Term and Termination Clause
(Managed Care Contracts)

Summary

This term and termination clause for a managed care agreement between an insurer and healthcare provider defines how long the contract will have effect and how it can be terminated, the latter of which can either be for cause or without cause. This clause includes practical guidance, drafting notes, and optional provisions. Some states have found that so-called without-cause termination clauses in managed care agreements are contrary to public policy and have passed legislation that either prohibits them or provides parameters restricting their use (e.g., Massachusetts, 211 Mass. Code Regs. 52.11). Other states require any clause providing for termination without cause to provide a written explanation (e.g., Florida, Fla. Stat. Ann. § 641.315) or to apply equally to both the insurer and healthcare provider (e.g., Alaska, Alaska Stat. § 21.07.010). Still others have codified a minimum period of advance written notice before an insurer can terminate a provider's contract (e.g., Illinois, 215 Ill. Comp. Stat. Ann. 134/20). Insurance is primarily regulated at the state level. Accordingly, contract provisions must be drafted to comply with applicable state law. The American Medical Association provides one resource to help identify state managed care contracting requirements at Managed Care Legal Database. Termination clauses must be read with other contract provisions in mind. For more information on managed care, see Managed Care and Health Insurance Resource Kit. For more information on health law practice, see Healthcare Fundamentals Resource Kit. For additional related content on managed care contracting, see Amendments Clause (Managed Care Contracts) and Notice Clause (Managed Care Contracts).