Preventing the Problems Created by “Take it or Leave it” Contracts in Mental and Behavioral Health Services

Contracts of adhesion, where one party sets the terms while the other party has little to no ability to negotiate, are common in various industries, including healthcare. In healthcare, these contracts often appear in the form of insurance policies, service agreements, and terms of use for healthcare services and products. The concern with these contracts is that they can potentially exploit consumers, as provider agree to the terms as presented without any negotiation.

Provider groups have little or no room for negotiation and must either accept the contract as it is or reject it entirely. There are reason why Healthplan prefer Take it or Leave It contracts over a negotiated contract.

1. Power Imbalance: The health plan holds more power in the negotiation process, often due to its size, resources, and control over funding, which puts the provider group in a weaker position.

2. Standardized Terms: The contract terms are standardized and non-negotiable, designed to benefit the health plan, potentially at the expense of the provider group.

3. Efficiency: This strategy can be efficient for the health plan, as it reduces the time and effort needed to negotiate individual contracts with multiple providers.

4. Risk Minimization for the Health Plan: By offering a uniform contract, the health plan minimizes its risk and ensures consistency in its dealings with all providers.

5. Limited Provider Leverage: Providers will feel compelled to accept the terms, especially if rejecting the contract means losing access to a significant patient base or essential funding.

A take it or leave it contract is used in fee-for-service contracts. However, take or leave it contacts can create risks when offering a measurement and value-based payment contract. Without shared values, objectives, controls and key performance measures, providers have justifiable options:

1. Collective Bargaining: Provider groups can come together to form a coalition, increasing their bargaining power and making it harder for the health plan to ignore their concerns.

2. Regulatory Appeal: Given that taxpayer dollars are involved, providers can appeal to state regulators or legislative bodies to intervene and ensure fair contract terms that protect public interests.

3. Public Advocacy: Raising public awareness about the unfairness of the contract can put pressure on the health plan to reconsider its stance, especially if it involves taxpayer money.

4. Legal Action: If the contract terms are deemed unfair or unconscionable, providers may consider legal action to challenge the contract's enforceability.

5. Transparency and Accountability: Advocating for transparency in how taxpayer dollars are used and ensuring that contracts are fair and in the public interest can be a powerful strategy.

For more information see:
What Problems Are Created When Healthplans Offer Providers “Take it or Leave” Contracts (contracts of adhesion)? 
https://www.mentorresearch.org/take-or-leave-contract-in-healthcare

In the United States, there isn't a specific federal legislation that directly limits contracts of adhesion in healthcare. However, several laws and regulations can indirectly influence and mitigate the potentially unfair aspects of these contracts:

1. The Affordable Care Act (ACA): Although not directly addressing contracts of adhesion, the ACA imposes significant regulations on health insurance providers, including requirements for clear coverage explanations and appeals processes, which can help protect consumers against unfair contractual terms.

2. State Insurance Regulations: Insurance, a significant part of healthcare, is primarily regulated at the state level. Many states have laws that require insurance contracts to be clear and fair and may reject insurance policy terms that are deemed to be unjustly prejudicial against consumers.

3. Consumer Protection Laws: Federal and state consumer protection laws, though not specific to healthcare, provide a general safeguard against unfair contracts. These laws protect against deceptive, unfair, or abusive practices and may be applicable if a contract of adhesion includes terms that could be considered exploitative or deceptive.

4. Legal Precedents: Courts sometimes play a role in limiting the impact of contracts of adhesion by interpreting them in ways that favor the adhering party, especially in cases where terms are found to be unconscionable or unjustly oppressive.

5. Specific State Legislation: Some states may have specific laws that address contracts of adhesion more directly, requiring that certain contracts meet fairness criteria or that specific terms be presented clearly to consumers.

While direct legislation targeting contracts of adhesion in healthcare is limited, the combination of insurance regulations, consumer protection laws, and legal oversight works together to protect healthcare consumers to some extent.

A Hypothetical Proposal for Legislation that Would Limit the Problems Created by Contracts of Adhesion.

 Bill Title:

"The Fair Health Insurance Contract Act"

Preamble:

Whereas, the intent of this legislation is to protect consumers and healthcare providers from unfair and non-negotiable terms in health insurance contracts;

Whereas, ensuring transparency, good faith, fairness, accountability, and comprehensibility in health insurance contracts serves the public interest by promoting evidence based care, patient-center care, increased quality and improved health outcomes and equitable healthcare delivery;

Section 1: Definitions

Health insurance contract means any agreement between a health insurance provider and a consumer for providing health insurance coverage.

Contract of adhesion means a standardized contract formed between a party that holds more power and a party that holds less power where the weaker party has no opportunity to negotiate the terms, merely accepting them.

Consumer means an individual who seeks or acquires health insurance coverage.

Healthplan means any insurance payer who contracts with mental and behavioral health providers to provide services to consumers.

Internal audit means an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes

Objectives mean specific, measurable, and achievable goals set within the framework of service delivery, compliance, and performance

Provider means a mental and behavioral health professional or group practices that delivers medical services.

Value means the delivery of evidence-based, person-centered, and care that contributes to improved quality and positive health outcomes at an appropriate cost.

Section 2: Requirements for Health Insurance Contracts

Subsection 2.1: Transparency

All health insurance contracts must include a clear, concise summary of values, objectives, controls, key indicators of success, audit program, benefits, including coverage limits, exclusions, requirements, payments, and the appeals processes.

Key terms must be defined within the contract in plain language.

Subsection 2.2: Fairness

Prohibit exclusionary clauses that unfairly limit necessary medical treatments as determined by medical professionals.

Establish a mandatory review period during which consumers can review the contract and cancel without penalty.

Policies to regulate provider practices must be aligned with the Health Contract bill (under construction)

Subsection 2.3: Negotiability

Require Healthplans to hear, document, perform a transparent internal audit of issue and negotiate reasonable alternative contract/policy option with negotiable terms.

Establish a process for consumers and providers to request modifications to contract terms based on specific needs, to protect public health or other circumstances that undermine values as established in the Healthy Contracts bill.

Section 3: Enforcement and Compliance

Subsection 3.1: Regulatory Oversight

Designate a state agency or existing health authority to oversee compliance with this act.

Develop guidelines for acceptable contract terms in collaboration with healthcare providers, insurance companies, and consumer representatives.

Subsection 3.2: Penalties

Establish penalties for health plans that fail to comply with the transparency, fairness, and negotiability requirements.

Penalties may include fines, mandatory corrections to contracts, and public notices of non-compliance.

Section 4: Dispute Resolution

Require the State Attorney General to investigate allegation of a criminal conduct or civil misconduct submitted the providers and consumers.

Create an independent arbitration panel to resolve civil disputes between consumers or providers and health insurance companies concerning contract terms.

Ensure the arbitration process is accessible and affordable for all parties. The state will pay for complaints submitted by consumers and providers where the cost exceeds 8% of their gross income.

Section 5: Monitoring and Reporting

Require annual reporting by the overseeing authority on the market impact of this act, including effects on insurance premiums, coverage quality, and consumer satisfaction.

Mandate that health plans provide data on contract complaints, disputes and resolutions.

Section 6: Effective Date

The provisions of this act shall take effect on January 1st of the year following its enactment.

Section 7: Severability

If any provision of this act, or the application thereof to any person or circumstance, is held invalid, the remainder of the act and the application of such provisions to other persons or circumstances shall not be affected thereby.

Conclusion: This legislative outline aims to balance the scales for health insurance contract negotiation, ensuring that contracts are fair, understandable, and reasonably negotiable to protect both consumers and providers.

DISCLAIMER and PURPOSE: This discussion document is intended for training, education, and or research purposes only. The information contained herein is based on the data and perspectives available at the time of writing. It is subject to revision as new information and viewpoints emerge.

For more information see: https://www.mentorresearch.org/disclaimer-and-purpose