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Politics

Texas Health Insurance Set for Massive Steering and Tiering Shakeup

HB 711 overwhelmingly passed both chambers of the Texas legislature and would allow employers to tier hospitals within a system and steer patients to higher performing centers.
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Health insurance plans are in for significant changes with the filing of HB 711, which allows employers to steer employees to higher-performing health centers and tier hospitals based on performance within health insurance plans.

Currently, if an employer wants a specific hospital to be in its insurance network, the insurance plan has to include all of the hospitals in that network, even if some are lower performing. Additionally, the plans cannot incentivize employees to go to certain hospitals over others by offering more coverage at higher-performing facilities. But that is all about to change. Even though Abbott didn’t sign the bill, it was filed without his signature and is effective immediately.

HB 711, introduced by North Texas legislator and business owner Rep. James Frank, passed 146-0 in the Texas House of Representatives and received only one “nay” vote in the Senate from Charles Schwertner, a physician legislator. For Frank, this bill brings market competition to the healthcare industry.

“House Bill 711 is a step in the right direction to fix anti-competitive practices and encourage market competition,” said Rep. Frank. “Prohibiting certain unfair contract provisions will enable employees and employers to get the highest quality care for their healthcare dollars.”

Frank is motivated by his experience as a business owner and the increasing price of healthcare, which he hopes the competition will improve. Incentivizing employees to go to higher-quality hospitals will reduce hospital readmissions and mistakes that make a trip to the hospital even more costly.

HB 711 was originally written to remove the “all or nothing” clause in insurance contracts that says that if an employer wants to have one hospital in a network, it must have every hospital, even if those hospitals are more expensive or have worse results than others. Hospital prices vary significantly from one side of town to the other, even in the same network. This section of the bill was removed during the legislative process.

It would also eliminate the “anti-steering” allowing insurance plans to guide patients to a particular provider and 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.

Nonprofit Texas Employers for Affordable Healthcare played a crucial role in advocating for this bill, meeting with legislators and talking them through the changes the bill would provide, says Chris Skisak, the group’s executive director. Texas 2036 and the regional and statewide State Business Groups on Health were also part of the on-the-ground lobbying efforts.

Since the bill is effective immediately, brokers and benefits managers can factor the legislation into their next health plan. But the anti-steering and anti-tiering provisions in contracts remain in effect until the end of the year.

After the new year, plans can use incentives such as no deductibles or copays to steer patients to higher quality hospitals, but it is up to employers to push for the changes, Skisak says. “If employers don’t take advantage of tiering and steering, a reasonable person would ask what the rationale is for not being more fiduciary about this,” he says. “The bullseye is on their back, but this legislation gives them the tool to make a change.”

Skisak says The Leapfrog Group’s ratings are a great quality measure, as they prioritize safety. Other rankings weigh expertise and complexity more heavily. “Spina bifida surgery in-vitro is great, but it’s not what most people go to hospitals for,” he says. “Leapfrog combines safety and quality while others are based on upcoming innovation.”

Skisak highlighted the National Academy for State Health Policy’s hospital pricing dashboard to check the profit margins for different hospitals. Employers in Texas are paying a median of 315 percent of Medicare reimbursement rates for hospital procedures, while NASHP data says that most hospitals break even at 110 percent of Medicare rates. For Skisak, building networks is about balancing margin and quality when selecting a hospital. “By no means are we saying that hospitals should break even.”

Time will tell if employers and brokers take advantage of the bill, build narrower networks, or steer patients. It can be precarious to tell employees that their preferred hospital is not part of the network or isn’t part of the incentive plan. “We are well aware of HB 711, and our only comment regarding this bill or other bills regarding steering patients always allows patients to make a choice and have a voice in their health treatment,” said DFW Hospital Council President and CEO Steve Love. “Please have providers sit down at the table, discuss the concerns and be part of a workable solution before filing bills that could produce unintended consequences.”

As transparency and competition bills move forward through different states, the Texas bill stands out. We will see if employers use the tool they now have to make a change. “In terms of the content of House Bill 711, we are now considered a national leader,” Skisak says.

Author

Will Maddox

Will Maddox

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Will is the senior writer for D CEO magazine and the editor of D CEO Healthcare. He's written about healthcare…

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