Representative James Frank wants to make health insurance contracts more competitive and transparent in Texas. The Wichita Falls legislator has introduced HB 711 to end some practices he says increase costs for employers and workers.
Frank has an intimate view of how health insurance contracts work as CEO of Sharp Iron Group, a contract manufacturer in Wichita Falls with 180 employees. Frank’s adventure into healthcare reform began with an unfortunate fact of American healthcare: we pay much more than other developed countries but get much worse results. Whether it is population health outcomes, surgeries, or pharmaceuticals, he felt that his company and the country, in general, were not getting their money’s worth with the healthcare it paid for.
According to the Texas Employers for Affordable Healthcare, a family of four pays more than $22,000 in health insurance premiums each year. With high deductibles rising, families are paying more for healthcare services than ever. Hospital prices have increased more over the past decades than the consumer price index and wages. Since 2009, wages are up 20 percent, inflation is up 26 percent, health insurance premiums are up 54 percent, and deductibles are up 162 percent, according to the National Academy for State Health Policy.
“There’s nothing else in this country that if we were getting 50 cents of value for every dollar that we spent, that it would be OK,” he says. “Companies wouldn’t be OK with that.” But in his opinion, that is what was happening with healthcare. There are plenty of cost centers for healthcare, but Frank’s bill is focused on healthcare contracting and being able to steer patients toward facilities that maintain good results without exorbitant costs.
With increased transparency, it is easier to see how much hospitals charge for different procedures compared to what Medicare would pay for the same service and what hospitals need to charge to break even. Many hospitals charge much more than they need to break even, and a hospital’s profit margin rarely correlates with quality. But insurance contracting laws make it challenging to guide employees away from undesirable hospitals.
For Frank, the problem begins with the need for a genuine market for healthcare. Markets have transparency of pricing, competition in who provides the service, and the person receiving the service is the one who pays for it. Healthcare doesn’t have any of those elements. “It’s amazing to me that you have hospital boards and others that can sit there and be OK hiding costs from patients at their most vulnerable time and think that’s ethical,” he says.
HB 711 looks to eliminate the dysfunction in the healthcare market by creating more competition. First, it seeks to eliminate the “all or nothing” clause in insurance contracts that say that if an employer wants to have one hospital in a network, it has to have every hospital, even if those hospitals are more expensive or have worse results than others in the network. Hospital prices vary significantly from one side of town to the other, even in the same network.
Next, the bill seeks to eliminate the “anti-steering” clause, which means that insurance companies cannot guide patients into a competitor’s services, even if that hospital or system has better prices and results. It also wants to eliminate “anti-tiering” clauses that don’t allow insurance carriers to put providers into tiers based on outcomes or price and communicate those tiers to members.
HB 711 goes after the “most-favored nation” clause that prohibits a provider from offering a better price to another insurance carrier than the established price. It also seeks to prohibit “gag clauses” restricting the provider’s ability to tell the patient price or quality information, negotiated rates, or out-of-pocket expenses.
“Nonprofit hospitals around the state have spent millions of dollars trying to keep their prices hidden with lawyers,” Frank says. “It is embarrassing and not done anywhere else.”
Healthcare reform bills often have plenty of enemies, but they don’t follow traditional political divisions, meaning the increased competition has friends and challengers on both sides of the aisle. The pharmaceutical, insurance, health services, and hospital industries are among Washington’s biggest spenders on lobbying efforts to seek favorable legislation. But the system as it exists is a dysfunctional market, Frank says. And he is out to fix it.
Frank sees the monopolizing power of health insurance companies and hospitals as an opportunity for the government to step in and improve competition. “I don’t like regulation, but making sure that there is not a monopoly behavior is one of the primary roles of government. Without it, there is no market,” he says.
He is optimistic about his bill, which he introduced before the session. He has seen the movement around price transparency and knows that payers and patients alike are getting fed up with hidden prices and anti-competitive practices. Nearly two dozen states around the country have passed similar legislation.
“The industry is so consolidated that the players are using heavy-handed practices to make sure that they continue to expand their position,” Frank says. “We’re trying to level the playing field to allow actual competition.”