Last-best-offer should be law
When state Attorney General Josh Shapiro asked the Commonwealth Court last week to intervene in a market-share battle between the state’s largest health care provider and its largest insurer, he included a proposal that could be borrowed to resolve another policy issue.
The case in question is an impending end to a five-year consent decree between the University of Pittsburgh Health System and Highmark insurance. July 1, UPMC intends to place 70,000 Highmark subscribers out of its networks, potentially increasing their costs and disrupting their continuity of care.
Shapiro wants the court to continue the consent decree indefinitely. As part of that, he proposed that the court employ a system of last-best-offer arbitration to settle any reimbursement disputes between the health care system billing for care and the insurer paying the bill.
Under last-best-offer, each side would propose a payment and an arbitrator would choose one of them, and would not be allowed to fashion a compromise.
As a result, the parties would be more likely to fashion a compromise of their own than to risk losing everything with an extreme proposal to an arbitrator.
The system is best known for its success in Major League Baseball. Players with between three and six years in the major leagues typically are eligible for last-best-offer salary arbitration. The player and the team each make a proposal and the arbitrator chooses one of them.
This year, of the 198 players eligible for arbitration, more than 190 reached agreements with their teams without going to arbitration. That, of course, is the objective of the exercise. The risk of losing in arbitration causes each side to compromise toward the middle.
Pennsylvania lawmakers should outlaw teacher strikes and mandate the lastbest-offer arbitration system as the means to resolve school district labor impasses. The current system is a farce, since state law requires teachers to teach and, therefore, be paid for 180 days of school regardless of whether they “strike.”
Last-best-offer is an instrument of compromise to produce fair settlements. The Legislature should make it the law.