ISMA states that health care providers do not 
want to play the role of creditor, but they are often forced to do so. 124 Pro­
ponents think that allowing AOB would help remove the need for providers 
to go to court after patients fail to pay, because when the patient assigns the 
benefits, the insurer's reimbursement goes directly to the provider. 125 

Furthermore, when an insured is unable to assign benefits to an out-of­
network provider, the provider generally cannot challenge the insurer's re­
imbursement126 The American Medical Association says that providers are 
more willing and capable of investigating and appealing the reimburse­
ments when a dispute exists concerning the amount the health plan should 
cover.127 Therefore, the organization says that it is unfair to give patients 
the responsibility of legally challenging a reimbursement. 128 

D. Mandatory AOB Would Reduce the Amount of Out-of-Network Provid­
ers Who Require Full Payment Up Front 

Proponents argue that AOB would reduce the number of out-of­
network providers who require full payment before services are rendered 
because they know they will receive some reimbursement from an insur­
er.129 For example, many Indiana psychologists have begun to ask for up­
front payments because of the difficulty of collecting payments after they 
provide services.130 Many dentists who do not participate in a network are 
also forced to choose whether to require up-front payments or risk that the 

121. Id 
122. Id 
123. Interview with Rinebold, supra note 52. 
124. Id 
125. /d. 
126. David M. Hyman et al., Hey, What About Me? Non-Participating Healthcare Pro­

viders' Ability to Sue Health Insurance Companies Regarding Payment of Claims, N.J. 
LAWYER, February 2007, at 37 ("Without a valid assignment, non-participating providers 
face a considerable hurdle in establishing the right to demand or contest payment from health 
insurance companies."). 

127. AM. MED. Ass'N, supra note 109. 
128. Id 
129. See Dolinski, supra note 5; AM. MEn. Ass'N, supra note 109 ("If an assignment is 

given by the patient and ignored by the insurer, the patient is forced to 'front' the cost of the 
service, until the insurer either sends payment to the patient or the provider reimburses the 
patient. This is an unreasonable burden to place on the consumer."). 

130. IND. HEALTH FIN. CoMM'N, supra note 81, at 3; see also IND. PsYCHOL. Ass'N, 
supra note 91 (''[AOB] often allows patients to leave the office without making full payment 
for services, knowing that the psychologists will bill them for any balance not paid by the 
insurance company."). 



186 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

patient will not pay later.131 Because of this, the IDA argues that AOB 
would lead to "little or no up-front costs at the time oftreatment."132 

IV. ARGUMENTS AGAINST STATES MANDATING AOB 

A. Mandatory AOB Would Weaken Insurers' 
Health Care Networks 

As proponents of mandatory AOB present their arguments to state 
lawmakers, health insurance companies, employers, and labor unions join 
forces to argue their opposing positions. 133 A chief argument against enact­
ing broadly applied, mandatory AOB is that it would weaken insurers' 
health care networks.134 Insurance companies contend that a doctor's abil­
ity to receive reimbursements directly from an insurer is an important in­
centive for the physician to join the insurer's network. 135 The argument is 
that if any provider can receive direct payments from any insurer, then there 
is less of an incentive to stay in a certain network. 136 

During AOB legislative debates in Maryland, an insurer presented ev­
idence regarding the effect AOB had on other health plans.137 The Mary­
land-based insurer, CareFirst BCBS, reported that when Idaho enacted 
mandatory AOB in 1992, half of the dentists in one network dropped out of 
it within a matter of weeks.138 CareFirst also noted that a survey of Hawai­
ian providers indicated that slightly more than half would leave a network if 
insurers were required to honor AOB. 139 CareFirst also presented data that 

131. IND. HEALTH FIN. CoMM'N, supra note 81, at 3. 
132. Support Patient Rights - Support Assignment of Benefits, IND. DENTAL Ass'N, 

http://www.supportpatientrights.com (last visited Dec. 7, 2010). 
133. See, e.g., IND. HEALTH FIN. COMM'N, supra note 81, at 3-4; Dolinski, supra note 5; 

Smith, supra note 1. 
134. See Lucas & Williams, supra note 17, at 143-44; VA. DEP'T OF PLANNING AND 

BUDGET, H.B. 253 FISCAL IMPACT STATEMENT 1 (2006), available at 
http://leg l.state.va.us/cgi-bin!legp504.exe?071 +oth+HB253F 122+PDF; JOHN M. WANDER & 
DANIEL FREIER, RENDEN & ANDERS, LTD., THE POTENTIAL IMPACT OF STATE MANDATORY 
ASSIGNMENT LEGIS. ON CONSUMERS 10 (2003), available at 
http://www .bcbsok.comlgrassroots/pdfi'bcbsa_ assignmentofbenefitsrpt_ oct03.pdf (prepared 
for BCBS Ass'n); Smith, supra note 1; IND. HEALTH FIN. COMM'N, supra note 81, at 3-4. 

135. FLA. S., S.B. 1122 ANALYSIS AND FISCAL IMPACT STATEMENT 4 (2009), available 
at http://www.flsenate.gov/data/session/2009/Senatelbillslanalysislpd£'2009s1122.ga.pdf; 
see also Dolinski, supra note 5; MANDATED HEALTH BENEFIT TASK FORCE, supra note 27, at 
4 ("Direct payment of claims to participating providers is a key benefit of contracting with a 
health care payer."); Letter from William Casey, V.P. Gov't Affairs, CareFirst BCBS, to 
Thomas Middleton, State Senator, Md. S. Fin. Comrn. 1 (Mar. 4, 2009) [hereinafter Letter 
from Casey], available at http://www.bmbassoc.com/issues 
/aob/docs/BCBS_2009%20Letter'lo20too/o20Middleton%20SB%20852.pdf. 

136. Smith, supra note 1. 
137. Letter from Casey, supra note 135, at 3. 
138. Id. 
139. Id. (The source does not state whether this survey was scientific). 



2011] STATE MANDATORY AsSIGNMENT OF BENEFITS LEGISLATION 187 

a Virginia insurer bad a stronger network after adopting a policy to refuse 
AOB. 140 It was further mentioned by CareFirst that insurers in Nevada and 
Colorado have experienced difficulty in establishing strong networks be­
cause of mandatory AOB legislation.141 Advocates for the health industry 
argue that a weakened network would result in less access to care for pa­
tients because there would be fewer providers participating in a network.142 

B. Mandatory AOB Would Increase Health Care Costs 

In addition to decreased. access to health care services, many argue 
that weakened networks would generally result in higher health care 
costs.143 During the AOB debate in the Virginia General Assembly in 2006, 
a representative of a health insurance company explained to a journalist that 
"[h ]ealth plan networks are all that stand between consumers and full 
charges."144 Health insurance industry representatives say that networks 
exist so insurers can negotiate rates with providers in an effort to contain or 
reduce the amount of money consumers pay out of their pockets for health 
care services.145 A provider would agree to this lower rate in exchange for a 
higher volume of patients.146 Health insurance representatives say that the 
agreement of in-network doctors to provide services at a discounted rate 
"substantially reduces health-care premiums."147 

The BCBS Association commissioned a study in 2003 that showed 
discounts and protections that patients receive from using networks for their 
care amount to thousands of dollars for people with major medical condi­
tions.148 The study looked at five patient ''profiles,"149 and found estimated 
annual cost savings of $3,234 to $13,482 for in-network physician services 
and $6,751 to $30,404 for in-network hospital services.150 The study con-

140. Id. 
141. Id. Nevada first enacted an AOB law in 1983, and Colorado did the same in 2005. 

MANDATEDHEALTIIBENEFITTASKFORCE,supranote27, at2. 
142. Bob Lotane, Commc'ns and Pol. Affairs Dir., Nat'l Ass'n of Ins. Fin. Advisors, 

Op-Ed., Direct Assignment Bill Guts Preferred Provider Plans, PAlM BEACH PosT, June 4, 
2009,at 12A 

143. See Jed Jacobson, V.P. of Delta Dental of Ind., Guest Commentary, Assignment of 
Benefits Hits Patients in Pocketbooks, THE TIMEs OF NORTHWEST IND., Jan. 29, 2009; Cyrus 
Jollivette, Senior V .P. of Public Affairs, BCBS of Fla., Op-Ed., SB 1122 Will Undermine 
PPO Networks, Raise Health-care Costs, PAlM BEACH PosT, June 11, 2009, at lOA; IND. 
HEALTIIFIN. COMM'N, supra note 81, at 3. 

144. Smith, supra note L 
145. WANDER& FREIER, supra note 134. 
146. Smith, supra note l. 
147. Lotane, supra note 142. 
148. SeeWANDER&FREIER,supranote 134. 
149. See id. at 7-8 (noting the five profiles as, "woman with advanced breast cancer," 

"man with coronary artery heart disease," "child with severe asthma," ''woman with ischem­
ic stroke," "man with diabetes mellitusj. 

150. /d. at 10. 



188 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

eluded that savings like these might be reduced if networks were weakened 
as a result of mandatory AOB. 151 Some argue that even if doctors do not 
leave their networks, AOB to out-of-network providers may give network 
doctors more leverage in their negotiations with insurers to argue for higher 
reimbursements.152 This leverage could interfere with the insurer's ability 
to negotiate with network providers for a lower reimbursement rate and thus 
could translate to higher medical costs for consumers. 153 

According to the insurer, CareFirst, AOB legislation in Idaho in 1992 
resulted in a twenty-nine percent increase in out-of-pocket health care 
costs. 154 CareFirst estimates that for every ten-percent loss in provider par­
ticipation in its network, the health care costs for consumers would increase 
by eight percent.155 The health insurance industry further argues that the 
deterioration of their PPO networks would increase the number of unin­
sured citizens. 156 

Some employers and labor unions fear that weakened networks would 
translate to higher premiums. 157 Employers are worried that by weakening 
health care networks, mandatory AOB would interfere with an insurer and 
an employer negotiating a contract.158 Legislative staff in Virginia who an­
alyzed the issue came to the conclusion that weakened health care networks 
would lead to higher premiums for both employers and their employees.159 

When Florida considered passing a mandatory AOB bill in 2009, 
BCBS of Florida asserted that a mandatory AOB would impose a signifi­
cant cost to Florida's State Employees' Health Insurance Trust Fund be­
cause of the effect of a weakened network.160 A BCBS of Florida analysis 
showed that it would cost the trust fund between $9.9 million and $25.7 
million in one fiscal year.161 Florida's Department of Management Services 
contracted out a study to review BCBS of Florida's analysis of how much 
mandatory AOB would cost the state. That study showed a range of $5.1 

151. Id 
152. Dolinski, supra note 5. 
153. See FLA. S., supra note 139. 
154. Letter from Casey, supra note 135, at 3. 
155. Id. at 2. 
156. Jollivette, supra note 143. 
157. See, e.g., IND. HEALm FIN. CoMM'N, INTERIM SnmY COMMITI'EE MEETING 

MINuTEs OF SEP. 1, Exhibit 7, 3 (2009) ("[Mandatory AOB legislation would] have a very 
significant impact on increasing the cost of health care and forcing even more employers to 
discontinue providing coverage.") (on file with Ind. Legis. Servs. Agency and with author); 
IND. HEALTH FIN. CoMM'N, supra note 81, at 4 (AFL-CIO representative stating that strong 
networks result in millions of dollars worth of savings and "direct payments to out-of­
network providers would increase costs"). 

158. IND. HEALTH FIN. COMM'N, supra note 81, at 4. 
159. VA. DEP'T OF PLANNING AND BUDGET, supra note 134. 
160. FLA. S., supra note 135; see also VA. DEP'r OF PLANNING AND BUDGET, supra note 

134. 
161. FLA.S.,supranote 135. 



2011) STATE MANDATORY AsSIGNMENT OF BENEFITS LEGISLATION 189 

million to $18.5 m.illion.162 The state's independent study also showed that 
mandatory AOB would increase an individual's out-of-pocket expenses by 
seventy-five percent.163 

C. Mandatory AOB Would Interfere with an Insurer's Ability to Manage 
Quality of Care 

In addition to managing the cost of health care, insurers attempt to 
control the quality of care.164 Some believe that conferring the right to col­
lect directly from insurers would blur the distinction between network pro­
viders and out-of-network providers, which could be harmful to the 
system. 165 For good or bad, networks play a central role in the benefit de­
sign of our health care system. 166 The ability to collect reimbursements di­
rectly from insurers is often only available to providers who are in the 
health plan's network.167 However, the method of receiving reimburse­
ments for services is not the only distinction between network providers and 
out-of-network providers. Among the many important differences are qual­
ity assurance and credentialing. 168 Therefore, some argue that blurring the 
distinction between network providers and out-of-network providers would 
harm the insurance companies' ability to create what they think is the most 
"intelligent, legally acceptable, and commercially attractive" benefit de­
sign.169 Furthermore, insurers argue that mandatory AOB would result in 
providers exiting their networks.170 If this occurs, the health insurance 
companies would not be able to manage the quality of health care as effec­
tively because the network would have fewer participating providers.171 

Also, insurers may not be able to offer some specialized services like chron­
ic care management because of a lack of participating providers. 172 

162. !d. (citing GABRIEL ROEDER SMITH & Co., REviEW OF MANDATORY ASSIGNMENT 
MODEL (2009)). 

163. Id 
164. See KONGSTVEDT, supra note 6, at 230. 
165. Foust, supra note 48. 
166. !d. 
167. See KONGSTVEDT,supranote 6, at 139. 
168. Foust, supra note 48. 
169. Id; see also, e.g., Letter ftom Casey, supra note 135, at 3 ("CareFit'St, like other 

carriers, continually strives to improve the quality of our networks."). 
170. Letter ftom Casey, supra note 135, at 3. 
171. !d. 
172. !d. 



190 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

V. WHY TilE ARGUMENTS IN FAVOR OF MANDATORY AOB PREVAIL AND 
HOW LEGISLATION SHOULD BE STRUCTURED 

A. Why Indiana Should Mandate AOB 

The parties who participate in the AOB debate have in large part tried 
to present their arguments within the frame ofwhat is best for consumers. 173 

However, both insurance companies and doctors have interests in making 
profits. One possible solution falls somewhere between the positions of 
providers, insurers, and sponsors. Indiana legislators should require that 
health plans honor AOB, as well as create a conditional sunset provision for 
the AOB legislation. The legislature should also consider imposing re­
quirements on the amount of reimbursement paid to out-of-network provid­
ers, prohibiting balance billing for emergency care services, and repealing 
the state's A WP law. 

1. How the RefUsal of Insurers to Honor AOB Harms the Health 
Care System 

Considering that anecdotal data dominates the AOB debate, legislators 
likely have a difficult time weighing the potential outcomes of their deci­
sion regarding the AOB issue.174 At least in Indiana, opponents of manda­
tory AOB note that proponents do not use empirical data to support their 
arguments. 175 For example, the testimonies of Indiana providers detail the 
experience of only some medical offices.176 Nonetheless, these testimonies 
show that the inability of at least some out-of-network doctors to receive 
direct reimbursements poses significant financial burdens on their practic­
es. 177 Assuming that these providers will shift at least some of the financial 
burden to patients, it follows that the insurers' refusal to honor AOB raises 
the cost of care that these out-of-network doctors provide.178 

The evidence also shows that some consumers covered by a network 
plan choose to receive services from out-of-network providers at least some 
of the time. 179 When the insureds are unable to assign their health insurance 
benefits to their out-of-network providers, they often experience a cumber­
some process of waiting to receive payments from the health plan and pay­
ing their doctor's bills.180 The evidence further shows that the insurer's 

173. See, e.g., id. at 4. 
174. See IND. HEALTH FIN. COMM'N, supra note 81, at 3-4. 
175. See id. at 3. 
176. See id. at 3-4. 
177. See id. 
178. See generally supra Part III.A. 
179. IND. HEALTH FIN. CoMM'N, supra note 81, at 3-4. 
180. See generally supra Part III.B. 



2011] STATE MANDATORY AsSIGNMENT OF BENEFITS LEGISLATION 191 

refusal to honor assignment requests increases the transactional costs of 
health care delivery, as doctors spend more time trying to collect payment 
from patients and patients have more disputes with their health plans re­
garding reimbursements.181 Furthermore, the refusal to honor AOB requires 
some providers to demand up-front payments from consumers because of 
the uncertainties of being able to collect from them.182 These additional 
consequences that result from an insurer's refusal to honor AOB further 
raise or at least threaten to raise the cost of receiving services from out-of­
network providers. These consequences also likely affect, to some degree, 
access to care from out-of-network providers. 183 

2. The Evidence Fails to Show That Mandatory AOB Weaken 
Networks 

While the evidence shows that allowing insurers to prohibit AOB in­
creases the cost of health care that some out-of-network doctors provide, the 
health insurance industry argues that a mandatory AOB law would create a 
net increase in health care costs.184 However, information presented by 
health insurance companies does not prove such a position.185 In AOB dis­
cussions, insurers primarily argue that AOB laws threaten the strength of 
their networks. 186 

For example, when the Maryland General Assembly considered an 
AOB bill in 2009, an insurer, CareFirst, presented data in an effort to show 
the effect of AOB laws on the strength of health plan networks.187 As dis­
cussed more fully in Section N, CareFirst's information included anecdotal 
data about Idaho dentists from 1992, a survey of Hawaii providers, the ef­
fect of a Virginia insurer's anti-assignment policy on its own network, and 
general statements about the strength of the networks of insurers from Ne­
vada and Colorado. 188 While this evidence supports the argument that AOB 
laws may weaken health plan networks, it provides an insufficient basis to 
conclude that this result would happen in Indiana if the legislature enacted 
mandatory AOB. 

181. See generally supra Part ffi.C. 
182. See generally supra Part ffi.D. 
183. See ANDERSON, supra note 116, at 7. 
184. See, e.g., IND. HEALTH FIN. CoMM'N, supra note 81, at 3-4. . 
185. See MGT OF AM., INC., REsEARCH CoNCERNING PREMIUM RATE CHANGES FOR THE 

FLA. MEo. Ass'N 7 (2008) (on file with author) (finding that "[t]he direct impact of incorpo­
rating mandatory assignment of benefits and/or a reduction of the repayment period on 
health insurance premiums cannot be determined"). 

186. See, e.g., IND. HEALTH FIN. CoMM'N, supra note 81, at 3-4; See generally supra 
Part IV .A. 

187. Letter from Casey, supra note 135, at 3-4. But cf. Letter from Tolliver, supra note 
92 (stating that a survey of Maryland providers shows that ninety-percent would remain in­
network even iflegislature would enact AOB law). 

188. Letter from Casey, supra note 135, at 3-4; see also supra Part IV.A. 



192 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

In 2005, a consulting group that studied the AOB issue for a Virginia 
group of doctors concluded that AOB laws had not interfered with insurers' 
ability to provide "adequate cost-effective networks."189 The consultants 
observed that three of the four main health insurance companies in the 
United States- United Healthcare, Aetna, and Cigna- honor AOB but have 
not incurred any negative financial consequences for doing so.190 Accord­
ing to some reports, the insurance company, Humana, also honors AOB 
while containing costs with a "strong" network.191 The evidence that sever­
al insurers voluntarily allow AOB and maintain strong networks indicates 
AOB laws would likely have minimal effect on the strength of health plan 
networks. Other incentives, such as higher patient volume, will likely keep 
a large number of doctors in network, even if they can receive direct pay­
ments out ofnetwork.192 

Even if the networks of insurers would weaken in the coming years, 
the decline of strong networks would not necessarily be a result of manda­
tory AOB. "An increasing number of physicians do not contract with man­
aged care companies."193 Some providers believe a major reason for 
doctors leaving networks is because insurers' reimbursement rates are too 
low regardless of whether there is AOB.194 

3. The Evidence Fails to Show That Mandatory AOB Increases 
Health Care Costs Generally 

Even assuming that AOB laws weaken networks, health insurance 
companies have failed to prove the resulting weak networks would cause a 
net harm by increasing costs or limiting access to health care. As discussed 
previously, health insurance representatives commonly testify to the amount 
of health care savings members receive for participating in a. plan that uses 
a network. 195 For example, representatives often cite a 2003 study that a 
consulting group completed for the BCBS Association.196 This study 
tracked the savings that some types of patients realized when they used in­
network doctors.197 In at least one AOB debate, an insurer asserted that out­
of-pocket costs of consumers covered by a network increased by an esti-

189. ANDERSON, supra note 116, at 28. 
190. ld 
191. Dolinski, supra note 5; West, supra note 4. 
192. Dolinski, supra note 5. 
193. Hyman et al., supra note 126. 
194. E.g., Smith, supra note l. But cf., e.g., Letter from Casey, supra note 135, at 3 

(explaining that the insurers' rates are "fair and reasonable''). 
195. See, e.g., IND. HEALTII FIN. CoMM'N, supra note 81, at 3-4; see also supra Part 

N.B. 
196. See WANDER & FREIER, supra note 134. 
197. Id 



2011] STATE MANDATORY ASSIGNMENT OF BENEFITS LEGISLATION 193 

mated twenty-nine percent in Idaho in 1992 because of AOB legislation.198 

Despite empirical evidence showing savings consumers realize for us­
ing network doctors, and anecdotal data like the experience of Idaho pa­
tients, no one has established a correlation between AOB and an overall 
increase of health care costs. 199 Even assuming that mandatory AOB laws 
increase health care costs for some consumers, health insurance companies 
have failed to show this would cause a net increase in total costs. Further­
more, the evidence does not show that the increase in costs insurers fear 
would outweigh the financial burdens that out-of-network providers incur 
because of their inability to receive direct reimbursements. 

The extent of the harm that out-of-network providers in Indiana expe­
rience because insurers refuse to honor AOB is unknown. Nonetheless, 
evidence shows that allowing payers to reimburse consumers directly in­
creases the cost of out-of-network services, assuming that out-of-network 
doctors share some of their financial burdens with their patients. Mean­
while, AOB opponents base their arguments on speculation, which does not 
show that mandatory AOB would create a net harrn to health care costs. 
Therefore, Indiana should enact a broadly based, mandatory AOB law. 

B. Structure of the Legislation 

1. Indiana Legislators Should Consider a Conditional Sunset 
Provision 

When Florida implemented a broadly applied, mandatory AOB, it in­
cluded a conditional sunset provision.Z00 The amendment to Florida's AOB 
law are automatically repealed three years after its effective date if the Of­
fice of Program Policy Analysis and Government Accountability finds that 
"the amendments made by this act have caused the third-party administrator 
of the state group health plan to suffer a net loss of physicians from its pre­
ferred provider plan network and, as a direct result, caused an increase in 
costs to the state group health plan.''201 Indiana has entertained a similar 

198. Letter from Casey, supra note 135, at 2 (stating that "member out of pocket costs 
increased by an estimated 29% as a direct result of the passage of assignment of benefits 
legislation"). 

199. See ANDERSON, supra note ll6, at 28. 
200. 2009 Fla. Laws. 2009-124 (codified at FLA. STAT. § 627.638 (2009)); see also 

About OPPAGA, OFFICE OF PROGRAM POLICY ANALYSIS AND GoV'T ACCOUNTABILITY, 
http://www.oppaga.state.fl.us/shell.aspx?pagepath=about/about.htm (last visited Dec. 7, 
201 0) (The Florida OPP AGA is a staff unit of the Legislature responsible for examining 
agencies and programs "to improve services and cut costs when directed by state law, the 
presiding officers, or the Joint Legislative Auditing Committee." OPP AGA: supports the 
Florida Legislature by providing data, evaluative research, and objective analyses that assist 
legislative budget and policy deliberations.) 

201. 2009 Fla. Laws. 2009-124 (codified at FLA. STAT.§ 627.638 (2009)) 



194 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

mechanism in its debate over imposing a mandatory AOB.202 A conditional 
sunset provision could be a good tool to help protect the health care system 
in Indiana if the insurance companies' worst fears were to occur because of 
AOB legislation. 

2. Indiana Legislators Should Consider Imposing Requirements on 
Reimbursement Amount 

Requiring insmers to send payments directly to out-of-network pro­
viders could result in ''wasteful disputes" over the amount of reimburse­
ments.203 However, state legislators could create a more predictable 
business environment by imposing requirements on the reimbursement 
amount for out-of-network payments.204 Only a limited number of states 
have enacted legislation that governs the amount insmers pay to out-of­
network providers.205 

Florida's mandatory AOB law, for example, prohibits insurers from 
paying providers more than what the insurer would pay the·insured if there 
were no assignment. 206 If an insurer in Oklahoma pays a provider less than 
what the provider billed, the payer must furnish, upon request, the rationale 
for the reimbursement amount. 207 In Utah, payers must reimburse out-of­
network doctors at an amount that is at least seventy-five percent of the par­
ticipating provider rate.208 Colorado insmers must reimburse out-of­
network providers the lesser of the following amounts: the provider's billed 
charges; a "negotiated rate"; and the "the greater of the carrier's average in­
network rate for the relevant geographic area or the usual, customary, and 
reasonable rate for such geographic area.'.z09 Meanwhile, California's regu­
lations require insurers to pay out-of-network providers the "reasonable and 
customary value for the health care services," which is calculated based on 
the following: 

(1) the provider's training, qualifications, and length 
of time in practice; (ii) the natme of the services pro­
vided; (iii) the fees usually charged by the provider; 

202. IND. HEALTH FIN. CoMM'N, supra note 81, at 4. 
203. Foust, supra note 48. 
204. Id 
205. Id. See generally Kongstvedt, supra note 29, at 132 (describing the method insur­

ers generally use to reimburse out-of-network providers). 
206. FLA. STAT. § 627.638(2) (2009) ("Payment to the provider from the insurer may 

not be more than the amount that the insurer would otherwise have paid without the assign­
ment"). 

207. OKLA. STAT. ANN. tit. 36 § 6571 (West 2009). 
208. UTAH CoDE ANN.§ 31A-22-617(2)(b) (2009). 
209. CoLO. REv. STAT. § 10-16-704(2Xc) (2007). The statute defines the "usual, cus­

tomary, and reasonable rate" as "a rate established pursuant to an appropriate methodology 
that is based on generally accepted industry standards and practices." § 10-16-704(2Xf)(III). 



2011] STATE MANDA WRY ASSIGNMENT OF BENEFITS LEGISLATION 

(iv) prevailing provider rates charged in the general 
geographic area in which the services were rendered; 
(v) other aspects of the economics of the medical pro­
vider's practice that are relevant; and (vi) any unusual 
circumstances in the case.Z10 

195 

Although there is no consensus among the states on how to govern out-of­
network reimbursements, these examples provide guidance on how the In­
diana General Assembly should control the reimbursement amount if or 
when it enacts a mandatory AOB law. 

3. Indiana Legislators Should Consider Prohibiting Out-of-Network 
Providers from Balance Billing 

Indiana legislators may also want to consider implementing a prohibi­
tion on balance billing in some situations as a compliment to AOB legisla­
tion. Balance billing occurs when a provider bills a patient for the cost that 
exceeds the amount that the insurer covers.211 Most states do not explicitly 
prohibit balance billing and insurers rarely can prohibit out-of-network pro­
viders from engaging in the billing practice.212 However, some states re­
strict out-of-network providers from balance billing.213 For example, New 
York Rroviders cannot balance bill patients for emergency ambulance ser­
vices. 14 Meanwhile, Maryland and Florida prohibit providers from balance 
billing any HMO member.215 

The Indiana Mandated Benefits Task Force in its analysis of the AOB 
issue in 2008 recommended the state legislature to consider providing pro-

210. CAL. CODE REGs. tit. 28, § 1300.71(a)(3)(B) (2008). 
211. KONGSTVEDT, supra note 6, at 210. 
212. Lucas & Williams, supra note 17, at 147. See generally Foust, supra note 48 

(providing a background on balance billing). 
213. Lucas & Williams, supra note 17, at 148. 
214. N.Y. INs. LAW § 322l(l)(l5)(B) (McKinney 2010) (An ambulance service reim­

bursed pursuant to this section shall not charge or seek any reimbursement from, or have any 
recourse against an insured for the services provided pursuant to this paragraph, except for 
the collection of copayments, coinsurance or deductibles for which the insured is responsible 
for under the terms of the policy.). 

215. FLA. STAT. § 641.3154(4) (2004XA provider or any representative of a provider, 
regardless of whether the provider is under contract with the health maintenance organiza­
tion, may not collect or attempt to collect money from, maintain any action at law against, or 
report to a credit agency a subscriber of an organization for payment of services for which 
the organization is liable, if the provider in good faith knows or should know that the organi­
zation is liable.); MD. CODE ANN., HEALTH-GEN. § 19-710(p) (LexisNexis 2008)(A health 
care provider or any representative of a health care provider may not collect or attempt to 
collect from any subscriber or enrollee any money owed to the health care provider by a 
[HMO] .... A health care provider or any representative of a health care provider may not 
maintain any action against any subscriber or enrollee to collect or attempt to collect any 
money owed to the health care provider by a [HMO] .... ). 



196 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

tection against balance billing for emergency care services.216 The task 
force suggested that Indiana enact something similar to California's regula­
tion of balance billing. 217 In 2006, the California Court of Appeal held that 
state law did not prohibit out-of-network providers to balance bill patients 
for emergency services.218 The California Department of Managed Health 
Care subsequently created a rule that declares that balance billing of HMO 
members for emergency services is an ''unfair billing pattem.'.z19 

In January 2009, the California Supreme Court reversed the Court of 
Appeal's decision, holding that balanced billing of HMO subscribers is ille­
gal under California law when the provider has recourse to collect from the 
insurer.220 As previously discussed, California's regulations require insur­
ers to pay out-of-network providers a ''reasonable and customary value for 
the health care services.'.zz1 The California Supreme Court analyzed the 
issue of balance billing by considering whom the emergency room provider 
should involve when he or she disputes the ''reasonable and customary" 
amount paid by the insurer for services rendered.222 The court determined 
that the dispute should be between the provider and the insurer.223 In reach­
ing its conclusion, the court explained "a patient will have little basis by 
which to determine whether a bill is reasonable and, because the HMO is 
obligated to pay the bill, no legitimate reason exists for the patient to have 
to do so.''224 

Because of the nature of emergency care services, consumers have 
less choice as to who provides them medical care. For example, a consum­
er can generally choose which doctor to visit when he has a cold but may be 
unable to choose the emergency room to which an ambulance will take him. 
A prohibition on balance billing is appropriate in a situation where the 
emergency-care provider requires the patient to assign benefits, and where 
state law mandates the insurer to honor AOB. A balance billing prohibition 
in this case would likely reduce ''wasteful disputes.'.zzs Therefore, Indiana 
legislators should consider a balance billing prohibition for emergency care 
services. 

216. MANI>ATEDliEALTHBENEFITTASKFORCE,supranote27. 
217. Id. 
218. Prospect Med. Grp., Inc. v. Northridge Emergency Med. Grp., 39 Cal. Rpt. 3d 456 

(Cal. Ct. App. 2006), rev'd, 198 P.3d 86 (Cal. 2009). 
219. CAL. CODE REGS. tit. 28, § l300.71.39(a)(2008). 
220. Prospect Med. Grp., Inc., 198 P.3d at 92. 
221. CAL. CODE REGS. tit. 28, § 1300.7l(a)(3)(B) (2008). 
222. Prospect Med. Grp., Inc., 198 P.3d at 93. 
223. /d. 
224. Id 
225. See Foust, supra note 48 (examining topic of AOB and balance billing). 



2011] STATE MANDATORY AsSIGNMENT OF BENEFITS LEGISLATION 

4. Indiana Legislators Should Consider Repealing the State's 
AWPLaw 

197 

Indiana legislators should consider repealing the State's A WP law 
when they enact a mandatory AOB statute.226 Much of the Indiana Mandat­
ed Benefits Task Force five-page report includes a chart of states comparing 
AOB and A WP laws.227 In its analysis of the AOB issue, the task force 
emphasized that only one state, Georgia, has a broadly based A WP law and 
a broadly based AOB law.228 Therefore, it is reasonable to assume that the 
task force considers A WP and AOB to be incompatible. 

Some assert that the A WP law has "already severely damaged the 
ability of insurance networks to contain costs. "229 As previously discussed, 
opponents of mandatory AOB argue that an AOB law would exacerbate the 
problems for an insurer to manage costs.230 Therefore, some insurers see 
the existence of an A WP and an AOB law as two legislative measures that 
negatively affect their ability to manage networks.231 However, the bulk of 
the evidence shows that a mandatory AOB law would not harm a payer's 
ability to control costs.232 Nonetheless, repealing the A WP law may be a 
political compromise that could help ensure the passage of a mandatory 
AOB law. For example, a health care policy expert at the Indiana Chamber 
of Commerce states that he would not oppose AOB legislation if the state 
would repeal its A WP law. 233 

VI. CONCLUSION 

The debate over whether patients should have the right to assign 
health insurance benefits to out-of-network providers includes interesting, 
yet competing, public policy arguments. This important issue has garnered 
the attention of state legislators around the country.234 Requiring broadly 
applied, mandatory AOB would likely have many advantages. Perhaps the 
biggest benefit is ensuring that providers receive payment for their services 

226. See supra Part. II.E.l {concerning background information on A WP). 
227. MANDATED HEALTH BENEFIT TASK FORCE, supra note 27, at 2-3. 
228. /d. at 4; see also GA. CoDE ANN. § 33-24-54 {2008) {AOB law); GA. CODE ANN. § 

33-20-16 (2008) (AWP law). 
229. IND. HEALTH FIN. COMM'N, supra note 157, at 3; see also Smith & Stewart, supra 

note 62, at 1334-35 (examining AWP laws and their effect on health care costs). But cf. 
Interview with Rinebold, supra note 52 {arguing that A WP does not harm an insurer's ability 
to maintain its network and health care costs because insurers can easily remove providers 
from their networks). 

230. See generally supra Part N.B. 
231. Interview with Mike Ripley, V .P ., Health Care Pol'y, Ind. Chamber of Commerce, 

in Indianapolis, Ind. (Nov. 20, 2009) [hereinafter Interview with Ripley]. 
232. See generally supra Part V.A. 
233. Interview with Ripley, supra note 231. 
234. See, e.g.,IND. HEALTH FIN. CoMM'N, supra note 81, at 3-4. 



198 INDIANA HEALTH LAW REVIEW [Vol. 8:171 

so they can continue to provide care without raising their rates. 235 Another 
important advantage to mandatory AOB comes from the elimination of 
many of the administrative problems associated with payments and billings 
that providers and policyholders experieitce.236 

However, many argue that mandatory AOB would do significant harm 
to the health care system.237 A principal argument is that mandatory AOB 
would weaken networks, which in turn would lead to higher costs for poli­
cyholders, their employers, and others.238 Nonetheless, the empirical data 
related to this argument is weak. 239 In addition, there is evidence that man­
datory AOB would do little, if anything, to weaken networks and increase 
health care costs overall.240 Furthermore, legislators can structure laws to 
help protect against any harm by including a sunset provision.241 For the 
foregoing reasons, Indiana should adopt a broadly applied, mandatory AOB 
law. 

235. See generally supra Part Ill.A. 
236. See generally supra Part III.B. 
237. See, e.g., Letter from Casey, supra note 135, at 1. 
238. See generally supra Part N.A-B. · 
239. See supra Part V.A. 
240. See ANDERSON, supra note 116, at 28. 
241. See generally supra Part V.B.