Over 450,000 North Texas residents may soon lose their in-network health coverage at UT Southwestern Medical Center and Texas Health Resources because of a contract dispute with the state’s largest insurer, Blue Cross Blue Shield of Texas.
Current contracts are in effect through Oct. 3 for most Blue Cross products, including the Blue Choice PPO and Medicare Advantage PPO.
But if a new deal is not reached by Oct. 4 and the parties do not extend negotiations, UT Southwestern and Texas Health — and thousands of their affiliated doctors — would no longer be part of most Blue Cross networks. That means Blue Cross members would face out-of-network charges for most medical services, and those costs are often twice as much as in-network co-pays and deductibles.
It’s not uncommon for insurers and providers to clash over reimbursement rates in new contracts and threaten to go their separate ways. They usually strike a deal before causing major disruptions for patients, and that’s happened several times in the past between Texas Health and Blue Cross.
Several experts said they expect the parties to again settle because so much is at stake.
“Both sides have too much to lose,” said Marianne Fazen, executive director of the Dallas-Fort Worth Business Group on Health, which works with local companies to lower health costs. “This market is too dynamic right now and too big — with a steady influx of new companies and people. Nobody wants to lose out on a business that’s growing every day.”
Yet Blue Cross is trying to hold the line on rising medical costs in response to pressure from both employers and members. Health care spending in Dallas-Fort Worth topped $5,600 a person in 2020 — 16% higher than the national median, according to the Health Care Cost Institute.
Affordability remains a top issue in employer-sponsored coverage and individual plans on the health exchange, said Shara McClure, divisional senior vice president of health care delivery for Blue Cross Blue Shield of Texas.
“We administer benefit plans for a lot of governmental agencies, including municipalities and local school districts, and they cannot absorb large increases” for health insurance, McClure said.
Blue Cross wants to keep UT Southwestern and Texas Health in its networks, but she said they were “demanding a significant increase over the next 32 months.” On its website, Blue Cross said, “We owe it to you to keep prices down.”
“We’d love to reach an agreement,” McClure said. “We’re just not there. And we’re very far apart right now.”
In about the last six months, she said, Blue Cross had renewed contracts with the other major health systems in North Texas. “And what we’ve put on the table [for UT Southwestern and Texas Health] is comparable with what we agreed on with every other system,” McClure said.
The current dispute stands out, in part, because of the size of the players. In 2015, UT Southwestern and Texas Health joined together to create an alliance known as Southwestern Health Resources, and that venture is negotiating the new contract.
Southwestern Health said it is the largest provider network in North Texas with over 5,500 physicians and clinicians. It said it has 29 hospitals and over 650 access points for care, and coordinates care for over 730,000 patients in 16 counties in North Texas.
Texas Health had nearly 25,000 employees and $5.5 billion in operating revenue last year. UT Southwestern has nearly 19,000 employees and an operating budget of $4.1 billion.
On the other side of the table is the state’s largest insurer with over 6.8 million members in Texas. Blue Cross Blue Shield of Texas has over 8,300 employees and said it has an economic impact of $1.7 billion, including wages, benefits, taxes, charitable contributions and real estate spending.
“This is a battle of the titans,” said Britt Berrett, a former senior leader at Texas Health Resources and currently managing director and teaching professor at Brigham Young University.
He expects them to reach an agreement, as they have in the past. But he’s sympathetic to Blue Cross trying to keep a lid on rising rates. The high health care spending in Dallas, he said, is related to the high number of uninsured residents.
Providers can’t raise rates on Medicare and Medicaid, so increases often fall on the insured side of the business: “It’s cost-shifting,” Berrett said.
In June, Southwestern Health filed a notice to terminate the contract with Blue Cross, but a spokesman said the network has been negotiating with the carrier since July 2021.
“We continue to negotiate and remain committed to reaching an agreement as soon as possible,” chief marketing officer Darin Szilagyi wrote in an email.
He urged those currently in treatment to contact Blue Cross about getting authorization to continue as in-network patients. On its website, Southwestern Health said pregnant women in their second or third trimester were encouraged to apply for continuity of care benefits.
Szilagyi said Southwestern Health had sent postcards to 459,000 patients who received care from a network provider or facility since April 2021 and were covered by Blue Cross Blue Shield. Such notices are required to inform patients of a major change in their coverage.
Blue Cross also sent postcards to members, advising them that UT Southwestern and Texas Health facilities and doctors would be out of network on Oct. 4 unless a new contract is signed. The Blue Advantage HMO has a separate contract with Texas Health providers that expires Dec. 18.
Blue Cross estimated that about 230,000 members would be affected by ending the contracts, a number based on those who used Southwestern Health providers in the past year. It lists dozens of facilities that would be out of network if the contracts end.
It’s not clear why there’s such a large difference in the two estimates of people who’d be affected, but either way, the numbers are big. In March 2018, when Texas Health and Blue Cross were last at loggerheads, an estimated 185,000 in North Texas were told to be prepared to scramble for new in-network providers.
The sides reached a four-year deal just before the deadline, and that’s the contract being renegotiated.
While most provider contracts are settled by the deadline, Blue Cross and Memorial Hermann Health System in Houston let their contracts end on March 1, affecting about 100,000 patients. They reached an agreement about 10 days later.
Berrett said he doesn’t expect that to happen in Dallas-Fort Worth, and he recalled how Texas Health and Blue Cross came together in the past: “No one was happy with the rates, but we all realized that to disrupt patients was absolutely against our ethos.”