AUGUSTA — Gov. Paul LePage’s surprise veto last week of a health insurance bill that had won unanimous approval from the Legislature has set up an awkward vote for House Republicans.

When the House considers whether to override the veto, possibly today or Thursday, Republicans will have to choose between sustaining the veto of a bill they supported or siding against the Republican governor.

GOP House leaders, who were “caught a little off guard” by the veto, are discussing what to do next and are expected to decide within the next couple of days, said Lance Dutson, spokesman for House Speaker Robert Nutting, R-Oakland.

The Legislature’s Insurance and Financial Services Committee unanimously endorsed the bill, L.D. 1222, which passed in the House and Senate without debate.

The committee’s House chair, Rep. Wesley Richardson, R-Warren, was so upset when he heard about the veto that he called the governor’s office Tuesday to complain.

He said his committee heard compelling testimony that the bill would “level the playing field” between insurance companies and allow for more competition. He said he would vote to override the veto.

“It’s a good bill,” he said. “I am shocked the governor vetoed that bill and never notified anybody until it was on the House calender today.”

It was the first veto by LePage, who took office Jan. 5.

A two-thirds vote in the House is needed to override a governor’s veto and send a bill to the Senate, where another two-thirds vote is needed to override.

House rules require a vote within a week after a governor’s veto, so the deadline is Thursday. But the rules can be suspended. The Maine Constitution requires a vote before the end of the legislative session.

L.D. 1222, sponsored by Rep. Sharon Treat, D-Hallowell, would prohibit insurance companies from including “most favored nation” clauses in their contracts with health care providers.

Such a clause requires a health care provider to give an insurance company the lowest rate the provider negotiates with any other insurance carrier.

The term “most favored nation” traces back to international trade agreements. When two nations agree that the tariffs between them will be no more than the lowest tariffs granted to any other nation, they are said to have conferred “most favored nation” status on each other.

Physicians and physical therapists in Maine lobbied to ban such clauses, arguing that they are unfair and anti-competitive.

Doctors who own their own practices say the clauses make it harder for them to survive as independent businesses because they lack the negotiating power of hospitals, said Gordon Smith, a lobbyist for the Maine Medical Association.

The clauses are among the factors that are causing doctors to close their private practices and join hospital groups, Smith said.

Because Anthem Blue Cross and Blue Shield controls more than 50 percent of the commercial insurance market in Maine, Smith said, doctors must do business with Anthem and accept its terms.

Smith said it’s upsetting that LePage vetoed the bill without giving doctors a chance to make their case. “For those doctors wanting to stay independent, this (veto) is a real blow to them,” he said.

Physical and occupational therapists in private practice need the bill if they are to stay in business, said Gwen Simons, past president of the Maine Chapter of the American Physical Therapy Association.

If they go out of business, she said, people will have to get their services through hospitals, and costs will increase exponentially.

She said nearly every insurance contract gives the insurer the unilateral right to reduce payments to the provider at any time. When that’s combined with “most favored nation” clauses, the result is “predatory price-fixing at unsustainable levels,” she said.

The U.S. government views such clauses as anti-competitive.

The antitrust division of the U.S. Department of Justice and Michigan’s attorney general sued Blue Cross Blue Shield of Michigan in October, arguing that the health insurer’s contracts with hospitals violate federal antitrust laws because they reduce the ability of other health insurers to compete with Blue Cross Blue Shield of Michigan.

Federal antitrust investigations of insurance programs are under way in five other states.

In his veto message to the Legislature, LePage said his administration strongly believes that businesses have a right to contract with each other as they deem appropriate.

“Laws and regulations that require or prohibit certain provisions of contracts take away the rights of job creators to independently organize their affairs,” he wrote.

LePage added that Maine’s antitrust laws are strong and he has no doubt that Attorney General William Schneider will enforce them.

Nobody spoke against the bill at the public hearing on it last month, although Anthem later sent the Insurance and Financial Services Committee a letter in opposition, arguing that most favored nation clauses ensure lower health care costs for consumers.

In the letter, Anthem lobbyist Kristine Ossenfort said health insurance companies want to negotiate the best prices based on volume. She said most favored nation clauses ensure that large-volume purchasers, such as hospitals, can get competitive discounts, which can be passed on to their customers.

Because people’s out-of-pocket expenses are a percentage of what a hospital agrees to accept as payment in full, she said, lower costs for service mean that people, not just insurers, save money.

MaineToday Media State House Writer Tom Bell can be contacted at 699-6261 or at: tbell@mainetoday.com