Washington: Addressing Anticompetitive Contracting
Upshot
H.B. 1741 includes two provisions that are intended to address high health care costs in Washington. The first is to institute regulations to prevent some anticompetitive provider contracting practices. The second is to study ways other states are improving health care affordability.
The sponsors developed the bill in response to increased hospital consolidation nationwide and within the state, which they say is contributing to higher health care costs according to a MedPAC report.
The bill was introduced on January 10, 2022 by Democrats in the state legislature and was discussed in the Health Care and Wellness and Appropriations Committees. However, it died when the legislative session ended on March 10, 2022.
Background
Washington operates a robust state-based Marketplace with 120 plans offered by twelve insurers. Washington also provides a public option as of 2021 and has a state subsidy program for individuals with incomes up to 250 percent FPL who enroll in silver or gold metal tier public option or standardized plans.
In the bill, the legislature expresses concern about health care costs and the rise in health care spending. The authors cite the aforementioned Millbank Memorial Fund issue brief and MedPAC report to support reforming provider contracting practices to reduce consolidation. The five largest hospital systems in Washington had 30 hospitals in 2010 – a value which has grown to 49 hospitals in 2021. The legislature also notes that nearly 40 percent of patient care physicians are employed directly by a hospital and 72 percent of hospitals are affiliated with a hospital system.
Summary
This legislation would establish guardrails for provider contracts between hospitals and health carriers intended to curb anticompetitive practices and lower the cost of health care services. Beginning January 1, 2023, provider contracts would be barred from including:
An all-or-nothing clause, which requires an insurer contract with all facilities in a health system rather than select facilities;
An antisteering clause, which restricts a carrier or health plan from encouraging an enrollee to obtain services from a competitor of the hospital or health system;
An antitiering clause, which prohibits a health plan from placing providers associated with a hospital system in a preferred tier or at the lowest cost-sharing rate; or
Any clause that sets provider compensation agreements or other terms for affiliates of the hospitals that will not be included as participating providers in the agreement.
These changes would not prohibit a health carrier from contracting with other hospitals owned or controlled by the same single entity, but the carrier must file an attestation with the Office of the Insurance Commissioner. The new policy would also not prevent a hospital, provider, or health carrier from participating in:
A state-sponsored health care program, federally funded health care program, or state or federal grant; or
·A VBP arrangement intended to reduce utilization, improve outcomes, and contain health care costs.
Additionally, the Insurance Commissioner would be directed to study regulatory approaches other than traditional rate reviews used by other states to address the affordability of health plan rates. For each state, the study would include:
The statutory and regulatory authority for the state’s affordability activities;
A description of the activities and processes developed by the state; and
Any available research or other findings related to the impact or outcomes of the affordability activities.