Overall Vote Recommendation

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

HB 3863 addresses the method by which healthcare providers receive claim payments from health insurers and Medicaid managed care organizations. Specifically, the bill prohibits these entities from requiring physicians or healthcare providers to accept payments in the form of virtual credit cards (VCCs) or any other payment method that imposes fees in order to access funds. The legislation ensures that providers can receive full claim payments without having to incur unnecessary transaction or processing costs.

The bill amends three key areas of Texas law: the Government Code and the Insurance Code. It adds a new subsection to Government Code Section 540.0265 to prevent Medicaid managed care organizations from imposing VCC payments in provider contracts. It also revises Insurance Code Section 843.346, which governs HMOs, to include similar restrictions. Additionally, it creates new Section 1301.141 in the Insurance Code to apply these protections to preferred provider benefit plans (PPOs). Importantly, the bill clarifies that a nominal fee charged by a provider's bank to receive a standard electronic funds transfer (EFT) is not prohibited.

These changes apply only to contracts and claims initiated on or after the effective date. However, the bill allows state agencies to delay implementation of any provision if federal waivers or authorizations are required. The overall goal of HB 3863 is to protect healthcare providers from incurring avoidable financial burdens and to ensure fair, transparent payment practices within Texas’s healthcare system.

The Committee Substitute for HB 3863 significantly narrows the scope of the originally filed version of the bill. The originally filed bill proposed a broad set of reforms aimed at expediting claim payments and strengthening enforcement mechanisms across Medicaid managed care organizations (MCOs), health maintenance organizations (HMOs), and PPOs. These reforms included shortening claim payment deadlines from 45 days to 30 days for both electronic and paper claims, adjusting penalty structures for late payments, and enhancing provider appeals processes, particularly regarding medical necessity disputes. The original version also required binding decisions in some cases and imposed stricter audit timelines.

In contrast, the Committee Substitute refocuses the legislation primarily on one issue: prohibiting insurers from requiring providers to accept payment via VCCs or other methods that impose transaction fees. This version removes the broader payment timeline reforms and appeals process changes, streamlining the bill to target a single, widely criticized administrative burden. The language clarifies that while insurers cannot impose fee-based payment mechanisms, they may continue using EFTs, even if a nominal fee is charged by a provider’s bank, provided it is not imposed by the insurer itself.

Additionally, while both versions include provisions allowing a delay in implementation if federal waivers are needed, the Committee Substitute simplifies the implementation framework by applying it only to new contracts and claims submitted after the effective date. This narrower approach indicates a legislative pivot toward a more achievable, less contentious reform, focusing on protecting healthcare providers from involuntary, fee-based payment schemes rather than attempting to restructure claims adjudication timelines across the healthcare system.

Author

Terry Canales

Tom Oliverson

Lacey Hull

Contact the Author

Rep. Terry Canales

Capitol Phone:

(512) 463-0426

Capitol Office:

CAP 4S.4

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

According to the Legislative Budget Board (LBB), the fiscal implications of HB 3863 are expected to be minimal for both the state and local governments. According to the LBB, no significant fiscal impact to the state is anticipated as a result of the bill’s implementation. State agencies such as the Texas Department of Insurance, the Health and Human Services Commission, and other relevant entities are expected to be able to absorb any associated administrative or compliance costs within their existing budgets and resources.

The bill prohibits health insurers and managed care organizations from requiring healthcare providers to accept claim payments via virtual credit cards or other payment methods that involve processing fees. While this change may alter internal payment processing systems for insurers, the fiscal note indicates that any operational adjustments are not expected to impose new or substantial financial burdens on state agencies responsible for oversight or administration.

Similarly, no significant fiscal impact is projected for local units of government. Since the bill primarily affects private-sector payment practices between insurers and providers, its fiscal footprint on publicly funded healthcare systems or local government operations is negligible. Overall, the bill is structured in a way that targets administrative reform without requiring new public expenditures or appropriations.

Vote Recommendation Notes

While the intent behind HB 3863 is understandable, seeking to protect healthcare providers from transaction fees associated with certain payment methods, the means by which it accomplishes this objective raises several serious concerns regarding limited government, free enterprise, and contract autonomy. As such, Texas Policy Research recommends that lawmakers vote NO on HB 3863.

The bill prohibits health plans, including Medicaid managed care organizations (MCOs), health maintenance organizations (HMOs), and preferred provider benefit plans, from requiring providers to accept virtual credit cards (VCCs) or any other form of payment that imposes a fee to receive the payment. While this is framed as a protective measure for providers, it effectively places the state in the role of arbiter in private business transactions, overriding voluntarily negotiated contract terms between private entities. From a limited-government perspective, this is problematic. The state’s role should be to ensure transparency and fair competition, not dictate the form of lawful private-sector payment methods.

Additionally, the bill creates a one-sided statutory mandate favoring one group of private market participants—healthcare providers, at the expense of another, insurers and managed care organizations. Even if the current market behavior is perceived as unfair, the proper response should come from private negotiation, market pressure, or civil litigation, not from the Legislature imposing a statutory ban. Once the state begins regulating private contracts in this manner, it opens the door to further interventions under similar justifications, increasing the risk of regulatory creep.

Although the bill does not have a significant fiscal cost and does not expand government agencies, it still increases the regulatory footprint of the state by adding new prohibitions and compliance obligations on businesses. For lawmakers concerned with preserving the autonomy of Texas’s market economy, even a narrowly tailored mandate like this one presents a precedent-setting intervention in the private sphere that could be used to justify more expansive economic regulations in the future.

For these reasons, despite the good intentions and sympathetic concerns of healthcare providers, HB 3863 does not meet the test of a constitutionally restrained, market-oriented solution. Lawmakers committed to individual liberty, private contract rights, and minimal state interference in business should reject the bill and encourage market-based or negotiated alternatives to address payment disputes in healthcare contracting.

Individual Liberty: Although the bill attempts to shield individual providers from predatory payment practices, it does so by restricting the voluntary contractual rights of other private parties, namely, health insurers. In a free society, liberty includes the right to enter into contracts, even if some terms are disadvantageous. Legislating which payment methods are permissible limits the ability of individuals and businesses to negotiate freely and voluntarily, thereby impinging on individual liberty under the guise of protection.
Personal Responsibility: The bill effectively shifts the burden of negotiating more favorable payment terms away from providers and places it on the state. Rather than expecting providers (or their associations) to push back through negotiation, collective bargaining, or market exit, the state imposes a blanket prohibition on VCC-based payments. This diminishes the principle that private actors are responsible for the contracts they enter into and for asserting their own interests within the bounds of the market.
Free Enterprise: The bill interferes directly with market autonomy by banning specific payment methods in private business arrangements. Even if VCCs are inefficient or unfavorable, it is not the state’s role to dictate how private businesses conduct lawful transactions. A free enterprise system allows market participants to innovate, compete, and even fail without legislative micromanagement. This bill undermines that system by substituting legislative judgment for market discipline.
Private Property Rights: One could argue that the bill protects a provider's earned compensation from being diminished by unfair fees, thus defending their property. However, it does so by infringing on the rights of payers (insurers) to structure their payment systems as they see fit. Private property includes not only physical assets, but also the right to use resources, including money, in lawful ways through contract. By telling insurers how they must transmit payments, the bill infringes on their use and disposition of property under contract.
Limited Government: This is perhaps where the bill most directly conflicts with conservative-liberty values. The bill expands the role of the state into private contracting and administrative operations of health plans. While well-intentioned, it invites further regulatory intervention into economic activity and weakens the guardrails against government overreach. Even though the bill does not grow bureaucracy or require taxpayer funding, it expands government authority into a domain it traditionally avoids: dictating how private parties conduct business with one another.

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