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Three Steps Texas Can Take Towards a Free and Fair Healthcare Market

By Gray Rutledge, December 11, 2023

Despite the accomplishments of 88th Regular Session in achieving a better healthcare market, Texans continually face an insurance landscape largely devoid of the three fundamental elements to any healthy market: competition, consumer participation and price transparency. The next Legislature should continue this progress by completing some of the initiatives that began in the last Session. TCCRI has identified three pieces of healthcare legislation that target each of the fundamental elements that compose any free and fair market. The Legislature should consider adopting these measures.


Currently, the state requires the Health and Human Services Commission (HHSC) to award certain Medicaid managed care contracts to managed care organizations (MCO) that are owned and operated by a public hospital system. This mandatory contracting provision results in HHSC being able to award Medicaid MCO contracts to only a handful of health plans that fit this definition. By allowing this provision to remain, the state is stifling competition in Medicaid managed care area and rewarding poor-performing health plans simply because they meet criteria that is no longer relevant in Medicaid managed care.[1]

In 2023, HHSC awarded seven contracts for the STAR+PLUS program. Of those awarded, three of the top performing applicants were unable to contract with the state in place of lower-performing applicants due to these health plans matching the statutory mandatory contracting provisions.[2] SB 651 by Senator Perry and HB 2401 by Representative Oliverson would have repealed this requirement in full.[3] The elimination of mandatory contracts in the Medicaid managed care context would open these contracts to more competition and likely lower costsfor the state; relieving a burden that would fall ultimately on taxpayers.

Consumer Participation

Within the health insurance marketplace, the Texas Department of Insurance’s (TDI) interpretation of current law prohibits Preferred Provider Organizations (PPOs) and Exclusive Provider Organizations (EPOs) from offering incentives for enrollees to select high-quality care at a low cost. This current interpretation deprives consumers of the ability to shop for the best care that fits their needs; an ability that is not only important to a free market, but also to the average consumer themselves. In a 2023 survey of 1,000 healthcare consumers, Kyruus reported that 89% of those surveyed consider “clinical expertise on my condition” to be “extremely important” while 93% of the same group view cost as at least “somewhat important.”[4] With consumers viewing quality and cost as important factors in their care decisions, Texas should adjust the market to allow PPOs and EPOs to reward their enrollees for selecting providers based on such factors.

HB 2414 (Frank) was filed last Session to end TDI’s prohibition. It allows a PPO or EPO to create incentives that steer patients towards providers based on quality and price. These incentives could take the form of modified deductibles, copayments, coinsurance, etc. Such incentives are already authorized for Health Maintenance Organizations (HMOs). To protect the enrollee from any conflicts of interest, HB 2414 contained a provision that an insurer who uses these incentives “has a fiduciary duty to the insured or policyholder to engage in that conduct only for the primary benefit of the insured or policyholder.”[5] The bill would empower consumers to shop for the best appropriate care and should be pursued again next session.

Price Transparency

The 87th Legislature passed SB 1137 (Kolkhorst) which codified into law a federal requirement that hospitals publicly disclose all standard charges for services on their main website. This has brought Texas hospitals closer in line with standard practices befitting an open and fair market. In 2022, hospitals across the nation had a compliance rate of 70%, a 21% increase from the year before SB 1137 took effect.[6] With hospitals now required to take the blindfold off Texans who engage their services, it is now time for Texas expand that requirement to other facilities such as urgent care or retail clinics, outpatient clinics, birthing centers, and ambulatory surgical centers. In the 88th Legislature, Senator Kolkhorst filed SB 945 to accomplish this expansion. Although its progress through the legislative process was incomplete, its language should again be considered next session. Its passage will be a robust step towards a more transparent market.


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