Time to “Tier” and “Steer”

Time to “Tier” and “Steer”

Texas House Bill 711 | https://capitol.texas.gov/tlodocs/88R/billtext/pdf/HB00711F.pdf#navpanes=0

What it means for the future of health plans in the State of Texas

HB711 immediately went into effect on June 12, 2023 after receiving far more than the 2/3 votes in the House and Senate needed for immediate passage.  The bill was filed with Governor Abbott, but does not require his signature for enactment.

HB711 is officially the law in Texas.

But what does HB711 actually say, and more importantly, what does it do?  The bill relates to certain contract provisions and conduct affecting health care provider networks.  Yes, think “PPO, HMO, EPO” provider networks that are owned and operated by Blue Cross Blue Shield, Cigna, Aetna, United Healthcare, etc.  These “networks” are now required to abide by HB711.

Let us dig in deeper to HB711.

First, the term “general contracting entity” is used throughout.  A GCE is an entity who contracts with these networks.  It could be an employer, an insurance company, a reinsurance company, a third-party administrator.  Any entity that contracts or subcontracts with these “networks”.

HB711 seeks to level the playing field for the true “payers” of healthcare in this state….employers and employees.  The bill addresses gag clauses, anti-steering, and anti-tiering found in most network agreements.  We will discuss each of these and a couple of other massive provisions of HB711.

For the record, this bill passed unanimously in the Texas House, and only received a single “nay” vote in the Senate.  That’s what we call “bi-partisan”.

However, not everyone supported HB711.  The Texas Hospital Association, representing more than 650 members, doesn’t like the vast majority of the provisions within the bill.  THA still expresses “strong concern for the continued inclusion of the anti-steering and anti-tiering prohibitions”.  And why?  According to Heather De La Garza with THA, “Hospitals negotiate rates based on the ‘discount for volume’ where hospitals accept a lower rate to secure a critical mass of patients.  Prohibiting hospitals from requiring that a health plan NOT steer or tier enrollees away from them does not allow hospitals to enjoy the benefit of their bargain to accept a lower rate and tilts the scale in favor of the health plans.”

This is how the big get bigger, and stay bigger.  This type of approach leads to monopolistic market dominance, where only one or two health insurance companies have all the market share.  Hospitals should not be opposing this bill, but they are.  They simply don’t understand that if you open up competition, and provide discounts to ALL payers, negotiating power will not be consolidated with one or two health insurance carriers! 

Let’s discuss “gag clauses” that HB711 prohibits.  A gag clause is a provision within a provider network contract that restricts the ability of an employer or doctor to disclose specific price and quality information, including the allowed amount, negotiated rates or discounts, fees for services, or other claim-related financial obligations included in the contract.  The Consolidated Appropriations Act also banned these types of “gag clauses” in network contracts.

Translation:  no more insurance companies telling employers they cannot provide claim level data, and quality data on providers within these networks.  Claims data belongs to the employer and the plan sponsor and its’ members….aka…employees!

This provision of HB711 is critical, because how else are employers supposed to make good purchasing decisions if they can’t obtain their own claims and utilization data??? 

HB711 prohibits these gag clauses.

“Anti-steering” clauses in network contracts that restricts the ability of an employer to encourage an employee to obtain health care service from a competitor of the provider, including offering incentives to encourage employees to use specific providers.

Think about this for a moment.  These network contracts prohibit employer plans from “steering” employees to higher quality, lower cost providers.  It almost seems like they don’t care about where people get health care, right? 

HB711 eliminates these restrictions, and allows employers to steer and incentivize employees to seek care at specific facilities. 

“Anti-tiering” clauses restrict employers to introduce or modify a tiered network plan or assign providers into tiers.  This means that ALL PROVIDERS had to be in the same “network tier”.  An employer couldn’t have a Tier 1 list of providers, and then a Tier 2 list of providers. 

HB711 changes this as well, and now allows employers to build health plans with different “tiers” of providers within their networks.

Three massive provisions of HB711.

But do not expect the major carriers to come out with “Tiered” plans that incentivize “steerage” any time soon.  It doesn’t help the carriers either.  Employers have been given this massive resource, but they will require sophisticated organizations that can take advantage of these new opportunities.

Another fascinating provision of HB711 that is going to cause a shockwave in the self-funded world in Texas states that employers can require, or option to require that a provider accept a lower rate for health care services if the provider agrees with another employer to accept a lower rate for the services.

Blink, blink….

Translation:  If Hospital A gave the local school district a contract at 150% of Medicare, the hospital now has to give your company the same rate.  This is absolutely huge.

I’ve studied hospital price files, and some of the payer contracts are 3x lower than others.  This is going to have a monumental effect on this industry. 

Savvy employers will figure this out.  Others will refuse to take advantage of these opportunities.

We launched High Plains Health Plan last year, and HB711 affirms everything we are doing with HPHP.  HPHP already deploys a “tier” and “steer” methodology.  Our Tier 1 network is comprised of high-quality providers who have contracted with HPHP at a lower rate.  In exchange, we offer plan members $0 deductibles and copays when they “steer” to a Tier 1 provider. Check out High Plains Health Plan here: https://hphealthplan.com/

In a nutshell, we’re ahead of the curve, and the state legislature has just codified our plan designs into law.  Pretty strong affirmation if you ask me.

If you’re organization is looking for a consultant who doesn’t just know HB711, but preemptively built a health plan that is now affirmed by HB711, reach out to me at Butler Benefits & Consulting.  We’re building the future right now, and you can take advantage of it early.

Josh Butler

Josh is the President of Butler Benefits & Consulting. Passionate about healthcare reform and helping employers save money while improving the quality of employee benefits.

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