To the dismay of hospital leaders, the House-Senate compromise legislation to end surprise out-of-network bills includes bans on secret contract terms between providers and health plans that critics say are anti-competitive and drive up prices.
Earlier this month, three key Senate and House committee leaders announced a bipartisan deal on surprise bill legislation that covered a broader range of issues, though it's unclear whether that will be included in the year-end government funding package. A competing surprise billing package was unveiled earlier this week and lawmakers are split over whether they should get something done this year, or let the policy debate spill over to 2020.
Section 201 of the House-Senate compromise would prohibit so-called gag clauses in contracts that prevent plan sponsors, enrollees or referring providers from seeing cost and quality data. Self-insured employers say that would be helpful because they often can't find out the rates they are paying providers from their third-party administrators due to these clauses.
Section 202 would bar various types of contract clauses that make it difficult or impossible for employers and plans to steer enrollees to lower-cost or high-quality providers. They include anti-tiering, all-or-nothing, and most-favored nation clauses. Employers say these limit their ability to create higher-value plan options for their workers. The provisions also would apply to individual-market plans.
That section, however, includes a newly crafted exception for vertically integrated systems like Kaiser Permanente, as well as an opportunity for states to waive the prohibitions for up to 10 years for arrangements they determine will not lessen competition.
The latter provision reportedly was added to protect a hard-won truce between Highmark Health and UPMC in Western Pennsylvania. Neither system offered comment.
The Congressional Budget Office has said these transparency provisions, carried over from the Senate health committee's legislation to end surprise bills, would reduce average premiums for private health insurance about 0.05% by enabling more plans to offer lower-cost, higher-quality provider networks.
Business groups say the provisions could clear the way for more more powerful strategies to reduce healthcare costs, while hospital groups warn they would give payers too much power.
Employers "are trying to do all kinds of innovative things, but in the current market environment there's only so far they can go," said James Gelfand, senior vice president for health policy at the ERISA Industry Council. "This bill says a lot of these shady contracting tactics will come to an end."
The Federation of American Hospitals and the American Hospital Association strongly oppose these provisions, warning they will lead to the growth of narrow network plans that consumers won't like.
"These are issues that ought to be settled in contract negotiations, not by dropping the government hammer through regulations," said Chip Kahn, CEO of the Federation of American Hospitals, who had hoped the provisions would be left out of the new House-Senate legislation.
The AHA warned that the bill's contracting restrictions would hurt patient access to care in rural communities by giving insurers more power to cherry-pick which of a health system's hospitals they contract with.
While there's no reliable data on how widely these contracting techniques are used, insiders say they are quite common.
In October, Sutter Health agreed to settle a class action lawsuit filed by employers, labor unions, and California Attorney General Xavier Becerra alleging that the California health system engaged in anti-competitive practices including all-or-nothing contracting.
A year ago, Atrium Health reached a settlement with the U.S. Justice Department prohibiting the hospital system from using anti-competitive steering restrictions in its contracts with insurers.
Employers say they frequently face these contract obstacles, such as all-or-nothing clauses, when they approach insurers and hospital systems to develop value-based networks.
"A few of their hospitals may be high quality and reasonably priced, while others are poor quality and high priced," said Gloria Sachdev, CEO of the Employers' Forum of Indiana. "Such clauses are antithetical to aligning payment with value."
Banning gag clauses is essential, she added. "Preventing plans and providers from sharing the negotiated rate with the purchaser is crazy," she said. "That hamstrings market solutions."
Business groups also back another provision in the bill would offer federal grants to states to establish all-payer claims data bases. Information from these data bases can help in designing lower-cost, higher-quality plans.
Under the bill, states could require self-insured plans to report to the data base as long as they use a standard national data format developed by the Secretary of Labor. That would sidestep a 2016 U.S. Supreme Court ruling that states cannot compel self-insured plans to submit their claims data.
"That provision is terrific because it will reinvigorate all-payer claims data bases, which languished after that ruling," said Erin Fuse Brown, a health law expert at Georgia State University.
Correction: This story originally gave the wrong time frame for when Atrium Health reached a settlement with the U.S. Justice Department; the settlement was in November 2018.