Congress is targeting anticompetitive provider-payer contract language, a practice that can prevent patients from getting care in lower-cost, higher-quality facilities.
A section of the Bipartisan Primary Care and Health Workforce Act of 2023, which passed the Senate Health, Education, Labor and Pensions Committee Thursday, would ban hospitals from using anticompetitive contracting practices when they negotiate prices with commercial insurance companies. The bill specifically takes aim at anti-steering and all-or-nothing provisions. Some dominant health systems have prevented insurers from including lower-cost providers in their health plans or they force insurers to contract with all of a health system’s facilities or none of them.
Here's what to know about the legislation and why it's moving forward.
What are anticompetitive contract provisions?
Both health systems and insurers tend to tilt payment negotiations in their favor when one party has a significant market share advantage. Patients are often caught in the middle.
Under an all-or-nothing agreement, a health system might require an insurer to include its facilities and physicians in the plan’s preferred network, regardless of their prices or quality relative to competitors. Anti-steering clauses typically offer incentives to an insurer for including a certain provider in a plan’s network. Exclusivity provisions prevent an insurer from including competing providers in-network.
Insurers have used market power to their advantage too. One example involves “most-favored-nation” clauses, which guarantee that insurers receive the lowest contracted rate on services, in some cases requiring hospitals to raise rates charged to other insurers.
What’s in the bill?
The latest version of the Bipartisan Primary Care and Health Workforce Act of 2023 would try to limit the gamesmanship.
The bill would forbid contracts that restrict insurers from steering patients to competitors or agreements that offer incentives to encourage patients to use certain providers. In addition, it would prevent provider-payer contracts that are contingent on an additional contract or specific payment rates with a competitor.
Glenn Melnick, a health economist at the University of Southern California who has studied anticompetitive contracting provisions, supports the idea of a federal law that prohibits such clauses.
“The challenge is how to define what are anti-competitive practices,” he said in an email. Contracting provisions are typically confidential, although some lawsuits have lifted the veil, he added.
How have courts viewed anticompetitive contract lawsuits?
Sacramento, California-based Sutter Health has been sued twice for allegedly imposing all-or-nothing and anti-steering contract provisions on insurers.
It successfully defended the allegations in a lawsuit filed in a California state court in 2012 by individuals and employers who purchased fully insured health plans from commercial insurers.
A similar lawsuit filed in 2014 in a federal court on behalf of patients and employers covered by self-insured plans was settled in 2019 with Sutter agreeing to pay $575 million. The settlement barred Sutter from enforcing anti-steering contract clauses and prevented it from penalizing insurers or self-funded employers for choosing to include some, but not all, of its facilities in their networks.
In 2018, the Justice Department reached a settlement with what was then known as Atrium Health, prohibiting the Charlotte, North Carolina-based health system from using anticompetitive steering restrictions in contracts with insurers.
Insurers have also been accused of gaming the system. In 2010, the Justice Department and the Michigan attorney general sued Blue Cross Blue Shield of Michigan, alleging the insurer forced hospitals to charge higher prices to rival insurers. The lawsuit was dropped in 2013 after Michigan passed legislation banning most-favored-nation contract clauses.
Are there related bills?
Certain parts of federal antitrust law, such as the Sherman Act, broadly prohibit anticompetitive practices.
A number of proposed federal bills have sought to ban all-or-nothing contract provisions, among other types of restrictive clauses. But to the American Hospital Association’s knowledge, no federal law outlaws specific types of anticompetitive contracting clauses between providers and insurers, an association spokesperson said. Some states have filled the gaps.
Four states—Nevada, Texas, Massachusetts and Connecticut—have passed laws banning anti-steering contract provisions, according to data from UC Hastings and UC Berkeley. Five states—California, Washington, New York, New Jersey and Maine—have pending legislation.
What does the research show?
A peer-reviewed study published in 2016 in Sage Journals found that a C-section delivery in Sacramento cost more than $27,000, nearly double what it costs in Los Angeles or New York. The study, which analyzed 2004-to-2013 hospital price and utilization data from Blue Shield of California, referenced all-or-nothing contract provisions, which could “result in higher prices to health plans and higher health insurance premiums to consumers.”