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Katherine L. Gudiksen, Alexandra D. Montague, and Jaime S. King

September 23, 2021

Consolidation is a primary driver of high and increasing health care costs in the United States. Dominant health systems and insurers can use contract clauses to restrain competition, increase costs, and maintain market share. Recognizing these harms, state and federal antitrust enforcers filed a handful of lawsuits in the past 11 years against providers or insurers alleging harms from the use of specific contracting practices. Lawmakers have also considered bans on the use of the most problematic contracting practices, including all-or-nothing contracting, most-favored-nation clauses, anti-incentive clauses, and gag clauses, and a few states passed legislation prohibiting their use in contracts between providers and health insurers. This brief explains how the provisions are used in practice to stifle competition, describes the variation in state laws, and offers best practices to state policymakers seeking to address provider market power. Although litigation can address the use of anticompetitive contracting practices by dominant firms, passing legislation to prohibit the use of these terms in health insurance contracts allows state officials to avoid expending the time and resources needed for trial. Furthermore, laws prohibiting potentially anticompetitive contract terms apply uniformly to all health insurers and providers, fostering a more competitive market for health care services.

Download the report here.