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Billing, antitrust exemption changes upend negotiations between insurers and providers

A flurry of recent mandates will completely upend the negotiating table between payers and providers, but how the final contracts will change going forward all depend on enforcement.

Although most negotiations between hospital systems and insurers have been finalized for 2021, Rick Kes, a senior analyst at RSM, said recent mandates around surprise billing, price transparency and the antitrust exemption for health insurers will reverberate throughout the healthcare industry for years to come. In late January, CMS also approved a prior-authorization rule that requires payers to build application programming interfaces between their records and providers’, in a move to speed decisions about whether patient procedures are covered. The changes will phase in during 2023 and 2024.

Kes expects the new laws to accelerate hospitals’ move to value-based arrangements with insurers, and drive investment in consumer-centric digital tools that help individuals compare procedure prices between systems.

“The negotiation table has dramatically changed in just a period of a couple of weeks here,” Kes said. “Between surprise billing and price transparency getting rolled out, and now this competitive law for the insurer, it’s just a really dynamic situation.”

Although the rules around arbitration for surprise billing have yet to be ironed out, Kes said new legislation around surprise billing and price transparency creates an obvious headwind for insurers, removing bargaining chips that providers once held close to their chest at the negotiating table. The surprise billing legislation will take effect in 2022. Hospitals were required to publicly post their negotiated rates with insurers at the start of the year, although some health systems have been slow to meet this requirement.

A spokesperson for the American Hospital Association said the group has not yet decided whether it will further challenge the legality of the price transparency mandate. Molly Smith, group vice president of public policy at the AHA, said large commercial health plans have greater leverage at the negotiating table than individual health systems and that the new rules unfairly shift negotiations in insurers’ favor.

“We can expect commercial health insurers to demand lower rates from hospitals based on the lowest publicly released rate even if that rate is unsustainable,” Smith said in a statement. “This has immediate implications for patient access to care.”

To keep care costs down and incentivize insurers to go in-network with providers, Kes said he expects more hospital systems to move from fee-for-service models to value-based care arrangements, offering to share the risk of caring for a patient population with payers. This represents a big change in how providers have traditionally done business, Kes said, and will lead to increased investment in data analytic for managing their patient population.

“It really comes down to the market positions of the health plans that are negotiating versus the providers and their willingness to be innovative in how they accept risk,” said Daniel Schwarcz, a professor at the University of Minnesota Law School.

He added that it also opens the market for innovation on the consumer front. Price transparency legislation requires that the information posted be machine-readable, giving data scrapers the opportunity to come in, collect price information from multiple websites and aggregate the information in a searchable way that lets consumers know how much a procedure will cost at different health systems under their plan.

“If you think of a millennial or a Gen-Z person, they are going to be more demanding, from a transparency perspective, than generations before them,” Kes said. “They’re used to having all the information that they want at their fingertips when they make decisions on purchasing anything.”

But not all recent legislation is stacked in insurers’ favor.

Less than a month after new legislation passed that aimed at pinning down prices issued by providers, the hospital industry received a bargaining chip in return. In mid-January, then-President Donald Trump passed another law that removed the federal antitrust exemption health insurers enjoyed under the 1945 McCarran-Ferguson Act. The American Hospital Association celebrated, hoping the measure would introduce some competition in the insurance industry.

“We are hopeful that the repeal will encourage the Federal Trade Commission to begin giving the commercial insurance industry the same level of scrutiny it has given the hospital field,” the AHA’s Smith said in a statement.

America’s Health Insurance Plans CEO Matt Eyles, meanwhile, said the measure ignores the fact that healthcare is local and will add administrative and litigation costs to insurers’ operations, which they will ultimately have to pass on to members.

“States have always exercised great authority in ensuring fair and competitive markets that delivered consumer choice,” Eyles said in a statement. “Removal of this exemption adds tremendous administrative costs while delivering absolutely no value for patients and consumers. It will unnecessarily add layers of bureaucracy, destabilize markets, create conflicting federal and state oversight requirements, and lead to costly litigation.”

Schwarcz said he thinks the insurance industry’s reaction to the antitrust exemption is overwrought. While these new rules are a step in the right direction for consumers, he said whether they bring transparency to the industry depends on how they are enforced.

“It certainly won’t do harm, but it could end up doing very little if there’s not much enforcement of it, or if enforcement actions end up being not successful,” Schwarcz said.


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