On July 1, the House Education and the Workforce Committee’s Subcommittee on Health, Employment, Labor and Pensions held a hearing on the potential for direct health care contracts to reduce health care costs. The hearing generated considerable interest from both Republicans and Democrats on the subcommittee.

Direct health contracts between employers and health care providers, explained the subcommittee chair, Rep. Rick Allen (R-GA), bypass insurers and can lower health care costs both for employees and employers. “Direct contracting allows employers to negotiate directly with providers, helping reduce costs, improve quality and ensure more health care dollars are spent on patient care rather than administrative overhead,” Allen said.

While not endorsing direct contracting, the subcommittee’s Democrats reacted mostly positively to the concept. “Direct contracting may be part of the solution (to rising health care costs), but just a part of the solution,” said the subcommittee ranking member, Rep. Mark DeSaulnier (D-CA).

The subcommittee heard testimony pointing out that a plurality of large employers have entered into direct contracts with hospitals and doctors. The plans can include direct primary care delivered for a flat fee. Direct contract plans also avoid the problems associated with prior authorization, which lawmakers from both parties are trying to reform. Other benefits of direct contracts include simplified billing, stable and low prices, and healthier workers, the hearing witnesses said. Lawmakers did not signal what, if anything, they will do legislatively about direct contracts, but Chairman Allen did say that employers need more transparency from insurers, clearer information on plan usage, and spending data.

Prospects: Currently, the partisan divide on the health care costs issue is deep and wide and might prevent serious consideration of direct contracts as a way to control health care costs. But it is clear from the hearing that at least some Democrats are interested in the concept and so it may get serious consideration next year. Clearly, a shift from traditional health insurance, or from self-insurance with stop gap coverage, will impact NAIFA advisors working in the employer-provided health care space. The health insurance industry is sure to weigh in on the issue as lawmakers from both parties and in both chambers take a closer look at the concept.

NAIFA Staff Contact: Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org