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Past Time to Increase Competition in Health Insurance

Senator Thom Goolsby

May 2, 2013

As the uncertainty of ObamaCare looms on the horizon, state lawmakers have not been content to sit around and wait on the coming storm. Instead, the General Assembly recently passed legislation that will help take a bite out of spiraling healthcare costs.


House Bill 247, Freedom to Negotiate Healthcare Rates, prevents health insurance companies from restricting rate negotiations in contract agreements with healthcare providers. Specifically, the bill goes after “most favored nation” (MFN) clauses in contracts between healthcare providers such as hospitals and large insurance companies.


MFN clauses can require health care providers to offer services to large, “favored” insurance companies at rates equal to or lower than those extended to any other competing insurers. Many times these clauses also require providers to disclose their contracts with smaller competitors.


These clauses impair or outright prevent small insurance companies from competing because they cannot negotiate lower rates for healthcare services. The U.S. Department of Justice has weighed in on this situation. It has called the practice “anti-competitive” because it effectively locks in a large insurance company and drives potential competitors out of the marketplace. The inevitable result, once competition is stifled, is an increase in costs to consumers by the large insurance company which now has, in effect, a monopoly.


By preventing health insurance companies from including MFN provisions in their contracts, HB247 will ensure that doctors and hospitals can freely negotiate lower reimbursement rates with any and all insurance companies, regardless of size, for the services they deliver to patients.


A similar bill was passed last session and sponsored by then-Insurance Committee Chair Tom Apadoca, (R–Henderson). It languished in the N.C. House and was never heard. However, with the bill’s recent passage, Apadoca was upbeat: “Creating a streamlined regulatory environment includes making sure the rules for insurance providers are fair across-the-board,” he said. He added, “This bill creates a level playing field for insurers to deliver services at lower cost to North Carolinians.”


The potential impact of this legislation cannot be overstated. It has the ability to save North Carolinians tens of millions of dollars in what would otherwise be spiraling healthcare costs. It is shameful that in years past, whether through effective lobbying by the large insurers or through ignorance, the General Assembly never saw fit to deal with this issue.


A monopoly works well for the kingpin who holds all the power and money, but not for the rest of us. This bill will not solve all our problems with healthcare, but it is a significant tool to help reduce costs in the future and ignite competition to provide less expensive medical procedures and services.


Thom Goolsby is a state senator, practicing attorney and law professor. He is a co-chair of Senate Judiciary 1 and Justice and Public Safety Appropriations committees.


Carolina Columns.