A solution to make TX’s health care markets healthy

Texas 2036 Senior Policy Advisor Charles Miller offered oral and written testimony on Thursday to the Texas House Select Committee on Health Care Reform in favor of House Bill 711, which offers one solution to anti-competitive contracting and conduct affecting health care provider networks.

Here are highlights from his testimony:

Key takeaways:

  • HB 711 is the single most important thing the state can do to help empower employers to provide more affordable health care for their employees.
  • Unhealthy markets have led to high prices, and employers need help in addressing the issue.
  • HB 711 is a key part of a broader solution to make our health care markets healthy — informed, competitive and engaged.

House Bill 711 will not magically solve our unhealthy markets in Texas. But it will be a major step forward to empowering our businesses to get health care expenditures under control, allowing them the flexibility to provide their employees with greater access to affordable care, offer more competitive salaries in tight labor markets and invest in further company growth. 


Texas’ healthcare markets are unhealthy, and are leading to high and rising health care prices, putting affordable care out of reach for more and more Texans each year. Over half of Texans with insurance have skipped or delayed care in the last year due to cost.

In healthy markets, informed consumers are able to shop for care, comparing providers on both price and quality, and selecting them on the basis of their overall value. As medical providers compete for customers on these bases, basic economic theory tells us that prices will drop, and quality will improve. In order for Texas to achieve that vision, our markets need to be informed, competitive, and engaged.

Informed markets require customers to have access to information on both the price and quality of services. In Texas, we’ve made good progress on promoting price transparency – including large strides last session and in the interim thanks to the hard work of many members of this committee – but there are some improvements yet to be made.

Competitive markets require choices. When markets consolidate, they become less competitive. While many of Texas’ markets have become so concentrated that there is little or no effective competition, many of Texas’ largest markets still have some competition. Our efforts here need to focus on limiting further consolidation and concentration, and on mitigating the harmful impacts of what consolidation has already occurred.

Engaged markets require that both consumers and providers have the right incentives to act. For consumers, this means appropriate incentives to choose high-value care, and for providers, this means appropriate incentives to deliver high-value care. While each person will define value for themselves, as a general matter, value is a function of both price and quality.

HB 711 is a key part of our efforts to restore Healthy Markets to Texas’ health care. It prohibits four specific anti-competitive contracting clauses that serve to limit both competition and engagement in our markets, preventing employers from taking advantage of the transparency revolution that is currently underway. To paraphrase Chairman Frank: Transparency, without more, just lets you know how badly you’re getting [hosed]. HB 711 is the next step past transparency. While many of the problems with our health care industry can only be fixed through federal legislation, addressing anti-competitive behavior is the single most important thing the state can do to help Texas businesses lower the cost of health care for their employees.

Policy Recommendations

Given that many of our markets are already concentrated, we are left with the policy question of how to address that problem. Our recommendation is to first, stop the bleeding. HB 711 is a solution that will limit the harmful effects of already concentrated market segments from spilling over into market segments where competition can still exist. To do so, HB 711 prohibits the following four types of clauses in contracts between medical providers and employers or insurers:

  1. Anti-Tiering – Removal of these clauses will empower employers to implement tiered network designs in their health benefit plans. In short, this means that employers would be able to do things like offer lower co-pays or cost-sharing requirements when employees use high-value providers.
  2. Anti-Steering – Removal of these clauses will enable employers to incentivize their employees to use high-value providers through means other than tiered networks. Examples include offering free diapers for a year to employees that choose to deliver their child at a high-value hospital.
  3. Gag – These clauses were recently made illegal under federal law, yet they may still persist in contracts. Removal of these clauses will enable decision makers at every level of health care purchasing to have access to more information to help them make an intelligent decision. For example, a pharmacist would be able to inform a customer that paying cash for a prescription may be much less expensive than their co-pay using their insurance card.
  4. Most-Favored-Nation – Removal of these clauses will enable medical providers to offer care at prices lower than those negotiated with a market-dominant insurer. This can provide access to discounted rates for uninsured individuals and employers who wish to contract directly with the provider, as well as open up additional competition from other insurers in that market.

Importantly, HB 711 also imposes a fiduciary duty on insurance companies that would utilize Steering or Tiering mechanisms to do so only for the best interest of the patient. This crucial mechanism prevents insurers from engaging in self-dealing that would drive business to provider groups owned by or affiliated with the insurer when doing so would not be in the best interest of the patient. A fiduciary duty is among the strongest duties the law can impose.

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