Prohibits certain provisions in health plan contracts including most-favored-nation provisions and restrictions on disclosure of actual claim costs, prices or quality in certain situations.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8169A
SPONSOR: Cruz TITLE OF BILL:
An act to amend the insurance law, in relation to certain prohibited
contract provisions
PURPOSE OR GENERAL IDEA OF BILL:
This bill, known as the Hospital Equity and Affordability Legislation
(HEAL Act), aims to improve market access and increase transparency of
health insurance contracts by banning certain anti-competitive
provisions
SUMMARY OF PROVISIONS:
Section one of the bill amends section 3217-b of the Insurance Law to
prohibit insurers from entering into contracts with certain anti-compet-
itive clauses such as most-favored-nation provisions. The bill would
also allow insurers to disclose price and quality information regarding
negotiated rates and other discounts with health care providers.
Section two sets the effective date.
JUSTIFICATION:
In recent years, hospital consolidation has resulted in dominant systems
exercising anti-competitive market power. There have been a number of
hospital mergers and acquisitions, with big hospitals acquiring smaller
ones, along with physician practices. These hospital systems reduce
competition and have the market power to dictate price. While these
systems assert that the mergers will improve quality and reduce costs,
the data does not support that. Instead they leverage their market
power to increase prices when they negotiate rates and contracts with
payers. And often these contracts include clauses that prohibit the
disclosure of prices.
The landscape, however, is changing. In California, a group of payers
sued Sutter Health in a case that was joined by the State Attorney
General. They argued that Sutter engaged in anticompetitive practices
that drove up healthcare prices in Northern California. In March 2021, a
Superior Court of California judge granted preliminary approval for a
$575 million settlement, which also includes an agreement by Sutter
Health to end "all or nothing" contract provisions requiring payers to
contract with all Sutter hospitals if they wanted access to any Sutter
facility.
In New York, there are similar highly concentrated hospital markets.
The recent public disputes between payers and the large systems have
highlighted the need for increased transparency and visibility to the
terms and conditions of such multi-year agreements and how such agree-
ments are contributing to rising health care costs. Large hospital
systems that maintain robust provider networks are leveraging that
market share during negotiations to restrict health insurance networks
designs and access. The result of these anti-competitive negotiation
tactics is increased costs charged to insurance companies and self-in-
sured entities, which ultimately are passed on to consumers, through
premiums and cost sharing.
Importantly, these agreements affect the networks for commercial lines
of business including HMO, PPO, individual, small group, large group,
self-insured benefit funds, the State of New York, the City of New York,
other municipalities, Medicaid, and Medicare Advantage. This legis-
lation aims to increase fairness and visibility by outlawing most
favored nation clauses, which guarantee that a buyer of good or services
(i.e. a payer) receives terms from a seller (i.e. a hospital or provid-
er) that are at least as favorable as those provided to any other buyer.
It would also bar anti-disclosure clauses, which are contractual
provisions that prevent a party to the contract from revealing actual
claims costs, negotiated rates or discounts, or patient cost-sharing
data (protected health information would remain privileged and could not
be disclosed). This bill would apply to all health plans negotiated by
insurers, health maintenance organizations (HMOs), or third parties who
administer a health plan on behalf of another entity such as a self-in-
sured fund.
In barring these two contract practices which are widely recognized to
serve no purpose beyond the consolidation of market power and inflation
of healthcare prices, this bill will increase transparency and ensure a
fairer and more diverse healthcare marketplace for all.
PRIOR LEGISLATIVE HISTORY:
None
FISCAL IMPLICATIONS:
TBD
EFFECTIVE DATE:
This act shall take effect on January 1st, 2023.
