California Lawmakers Can Lower Healthcare Costs

This week I learned that the House Education and Workforce Committee considered an anti-competitive hospital contracting bill led by California Congresswoman Michelle Steele (CA-45)—the Healthy Competition for Better Care Act—that would massively boost healthcare affordability in the Golden State. The bill cracks down on anticompetitive “all or nothing” contracts hospitals force insurers to sign, in which large hospitals that own virtually all the hospitals in a region can compel an insurer to contract with all its hospitals or none at all. 

If passed, the Congressional Budget Office confirmed that this policy can save California employers, like me, as well as consumers, billions of dollars. This would allow insurers and employers to contract with whichever hospitals and providers made sense for their patients but wouldn’t require contracts with other affiliated providers.

Unfortunately, despite getting a unanimous bipartisan vote in committee this week and enjoying the same bipartisan support in the Senate, there is little chance the “Healthy Competition for Better Care Act” will pass in Congress anytime soon. 

Simply put, the hospital lobby in Washington is currently too strong. But there is an opportunity for California’s legislature to pick up Congress’s slack. Why not look at passing a state version of this policy as soon as possible? 

As a small business owner for nearly 30 years and a board member for the California Hispanic Chambers of Commerce, I know that navigating through costs and regulations has become part of small business owners’ daily routine. Healthcare costs and coverage for my employees are always at the top of my priority list, as their safety and health are vital to our success. 

I recently saw new research from the University of Southern California (USC) that found Sutter Health—one of Northern California’s most consolidated and most expensive hospital systems—used “all or nothing” contracts to boost their revenue. That same research found Sutter’s prices, which were relatively normal compared to similar hospitals before the use of “all or nothing” contracts, surged 30% higher than comparable California hospitals after adopting anticompetitive contracts. In other words, Sutter used its near-monopolistic market power to rip off patients.

Sutter’s anticompetitive behavior is not only outrageous, but also attracted legal scrutiny. Attorney General Xavier Becerra sued Sutter in 2018 for anticompetitive behavior. In 2022, Sutter even went to trial for their use of “all or nothing” contracts. Unfortunately, due to a faulty trial process, a jury let Sutter off the hook. 

Sutter is just one example of a hospital using its market size to abuse patients. A lot of time and energy have been devoted to exposing this hospital system. But this is only the tip of the iceberg.

For example, we need to start asking questions like: What kind of contract did Providence Health force Blue Shield to signusing a high-pressure out-of-network scare for Blue Shield members? How will John Muir Health use its market size—which attracted Federal Trade Commission (FTC) attention last year – to boost revenues?

More attention needs to be paid to what kind of contracts hospitals are pushing insurers to sign—and how they are using their leverage to rip off patients. Especially in Northern California where health care services cost 20-30% more than they do in Southern California. 

It needs to be reiterated that when insurers are forced to pay more, those costs are passed down to employers and workers that end up paying higher premiums.

Attention and shame will only get us so far, though. That’s why the state legislature should step in. Lawmakers have an opportunity to step in and tell every hospital in California that enough is enough—we demand more competition, because we need – and our very livelihood depends on – lower prices. Californians cannot afford the skyrocketing cost of care anymore.