The Healthy Competition for Better Care Act amends the Public Health Service Act, ERISA, and the Internal Revenue Code to outlaw specific contract terms between group health plans or health insurance issuers and ‘‘covered entities’’ that limit a plan’s ability to steer enrollees, offer incentives, or negotiate lower rates. It targets clauses that require plans to contract with affiliates or accept payment terms for non‑party affiliates, and clauses that prevent third parties from paying lower rates than an incumbent plan.
The bill preserves recognized value‑based and integrated network models through explicit exceptions.
The statute reaches insured and self‑funded plans by changing three federal statutes, directs HHS, Labor, and Treasury to issue implementing regulations within a year, and gives states a limited option to grandfather certain legacy contracts executed June 19, 2019 (and related contracts through Dec. 31, 2020) for up to 10 years. The amendments take effect for contracts entered into, amended, or renewed 18 months after enactment—creating a predictable compliance window but leaving key implementation questions to agency rulemaking.
At a Glance
What It Does
The bill bars contract terms that directly or indirectly stop group health plans or issuers from steering patients, offering enrollee incentives, or paying lower rates to alternative providers; it also bans clauses forcing plans to take on affiliate agreements or payment obligations for non‑parties. It preserves bona fide value‑based network models and allows states to grandfather select legacy deals.
Who It Affects
Group health plans, health insurance issuers (both group and individual markets where PHSA changes apply), ERISA plan sponsors and administrators, integrated health systems and provider networks, third‑party administrators, and state insurance and health regulators. Employers that purchase coverage and health plan members will feel the downstream effects.
Why It Matters
By removing contractual restraints on plan network design and pricing, the bill aims to restore purchaser leverage in negotiations, limit vertical leverage by large provider systems, and expand access to higher‑value, lower‑cost providers. The statutory cross‑cutting approach forces federal agencies and state regulators to coordinate on definitions, enforcement, and the scope of exceptions, which will determine the policy’s practical reach.
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What This Bill Actually Does
The Act adds a new, focused prohibition into three federal statutes so that group health plans and health insurers cannot sign contracts containing specific anticompetitive clauses. Practically, the bill bars terms that prevent a plan from steering members to other providers or offering incentives for members to use particular providers; it stops contracts that compel plans to accept separate agreements or payment terms for affiliates of a contracted provider; and it forbids clauses that prevent other plans or issuers from paying lower prices for the same items or services.
The drafters built in two important limits. First, the bill explicitly exempts long‑standing value‑based and integrated arrangements—examples named in the text include HMOs operating through exclusive multi‑specialty physician groups, ACOs, exclusive provider networks, centers of excellence, and provider‑sponsored insurers operating through aligned multi‑specialty groups.
Second, an applicable state authority can opt to carve out specific legacy contracts executed around mid‑2019 through the end of 2020 from the steering/incentives prohibition for up to 10 years if the state finds the contract is unlikely to harm competition.Rather than creating a new private right of action or a bespoke federal penalty scheme, the bill leans on existing statutory frameworks: it amends the PHSA, ERISA, and the Internal Revenue Code and tasks HHS, Labor, and Treasury with issuing regulations within one year to implement the changes. That means much of the operational detail—definitions of ‘‘restricts’’ or ‘‘value‑based network,’’ compliance pathways, and enforcement mechanisms—will be set in agency rulemaking.
The amendments apply to contracts entered into, amended, or renewed 18 months after enactment, giving plans and providers a transition period to revise contracting practices.
The Five Things You Need to Know
The bill defines ‘‘covered entity’’ to include health care providers, networks or associations of providers, third‑party administrators, and other service providers that offer access to a provider network.
It forbids contract clauses that (a) stop a plan or issuer from steering enrollees or offering enrollee incentives, (b) require the plan to sign additional agreements with an affiliate, (c) force the plan to accept payment rates or terms for affiliates not party to the agreement, or (d) bar other plans or issuers from paying lower rates.
The statute explicitly exempts HMOs that operate primarily through exclusive multi‑specialty physician groups and a broad set of value‑based network arrangements—ACOs, exclusive networks, centers of excellence, provider‑sponsored issuers tied to aligned multi‑specialty groups—plus any similar models later identified by the Secretary.
States may exempt specified legacy agreements executed on June 19, 2019 and related agreements executed on or before Dec. 31, 2020 from the steering/incentive prohibitions for up to 10 years if the state determines the contract is unlikely to significantly lessen competition; states may also decide on renewal within that period.
The bill amends PHSA section 2799A‑9, ERISA section 724, and IRC section 9824, requires HHS, Labor, and Treasury to issue implementing regulations within one year, and makes the prohibitions effective for contracts entered into, amended, or renewed 18 months after enactment.
Section-by-Section Breakdown
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Short title
Names the measure the Healthy Competition for Better Care Act. This is the formal label that subsequent citations and implementing guidance will use.
Prohibition and exceptions applied to health insurance issuers and plans under PHSA
Adds a new subsection that prevents group or individual market health insurance issuers and group health plans governed by PHSA provisions from agreeing to contract terms that impede plan steering, enrollee incentives, affiliate tie‑ins, or permit most‑favored‑nation‑style protections that block lower rates by others. The provision lists narrow exceptions for HMOs operating via exclusive multi‑specialty physician contracts and for a range of value‑based network arrangements, while delegating to the HHS Secretary the authority (via guidance or rulemaking) to identify similar permissible models. Practically, this change affects regulated health insurers in the individual and group markets that are subject to PHSA requirements and relies on HHS to issue the definitional and compliance details.
Parallel prohibition for ERISA‑covered group health plans
Mirrors the PHSA language within ERISA so that self‑insured employer plans and other ERISA‑covered arrangements cannot be contractually constrained in the same ways. Because ERISA governs many employer‑sponsored plans that are self‑funded, this amendment is the principal vehicle for reaching those arrangements. The insertion into ERISA preserves the same exceptions and includes a state grandfathering mechanism identical to the PHSA amendment, but it will be implemented by the Department of Labor in coordination with HHS and Treasury.
Tax code parallel for plans covered by the Internal Revenue Code
Updates the Internal Revenue Code entry used for tax‑exempt and other plans to create parity across federal statutes—ensuring the prohibition applies to plans and arrangements referenced in tax rules. The change aligns tax consequences and reporting expectations with the new contract prohibitions and likewise tasks Treasury to issue regulations in coordination with HHS and Labor.
Agency rulemaking deadlines and timing for contract compliance
The bill requires HHS (in consultation with Labor and Treasury), Labor (consulting HHS and Treasury), and Treasury (consulting HHS and Labor) to each promulgate regulations to implement their respective statutory amendments within one year of enactment. The substantive prohibitions apply to any contract entered into, amended, or renewed 18 months after enactment—creating a single transition window for market participants but placing heavy reliance on interagency coordination to produce consistent definitions, compliance tools, and enforcement approaches.
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Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Employers and plan sponsors that negotiate networks—They regain explicit contractual latitude to steer enrollees to lower‑cost, higher‑quality providers and to design incentives without being blocked by incumbent provider clauses.
- Smaller insurers and competing provider groups—The ban reduces the ability of large integrated systems to lock purchasers into broad affiliate packages, improving rivals’ access to business and strengthening competitive bargaining.
- Enrollees and patients—Removing contractual barriers to steering and incentives can expand practical access to centers of excellence and high‑value providers, potentially improving outcomes and lowering out‑of‑pocket costs.
Who Bears the Cost
- Large integrated health systems and hospitals that rely on exclusivity or affiliate tie‑ins—They may lose leverage that preserved higher negotiated rates and referral flows.
- Third‑party administrators, management services organizations, and brokered networks that used bundled access clauses—They will need to rewrite contracting models and may lose revenue streams tied to affiliate arrangements.
- State insurance departments and federal agencies—They face new workload and coordination demands to interpret the exceptions, adjudicate state grandfathering determinations, and write consistent regulations within the one‑year deadline; compliance oversight will add administrative cost.
Key Issues
The Core Tension
The central dilemma is balancing two valid aims: preventing anti‑competitive contracting that preserves legacy market power versus preserving legitimate, integrated, value‑based contracting that drives care coordination and quality improvements. Narrow prohibitions reduce hold‑up but risk handicapping complex, integrated payment models unless regulators craft precise, workable exceptions and enforcement rules.
The bill draws a bright line against several contractual practices, but it leaves critical thresholds and enforcement mechanics to forthcoming regulations. The statute does not itself create a bespoke enforcement regime, civil penalty schedule, or explicit private right of action; instead, it embeds the prohibition inside three different federal statutes and tasks agencies to implement them.
That structure raises immediate questions about how violations will be discovered, who can enforce them, and whether remedies will invoke existing statutory enforcement tools (for example, ERISA fiduciary enforcement, HHS enforcement authorities, tax‑code consequences) or new administrative penalties in the implementing rules.
The text’s carveouts and the broad ‘‘value‑based’’ exception risk swallowing the prohibition if agencies adopt expansive definitions of permissible models. Agencies will need to define terms like ‘‘restricts,’’ ‘‘indirectly,’’ ‘‘value‑based network arrangement,’’ and what counts as an affiliate payment obligation.
Contract drafters will respond by adding careful conditional language and indirect restraints that test those definitions, creating litigation risk and potentially protracted agency guidance. The state grandfathering window (mid‑2019 to end‑2020 contracts, up to 10 years) preserves many legacy arrangements and shifts attention to whether states apply the test for ‘‘unlikely to significantly lessen competition’’ consistently; divergent state determinations could fragment the market.
Finally, the policy tradeoffs are complex: removing anti‑steering clauses can restore purchaser leverage but could also alter cross‑subsidies that support unprofitable services (rural hospitals, 24/7 emergency care) or discourage integrated investments that deliver genuine care coordination savings. Agencies will need to balance competition goals against preserving legitimate value‑based care arrangements, and the detail of their rulemaking will determine whether the Act produces broad consumer savings or simply spawns a new round of contracting disputes.
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