[Senate Hearing 113-311]
[From the U.S. Government Publishing Office]
S. Hrg. 113-311
THE POWER OF TRANSPARENCY: GIVING
CONSUMERS THE INFORMATION THEY NEED
TO MAKE SMART CHOICES IN THE HEALTH INSURANCE MARKET
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HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 27, 2013
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
JOHN D. ROCKEFELLER IV, West Virginia, Chairman
BARBARA BOXER, California JOHN THUNE, South Dakota, Ranking
BILL NELSON, Florida ROGER F. WICKER, Mississippi
MARIA CANTWELL, Washington ROY BLUNT, Missouri
FRANK R. LAUTENBERG, New Jersey MARCO RUBIO, Florida
MARK PRYOR, Arkansas KELLY AYOTTE, New Hampshire
CLAIRE McCASKILL, Missouri DEAN HELLER, Nevada
AMY KLOBUCHAR, Minnesota DAN COATS, Indiana
MARK WARNER, Virginia TIM SCOTT, South Carolina
MARK BEGICH, Alaska TED CRUZ, Texas
RICHARD BLUMENTHAL, Connecticut DEB FISCHER, Nebraska
BRIAN SCHATZ, Hawaii RON JOHNSON, Wisconsin
WILLIAM COWAN, Massachusetts
Ellen L. Doneski, Staff Director
James Reid, Deputy Staff Director
John Williams, General Counsel
David Schwietert, Republican Staff Director
Nick Rossi, Republican Deputy Staff Director
Rebecca Seidel, Republican General Counsel and Chief Investigator
C O N T E N T S
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Page
Hearing held on February 27, 2013................................ 1
Statement of Senator Rockefeller................................. 1
Statement of Senator Thune....................................... 3
Statement of Senator Nelson...................................... 5
Statement of Senator Pryor....................................... 33
Statement of Senator Cruz........................................ 35
Statement of Senator McCaskill................................... 36
Statement of Senator Schatz...................................... 39
Witnesses
Lynn Quincy, Senior Policy Analyst, Consumers Union.............. 5
Prepared statement........................................... 7
Michael A. Livermore, Executive Director, Institute for Policy
Integrity, New York University School of Law................... 12
Prepared statement........................................... 14
Margaret O'Kane, President, National Committee for Quality
Assurance...................................................... 18
Prepared statement........................................... 20
E. Neil Trautwein, Vice President and Employee Benefits Policy
Counsel, National Retail Federation............................ 25
Prepared statement........................................... 27
Appendix
Response to written question submitted to Lynn Quincy by:
Hon. John D. Rockefeller IV.................................. 47
Hon. Amy Klobuchar........................................... 47
Response to written question submitted by Hon. Amy Klobuchar to
Margaret E. O'Kane............................................. 48
THE POWER OF TRANSPARENCY: GIVING
CONSUMERS THE INFORMATION THEY
NEED TO MAKE SMART CHOICES IN THE
HEALTH INSURANCE MARKET
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WEDNESDAY, FEBRUARY 27, 2013
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 2:30 p.m., in
room SR-253, Russell Senate Office Building, Hon. John D.
Rockefeller IV, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
U.S. SENATOR FROM WEST VIRGINIA
The Chairman. The hearing will come to order. And we--
please forgive us; we were having a little bit of fun up here.
It doesn't happen much around here, you know? You've got to
take advantage of it when you can do that.
Almost 4 years ago--that being 2009, I was good at math--
this committee held a hearing on many challenges that consumers
faced when trying to buy health insurance. And we spent a lot
of time in this committee on the health insurance industry and
healthcare. And at that hearing, we heard that shopping for
health insurance was frustrating, confusing, and stressful.
Consumers had no really easy way to find out what they were
about to get. And then, one of the problems was that, under the
old system, what the insurance company sent them was what they
had to take before--well, they had to buy the insurance first,
you see, and then they got the information about what they just
bought. And that wasn't really smart.
So, consumers didn't have any easy way to learn, or
compare, which is the main thing, different healthcare plans.
And that's the whole point of this. I mean, we're heading into
a new era, 2014 almost on us. They could get slick marketing
material from the insurance companies, which would say all
kinds of things, but they couldn't get straight answers about
the services a health insurance plan did, or did not, which is
just as important, cover.
When they asked for further information about health
insurance plans, consumers usually got bulky disclosure
documents. We--I was hoping we'd have a lot of bulky disclosure
documents around here so everybody could look at them. We
don't? I don't want it; I've already seen it. But, it's a trip.
Some of these 100 page--consumers would get a--100 page
explanations of what they had already paid for and, therefore,
were going to have to have.
So, they couldn't compare. They got their materials, but
they couldn't get straight answers. And when they asked for
further information about health insurance plans, consumers
usually got these bulky things. And something which makes a
point with me, you know, there's a fine print which can
actually drive you crazy. That's the fine print which the
insurance companies used. I mean, you take your Magellan
magnifying glass and put it right down there, and you can just
barely catch the word. And there was no standard terminology in
health insurance. For example, ``copay,''
``hospitalizations''--well, we all know what that means. No, we
don't. It varies, according to what the insurance plan might
be. ``Out-of-pocket limit,'' what does that mean? Well, it
meant many different things. So, consumers were kind of in the
dark, and that's exactly where the health insurance companies
wanted to keep them. And I'm not trying to be cynical about
this, but it was--we had a fellow, named Wendell Potter, who
testified, sat right there, Mr. Livermore, and he said that
they did this purposely; they purposefully made things small,
hard to read, long, legalese, healthcarese, so that people
would just get discouraged from plowing through, and,
therefore, would just go ahead and buy the product.
Mr. Potter told us that the industry's goal was to make
their disclosure materials so impenetrable and confusing that
consumers would give up and throw them away.
Now, as long as consumers couldn't understand what the
policies--how they work, they wouldn't understand the bad deal
they might be getting. Maybe they weren't, but maybe they were.
They couldn't know.
While the market we've heard about in 2009 was profitable
for health insurance companies, it was a disaster for families.
And that's all well documented, and we've done that.
Consumers assumed that, if they paid their health insurance
premiums every month, they were protected. I would have assumed
that. I would have assumed that. It's the way America works.
Only too late would they discover that the fine print in their
health insurance plans stuck them with thousands of dollars in
unexpected medical bills. A complicated pregnancy, a cancer
diagnosis, or even a broken limb, could push families well
beyond their budgets. In fact, medical debt had become the
leading cause of personal bankruptcy filings. We all know that.
That's been the case for years.
So, after hearing too many of these stories, some of us got
serious about bringing more transparency in the health
insurance market. So, we created a clear labeling requirement
in the Affordable Care Act, or the--you know, the--the Act, the
healthcare act, Obamacare, whatever you want. So, we put that
in there; they had to have clear labeling, just like when you
look at how much caloric content, fat content, et cetera, you
tend to get it on something that you buy. We required health
insurance companies to clearly and accurately disclose to their
customers that their--what their policies cost--that is now
law--and what their services might cover. Instead of 20 or 40
or even 100 pages--and I have all three in my back of my book
here--disclosure documents--the law required insurers to give
consumers about a 4-page document, a Summary of Benefits and
Coverage, SBC; and it had to be written in plain English. And
it is. And it had to be printed in font that customers, like
me, could read, which was a strict requirement.
The law also called for the development of industrywide
standard definitions, so consumers could clearly understand
words like ``copay'' or ``hospitalizations.'' They--in other
words, what was true for one plan had to be true for another
plan. Then you just put that into law, and then you try to
enforce it; and presumably you can, although everything takes
time. With clearly presented plan features describing--using
standard terms--consumers could finally make apples-to-apples
comparison--and that was good--between the health insurance
projects--products, and find the one that best met their health
coverage needs.
To help consumers understand how the policies would work in
a real-life situation, the law also required insurers to give
example of how their plans would cover the expenses of major
health events, such as having a baby or treating a chronic
disease, like diabetes. And then breast cancer comes into our
discussion today, because people can identify--and you can see
it in some of these plans, when you get them--how much
individual--for, say, breast cancer, or for diabetes 2--I mean,
what, exactly, are you paying? What, exactly, are you paying?
It's listed, and added up.
So, after extensive discussion and consumer testing,
insurance companies began issuing SBCs in the fall of 2012.
While there may be room for improvement--and there is--these
forms represent a major step forward. I'm actually very happy
about this, because it helps consumers make informed judgments,
which they need to do.
So, with this new transparency, health insurance companies
have a new incentive, to compete on the value of their
product--the value of their products--and on their--not on
their ability to confuse people.
So, in closing, our witnesses today are going to tell us
about how the SBC was developed and what they think of the SBC
as a tool for creating transparency and improving consumers'
health plans, and also how they think it could get better. I've
got a bunch of ideas on that; you probably have more. We need
to--while we're in the mood to get this SBC going, and while
companies are adjusting to it, let's make it as helpful as
possible to the consumer.
My honorable Ranking Member.
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
Senator Thune. Thank you, Mr. Chairman, for holding this
hearing.
I appreciate all the witnesses who are here today to
provide testimony. Thank you for being here.
And, as the Chairman has mentioned, today's hearing follows
hearings this committee conducted in 2009 which explored the
connection between how health insurance companies share
information about the benefits and coverage of their plans and
the ability of consumers to make informed choices in the
marketplace.
Mr. Chairman, I applaud your dedication to these issues.
Anyone who has had to compare healthcare plans and make
decisions for themselves or their families likely shares the
goal of improving the transparency and clarity of the plans'
descriptions, particularly in the individual and small group
markets.
We're here to examine how healthcare plans share
information with consumers in the health insurance market, and
what changes have been made since 2009 specifically with regard
to the implementation of the Summary of Benefits and Coverage
provision, or SBC, which was championed by the Chairman.
Since 2009, the health insurance landscape has changed
dramatically. Some changes, like the requirement that health
insurers provide standardized statements of benefits and
coverage, we hope are for the better. It's no surprise that
Americans appear to embrace the idea that health insurance
companies should provide easy to understand plan summaries.
Polling by the Kaiser Family Foundation in 2011 showed that
nearly 84 percent of respondents in its tracking poll held,
``very favorable'' or ``somewhat favorable'' views on this
idea.
As we explore the SBC today, which has yet to be fully
implemented, it's my hope that the Committee will find that
actual users' experiences are likely to match consumers' high
expectations.
Health insurance is complicated, given the many variables
that influence the actuarial assessments upon which coverage
and premiums are based. Provisions, such as the SBC, should
help simplify the process, but, at the same time, they must be
implemented in a way that provides an accurate picture of what
consumers can truly expect. The goals of clarity and
transparency are goals that we all share, but we should not
underestimate the ability of the government to implement good
ideas in ways that create additional confusion for consumers.
While some provisions in the healthcare law offer promise,
I am concerned that they pale against the backdrop of unwelcome
changes we have yet to fully realize. I'm especially concerned
about how the multitude of regulations mandated by the
Affordable Care Act will affect premiums. A recent study by
Oliver Wyman found that the President's health law will greatly
increase the cost of insurance for those in the individual
market by an average of 10 to 20 percent.
Taken as a whole, the regulatory burden of the Affordable
Care Act is crushing. Since its enactment, there have been more
than 18,000 pages of regulations issued. The SBC provision is
just one small part of this, and it's my hope the discussion
today will provide an opportunity to explore ways in which we
can increase its utility. But, as we seek to protect consumers,
we cannot ignore the larger law's likely impact on premium
increases. Perhaps our laws, like our health plans, should come
with a straightforward summary of their likely cost and
benefits to taxpayers; I think that would be refreshing, as
well.
So, I want to thank you all for being here. I look forward
to hearing your testimony and the opportunity to interact with
you, in some questions, and get your perspective on the SBC.
Thank you, Mr. Chairman.
The Chairman. I want to thank my Honorable Ranking Member,
and beg his indulgence, because I asked Senator Nelson if he
wanted to speak, which he has absolutely no right to do, under
our rules, as well established, but he said he wanted to say 20
seconds of nice things about me.
[Laughter.]
The Chairman. So, I decided----
Senator Thune. We'd better indulge that.
The Chairman. What I--that was my thinking.
[Laughter.]
The Chairman. The Senator from Florida.
STATEMENT OF HON. BILL NELSON,
U.S. SENATOR FROM FLORIDA
Senator Nelson. Mr. Chairman, Mr. Ranking Member, I did
want to say some nice things about you, because it is the
passion that you continue to carry, from being one of the
coauthors of the Affordable Care Act, that you bring to the
chairmanship of this committee in such things as the hearing
today, how to make it better.
With your indulgence, I have the privilege of chairing my
first hearing, in the Aging Committee, of which the subject
matter is how to improve the healthcare bill that was passed
back in 2009.
So, Mr. Chairman, I want to thank you for your continuing
passion.
The Chairman. Senator Thune, he did overrun his time a bit.
[Laughter.]
The Chairman. But, I think that, in the spirit, we should
be grateful.
Senator Thune. That's right. Unanimous consent, Mr.
Chairman, that he be allowed to use as much time as he already
has used.
[Laughter.]
The Chairman. OK.
Now our panel: Ms. Lynn Quincy, who's the Senior Policy
Analyst of the Consumers Union--and you're smiling, which is
good, because you'll be first up; Mr. Michael Livermore,
Executive Director, Institute for Policy Integrity, New York
University School of Law; Ms. Margaret--a.k.a. Peggy--O'Kane,
President, National Committee for Quality Assurance; and Mr.
Neil Trautwein, who's Vice President, Employee Benefits Policy
Counsel, of the National Retail Federation.
So, please give your testimony, and then we'll have
questions for you.
STATEMENT OF LYNN QUINCY, SENIOR POLICY ANALYST, CONSUMERS
UNION
Ms. Quincy. Senator Rockefeller, Senator Thune, and members
of the Committee, thank you so much for having me here today.
I'm absolutely delighted, on behalf of consumers everywhere, to
come and talk about the Summary of Benefits and Coverage.
I think we can all agree, health insurance is necessary for
the health and financial security of American families. What's
more, consumers must be fully informed about how their health
insurance works, as has already been referenced.
We do not want them out in the marketplace, shopping with a
blindfold on. And I'm afraid that's a little bit too common,
still. The Summary of Benefits and Coverage goes a long way
toward taking off the blindfold and helping them understand
their coverage options.
Today, we're releasing a nationally representative survey
that shows how the Summary of Benefits and Coverage fared in
the marketplace last fall. This is our first experience with it
out in the marketplace, and I'll share a few findings with you.
We also have evidence from pretesting of the form that was done
by Consumers Union and by health plans when it was being
developed. And, taken together, we have a really rich body of
evidence, which says how consumers respond to this form. And
I'd love to share just a couple highlights, because they're all
good.
These are just the very--there we go--it's a very visual
form, so we've got to look at it while we're talking about it.
Here are just a few highlights from all of this evidence. One,
consumers love the fact that they can line up plans from
different carriers or different employers and compare them,
apples to apples. This is a big deal for them.
They are very reassured by the element that says why this
matters, because they aren't sure why different features
matter. They really need help understanding how these important
cost-sharing features work, and whether or not it's important
to pay attention to them.
They really like having exceptions to coverage all in one
place. It helps alleviate some of the worry they feel about the
fine print that Senator Rockefeller referred to.
They--but, what proved transformational, when we did our
testing, is this element: the coverage example. The coverage
example--in this case, it's a medical scenario of having a
baby--tells consumers three things that they've never seen
before.
One, how much does healthcare cost? Well, they don't know;
and so, they don't know how much insurance they need. The
coverage example takes care of that problem.
It shows a bottom line for how much they would pay. That's
another thing they don't know, because consumers find it very,
very difficult to roll up all those disparate cost-sharing
provisions, like benefit limits and annual limits and out-of-
pocket maximums. It's pretty high-level math.
And third, and perhaps most surprising, it shows what the
plan pays. And here--this shows the real value of consumer
testing. That may not seem important; it may seem like it's
simply a residual. Well, it's not. It reminded them of the
importance of insurance coverage and the fact that an
unexpected medical event might happen to them, and that they,
if they have coverage, even if it has what seemed like a high
deductible, they're still getting a benefit, because they can
see the number that represents what the health plan paid on
their behalf. And perhaps you'll recall that traditional health
plan materials don't actually include that information.
So, this was enormous. And it's a wonderful tool in your
policymakers' toolbox that you can be exploiting as we go
forward with the SBC.
I mentioned the survey in the fall. Here's the bad news.
Only half of consumers, in the fall, who shopped for private
health insurance coverage recalled seeing the SBC. We must do a
much better job of raising awareness. And I suspect we need to
do a better job of getting the health plans to comply with the
requirements.
The good news is, when they did see the Summary of Benefits
and Coverage, the survey respondents told us that they viewed
it very favorably, and they told us it was more helpful than
any other form of health plan information that we gave them in
a list. This is things like information you get from your
employer, advice from a broker, et cetera. So, good news,
except for the awareness factor.
Going forward, I hope that we will do things to improve the
SBC, maybe get it professionally designed, add more coverage
examples, and all the other recommendations I included in my
written testimony.
I will stop there. Thank you so much.
[The prepared statement of Ms. Quincy follows:]
Prepared Statement of Lynn Quincy, Senior Policy Analyst,
Consumers Union
``A Retrospective And Prospective Look At The Summary Of Benefits And
Coverage Form''
Introduction
Consumers Union, the policy and advocacy arm of Consumer Reports,
\1\ appreciates this opportunity to provide testimony on the new health
insurance disclosure--the Summary of Benefits and Coverage or SBC form.
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\1\ Consumer Reports is the world's largest independent product-
testing organization. Using its more than 50 labs, auto test center,
and survey research center, the nonprofit rates thousands of products
and services annually. Founded in 1936, Consumer Reports has over 8
million subscribers to its magazine, website, and other publications.
Its advocacy division, Consumers Union, works for health reform, food
and product safety, financial reform, and other consumer issues in
Washington, D.C., the states, and in the marketplace.
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The SBC provides a very important consumer protection. For the
first time, consumers have a standardized disclosure that allows them
to compare health plans, even plans from different carriers or
different employers. This uniform, consumer-friendly information arms
consumers to be better shoppers and, in turn, improves the insurance
market place. What's more, a robust body of evidence shows this product
is working as intended.
My testimony describes this evidence and recommends some next steps
for the SBC and for consumer disclosures more generally.
Brief Background
The SBC requirement was included in the 2010 Affordable Care Act,
based on legislation introduced earlier by Senator Rockefeller (D-
WV).\2\ The statute described not only what should be in the SBC but
also legislative goals for the document:
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\2\ Informed Consumer Choices in Health Care Act of 2009.
[Standards] shall ensure that the summary is presented in a
culturally and linguistically appropriate manner and utilizes
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terminology understandable by the average plan enrollee.
Uniform definition of terms so that ``consumers may compare
health insurance coverage and understand the terms of that
coverage (or exception to such coverage);
Health insurance is costly and has profound implications for the
health and financial security of America's families. Hopefully, all
would agree it is important that consumers be armed with information
that is understandable, reliable, allows them to divine how much
coverage they are getting and can be readily compared across health
plans. The SBC requirements were a major step forward in this regard.
We all know that not every consumer disclosure works in practice as
intended by legislators. Consumers Union thinks it is very important to
directly assess the impact of required disclosures on consumers. Two
things must be done to reliably conduct this assessment: (1) use
independent, trained moderators to test disclosures with real consumers
simulating real marketplace conditions as closely as possible; and (2)
monitor how well the disclosure functions in the marketplace after roll
out. As described below, for the SBC we have a robust body of evidence
that shows this product is truly helping consumers and is as good or
better than other information found in the market today.
Evidence from Testing
For four years, I have served as a consumer representative with the
National Association of Insurance Commissioners (NAIC), the
organization tasked with initial development of the SBC form. NAIC
reached out to a diverse group of stakeholders to develop the form, but
did not plan any consumer testing. Nor did any of the Federal agencies
tasked with writing the regulations on the SBC plan to conduct consumer
testing.
As a result, with the support of some generous foundations,\3\
Consumers Union stepped in to do two rounds of consumer testing on the
prototype document.\4\ America's Health Insurance Plans and Blue Cross
Blue Shield Association also tested the prototype document.\5\ This
testing used either focus groups or cognitive interviews \6\ to learn
how and when consumers would use the prototype forms. Participants were
shown alternate versions of the form so that we could learn what was
and wasn't working.
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\3\ We'd like to recognize: California HealthCare Foundation,
Commonwealth Fund, Missouri Foundation for Health and NYS Health
Foundation.
\4\ Consumers Union and People Talk Research, Early Consumer
Testing of New Health Insurance Disclosure Forms, December 2010 and
Consumers Union and Kleimann Communication Group, Early Consumer
Testing of the Coverage Facts Label: A New Way of Comparing Health
Plans, August 2011.
\5\ America's Health Insurance Plans Focus Group Summary, JKM
Research, October 2010 and America's Health Insurance Plans [and] Blue
Cross Blue Shield Association Focus Group Summary, JKM Research, May
2011 [Report web links at the end of this testimony].
\6\ Cognitive interviewing is a technique used to provide insight
into learners' perceptions in which individuals are invited to
verbalize thoughts and feelings as they examine information.
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Lending credence to the findings, these studies agreed with each
other in almost all respects.
Health Insurance Is Complex--Consumers Dread Shopping
In our testing, we started with open ended questions to assess how
easy or difficult it was to shop for coverage prior to seeing the SBC.
Few will be surprised that consumers find it very difficult to sort
through health plan information. What's critical is to understand just
how profound this difficulty is, and to develop the nuanced
understanding of consumer difficulties that will allow targeted
improvements to health plan information.
In our testing, consumers told us that health insurance was one of
the hardest things they shop for. In particular, they highlighted the
difficulty of figuring out how much coverage is offered by a plan.
Specifically, sorting through a plan's cost-sharing provisions was the
most difficult aspect of health insurance shopping.
Aside from premiums and copays, many cost-sharing concepts were
unfamiliar to consumers. They don't know the meaning of terms like
benefit limit, annual limit, or out-of-pocket maximums. Yet these
concepts must be used, together with covered services, to understand
the overall financial protection offered by a health plan.
Testing allows us to take a nuanced look at these consumer
difficulties. As an example, there are three separate things that
consumers find difficult about coinsurance:
Many are not sure who is responsible for paying the
indicated percentage. They are particularly confused when
presented with a coinsurance rate of 0 percent or 100 percent.
Many consumers have poor numeracy skills. They have
difficulty applying a percentage to a dollar figure.
They don't know what they have to pay. Coinsurance
percentages are applied to the contracted charge between the
health plan and the provider called the ``Allowed Amount.'' At
the point of shopping for a plan, or even when receiving
medical care, this is an unknowable number so there is no
bottom line for the consumer. Coinsurance of 75 percent might
be better than 80 percent coinsurance--depending on those
underlying contracted amounts.
While not as frequent, consumers also had difficult understanding
some covered service terms, like the difference between screenings and
diagnostic tests.
As a result, it is very difficult for consumers to figure out how
much coverage is offered by a health plan. Even skilled consumers were
leery of committing to a plan, because they were worried about the
`fine print.' Due to these concerns, consumers told us they dread
shopping for health insurance coverage.
SBC Helps Consumers
While the SBC does not reduce the underlying complexity of health
plans, testing showed it does help consumers make sense of the
coverage. In particular, consumers told us they liked:
Uniform layout of SBC--so they can line up forms for
different plans and compare them;
``Why this matters'' information--to provide a sense of how
important specific features are;
Having ``exceptions to coverage'' all in one place; and
Coverage Examples--for reasons discussed below.
Coverage Examples Were Transformational
Coverage examples are a new feature, typically not provided in
other plan summaries. For selected medical scenarios, these examples
show how much the underlying health care costs and how much the plan
would pay (Exhibit 1).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Testing revealed that these examples provided consumers with three
pieces of information they wouldn't otherwise have:
How much medical care costs--helps them to avoid
underinsuring
A bottom line showing what the patient owed--rolling up
myriad cost-sharing provisions
What the plan paid towards the services
Testing showed us that this last item was much more important than
one would guess. Traditional health plan disclosures focus on what the
patient pays towards costs. After a long list of costs paid by patient,
some consumers question whether or not health insurance is a good deal.
Showing what the plan paid--especially for an expensive illness
like cancer \7\--greatly increased consumers' willingness to make a
health plan selection and increased their confidence in the
selection.\8\ It reminded consumers of the benefit that they get from
purchasing insurance.
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\7\ During development of the SBC, a breast cancer scenario was
tested but not included in the initial requirements for the SBC.
Because of the high charges associated with this scenario (roughly
$100,000), this example generated the biggest consumer response among
the three that were tested. HHS has committed to including up to four
more coverage examples (for a total of six) in future revisions of the
SBC.
\8\ Consumers Union and Kleimann Communication Group, Early
Consumer Testing of the Coverage Facts Label: A New Way of Comparing
Health Plans, August 2011 and America's Health Insurance Plans [and]
Blue Cross Blue Shield Association Focus Group Summary, JKM Research,
May 2011.
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That's pretty powerful stuff!
Evidence from Polling
Survey evidence reinforces the findings from consumer testing. One
nationally representative survey found that an SBC type of benefit
ranked the highest among the many provisions in the ACA--showing it is
highly valued by consumers.\9\
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\9\ Kaiser Health Tracking Poll, November 2011.
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In order to see how well the SBC worked in practice, Consumers
Union conducted our own nationally representative survey to see whether
consumers used their new benefit when they shopped for private health
insurance in the Fall of 2012--the first season when the benefit was
available.\10\ We learned:
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\10\ L. Quincy, Early Experience With A New Consumer Benefit--the
Summary of Benefits and Coverage, Consumers Union, February 2013.
Awareness of the new benefit is low. Only about 50 percent
of consumers who shopped for or renewed private health
insurance coverage recalled seeing the SBC. Rates were even
lower for those who shopped for coverage on their own in the
---------------------------------------------------------------------------
non-group market.
Among shoppers that did see the SBC, their impressions were
very favorable. Over 50 percent were very or completely
satisfied with the specific features of the SBC, with very few
expressing any dissatisfaction. When asked to rate the
helpfulness of the SBC against other common sources of health
plan information, the SBC was rated as helpful most often.
Few consumers reported seeing the new feature called
``Coverage Examples.''
Anecdotal evidence from the fall suggests that insurers may need to
make it easier for shoppers and current enrollees to access their SBC,
particularly in the non-group market. They may also need to improve
quality control to ensure that SBCs are released without errors.\11\
---------------------------------------------------------------------------
\11\ Ibid. As an example, we saw SBCs where maternity was shown as
``not covered'' in the coverage example but failed to be listed in the
box describing non-covered services.
---------------------------------------------------------------------------
Who Should Bear the Cost of Complexity?
Complexity has a cost. When consumers can't confidently compare
their health plan options, they may find themselves underinsured or
fail to complete enrollment. Under-insured consumers act like uninsured
consumers--consuming too little care due to concerns about costs,
possibly leading to poorer health and greater medical expenses down the
road. And consumer confusion costs money, leading to great use of
customer help lines.\12\
---------------------------------------------------------------------------
\12\ UnitedHealth Group conducted a study which found that it
clearer Part D and Medicare advantage products would save an estimated
$4 million/year through reduced consumer calls. Industry wide savings
would be greater and consumer satisfaction greater still (as not
everyone who is confused call the help line).
---------------------------------------------------------------------------
In their comments responding to the proposed SBC rule, several
insurers were concerned about the cost of producing the SBC form for
consumers. At the high end, they estimated it would cost a dollar per
enrollee to produce the form.
We can debate what the right number is but for us, it comes down to
this: health insurance is necessary for the health and financial
security of families. With something this important and this expensive,
consumers should not be asked to shop with a blindfold on, that is,
with an incomplete idea how much coverage they are getting.
Hence, someone has to invest the time to craft the reliable,
comparative information like that found in the SBC. From a societal
perspective, it makes much more sense for the expert health insurer to
do it once, providing a clear summary for all future shoppers for the
policy. The alternative is for each individual consumer to slog through
the same analysis--or giving up and going without coverage or buying a
product that doesn't provide sufficient protection for their family.
And while some insurers and employers have crafted nice looking
summaries over the years these have one big problem--they don't use the
same format. And some have failed to promote important loopholes in the
coverage.
An estimated 170 million consumers purchase private health coverage
today. Many have a choice and would benefit from having a standard
method of comparing plans:
66 percent of employees whose employer offers coverage have
a choice of plans.\13\
---------------------------------------------------------------------------
\13\ Decoding Your Health Insurance: The New Summary of Benefits
and Coverage, Families USA, May 2012.
Additionally, many employees have an alternate coverage
---------------------------------------------------------------------------
option through their spouse's employer.
Consumers purchasing in the non-group market (approximately
19 million today) also face a choice of plans.
Even those with only one coverage option from their employer
benefits from having a consumer-tested, understandable summary that
shows them how to use their health plan and stays that same over time,
rewarding them for learning to use the Summary.
You can't have a functioning marketplace until consumers are armed
with the information they need to meaningfully compare products. Like
the nutrition facts panel on food or the EPA's miles per gallon sticker
on new cars, having a standard description across products greatly
facilitates shopping and encourages competition based on the underlying
value of the products.
Next Steps for the Summary of Benefits and Coverage
Few consumer disclosures are perfect when initially rolled out.
Evidence from testing and our survey suggest that the SBC could be
improved in several ways. For example:
Add more coverage examples, including at least one showing
an expensive illness like breast cancer.
Ensure that the medical costs displayed in the coverage
examples represent realistic price levels. The current use of
Medicare pricing is too low.
Test moving coverage examples closer to the front of the
form so that more consumers are aware of them.
Add a row for premium back to the form. While the tested
versions contained this information, it was removed in the
final rule.\14\
---------------------------------------------------------------------------
\14\ Opponents of premium information argued that it was not
specifically required by statute but testing and common sense shows
that it is integral to achieving the statutory goal of allowing
consumers to ``compare coverage.'' The NAIC recommendations conveyed to
HHS included recommendations for how to include premium information
when necessary underwriting information was not available.
Work with a designer to improve the look and feel of the
form.\15\
---------------------------------------------------------------------------
\15\ While the NAIC worked very hard to provide their
recommendations to the tri-agencies and successfully engaged a diverse
group of stakeholders, a designer has not yet been engaged to
professionally improve the look and feel of the form. As this report
shows, alternate approaches to layout may further improve consumers'
ability to use the form: http://www.naic.org/documents/
committees_b_consumer_information_110505_literacy_review.pdf
Engage in activities to increase consumer awareness of the
---------------------------------------------------------------------------
form.
Improve insurer oversight with respect to compliance with
the rule.
Require Consumer Testing and Monitoring of New Disclosures
The value of consumer testing has been firmly established.
Unfortunately, there is no uniform Federal policy with respect to pre-
testing and monitoring federally-required, consumer-facing disclosures.
\16\ As a result, many disclosures are not tested or monitored to
assess their consumer impact.
---------------------------------------------------------------------------
\16\ Impressive work in this area includes CFPB's the ``Know Before
You Owe'' design and testing efforts with respect to mortgage
disclosures (http://files.consumerfinance.gov/f/201207_cf
pb_report_tila-respa-testing.pdf) and the redesign of the energy star
label for appliances (http://www.energystar.gov/ia/business/downloads/
FTCs%20Appliance20Labeling%20Rule.
pdf).
---------------------------------------------------------------------------
Going forward, consumer pre-testing and post-launch monitoring
should be required and funded by the governmental entity that requires
the disclosure. This effort should be commensurate with the number of
consumers expected to view the disclosure. We recommend that all
findings from monitoring and testing be made publicly available, to
ensure independence and as an aid in the development of other materials
for consumers.
Thank you for the opportunity to comment on this very important
consumer benefit.
Submitted by:
Lynn Quincy,
Senior Health Policy Analyst,
Consumers Union.
Web Links for the SBC Testing Studies
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you very much.
And actually, I was just thinking what Senator--Ranking
Member Thune said--84 percent like it. I think it's, far and
away, the most popular thing in the entire Act. Isn't that
true? I won't go----
Ms. Quincy. That's what the Kaiser poll showed.
The Chairman. Now, Mr. Michael Livermore--as I indicated,
Executive Director, Institute for Policy Integrity, New York
University School of Law.
STATEMENT OF MICHAEL A. LIVERMORE,
EXECUTIVE DIRECTOR, INSTITUTE FOR POLICY INTEGRITY,
NEW YORK UNIVERSITY SCHOOL OF LAW
Mr. Livermore. Thank you very much, Mr. Chairman, Senator
Thune. It's a wonderful opportunity to be here and have the
opportunity to testify today.
The center that I run at NYU focuses on the use of cost-
benefit analysis to evaluate government policy. That's really
our area of expertise. And, as you know, cost-benefit analysis
has been around for decades. And the question it asks is
whether what we're buying for the public is worth the price tag
that we're asking them to pay. That's the fundamental question.
Today, of course, we're here to discuss provisions of the
Affordable Care Act, requiring insurance companies to disclose,
in a standard format, information to potential customers about
their plans. The idea is to give consumers more information so
they can make better health insurance decisions.
Now, naturally, there's going to be some costs associated
with standard disclosure. Agencies have estimated we're talking
around $70 million per year, give or take. But, looking at the
cost of the SBC, alone, without attending to the benefits, is
economically meaningless. The question is not whether there are
some costs, in an absolute sense, but whether the benefits
justify those costs. And compared to the potential benefits of
improved consumers' decisionmaking in the health insurance
market, the costs of the SBC are going to be utterly swamped.
Health insurance is a massive market in the United States;
and changes to the way individuals, families, and businesses
make decisions are likely to have significant consequences.
Even a small improvement in consumer decisionmaking can
generate very large economic returns in this market. More and
better information means consumers can make better decisions,
and it helps them find insurance products that fit their needs.
There's a substantial body of research in behavioral
economics, psychology, in cognition, about consumers make
decisions. Based on this research, we can see that health
insurance is a context that provides particularly high
challenges to consumers. It involves long-term probabilistic,
risk-based assessments of people's health, there's a long time
lag between buying insurance and when you actually need to rely
on it to pay for care--there can be. And you don't make these
types of health insurance decisions very often, so you don't
build the kind of experience base that allows you to make smart
decisions.
Each of these, alone, would make the decision difficult for
consumers, but, collectively, they really create major
challenges to consumers maximizing their benefit. So, this
disclosure really helps, in that respect.
A second benefit is the time-saving to consumers by having
a standardized, comparative document that they can utilize.
Time is money in the healthcare selection business, just as
everywhere else in life. No one would characterize collecting
and comparing insurance plans as a leisure activity. It's work.
It's no fun. So, for time-pressed Americans, who have
responsibilities to parents and families, communities,
children, in addition to the hours they spend at work, anything
that we can do, in public policy, to free up leisure time has
real economic value.
This information is also going to help value-conscious
consumers get the most bang for their buck. And smarter, more
informed consumers means that insurance companies will waste
less time and money designing and promoting products that don't
maximize values for consumers--the dollar--the value that they
get for their dollar.
Consumers who also understand their plans better are in a
better position to take advantage of coverage that's offered,
so they can access healthcare services when they need them,
which is going to lead to better health. Especially for
preventative care, we're talking about long-term savings for
the American economy.
Finally, a straightforward, standardized disclosure creates
incentives for insurance companies to compete on price,
benefits, and quality. So, by helping to improve consumer
decisionmaking, the SBC creates a virtuous cycle, where
consumers can make better choices between plans that are
already on offer, but also creates incentives for insurance
companies to provide better plans and better choices in the
future.
So, consumer disclosure has proven extremely important in a
variety of different marketplaces. It's hard to imagine going
to the grocery store and not being able to look at nutrition
labels or buy a new car without having access to fuel economy
labels. And health insurance, if anything, is a context that
screams out for this kind of disclosure requirement. It's
exactly the kind of context where consumers have the most to
benefit.
Now, one of the most promising features of the rule that I
saw, the SBC rule, as it exists, is that the agencies have
committed to continue testing and making the rule even better.
There are many areas where improvement is certainly possible.
Expansion of the coverage examples is one area that maybe we'll
have an opportunity to discuss some more.
But, in general, the rule does a very good job. It's a very
first--good first cut, and it puts consumers in a much better
position than they have been in the past.
[The prepared statement of Mr. Livermore follows:]
Prepared Statement of Michael A. Livermore, Executive Director,
Institute for Policy Integrity, New York University School of Law
Mr. Chairman, thank you for the opportunity to testify before the
Senate Committee on Commerce, Science, and Transportation today. My
name is Michael Livermore and I am the Executive Director of the
Institute for Policy Integrity at New York University School of Law.
Policy Integrity is a non-partisan think tank dedicated to improving
the quality of government decisionmaking through advocacy and
scholarship in the fields of administrative law, economics, and public
policy.
The focus of my testimony is section 2715 of the Public Health
Service Act, as added by the Patient Protection and Affordable Care
Act, which requires uniform disclosure standards in providing benefits
and coverage explanation to insurance applicants and enrollees. On
February 14, 2012, a Final Rule was published by the Department of
Health and Human Services, Department of the Treasury, and Department
of Labor on Summary of Benefits and Coverage and Uniform Glossary (the
SBC Rule) pursuant to this section.
My testimony will make three basic points:
Analysis conducted by the agencies prior to promulgation of the
final rule shows that the benefits of section 2715, which
included both improved consumer decisionmaking and improved
health outcomes, will outweigh the costs, likely by a
substantial margin.
The substantive requirements of section 2715 and the SBC Rule
accord with available evidence on consumer decisionmaking. In
particular, the use of examples and the standardization of
disclosure of benefits and coverage information will empower
consumers to process information about plan alternatives to
make more informed choices that better match their risk
preference and long-term needs.
The agencies have committed to continually testing, updating,
and improving the SBC Rule, which will lead to increased
performance and greater net benefits over time. Because many
regulatory contexts involve conditions of uncertainty, the
agencies have adopted an appropriate policy of moving forward
with well-justified measures while continually revising and
improving their regulatory requirements in the face of new
information.
The Benefits of Section 2715 and the SCB Rule Outweigh the Costs
In their final rule implementing the requirements of section 2715,
the agencies find that benefits are likely to outweigh costs. Annual
compliance costs are estimated at $73 million. Given the massive size
of the private health insurance market in the United States, even a
small improvement in consumer decisionmaking would overwhelm this
relatively modest cost.\1\
---------------------------------------------------------------------------
\1\ For general background on the role of cost-benefit analysis in
administrative decisionmaking, see Richard L. Revesz & Michael A.
Livermore, Retaking Rationality: How Cost-Benefit Analysis Can Better
Protect the Environment and Our Health (2008). This testimony is based
on comments submitted by the Institute for Policy Integrity to the
Department of Health and Human Services on July 6, 2011, http://
policyintegrity.org/documents/IPI_Letter_to_
HHS_7.6_.11_.pdf.
---------------------------------------------------------------------------
The agencies cite several ways in which the rule will benefit
consumers. First, improved access to information will allow consumers
to ``make better coverage decisions, which more closely match their
preferences with respect to benefit design, level of financial
protection, and cost.'' \2\ Improved consumption decisions will result
in increased consumer satisfaction.
---------------------------------------------------------------------------
\2\ 77 Fed. Reg. 8682.
---------------------------------------------------------------------------
The factual premise underlying this conclusion is that, without the
rulemaking, consumers would not have access to, and process, an optimal
amount of information when making health insurance decisions. There are
good reasons to believe that this is correct. Choosing a health
insurance plan is a complex decision, involving a wide range of
probabilistic judgments on the part of consumers. This decision is made
infrequently, and any feedback that consumers receive is attenuated by
time and intervening circumstances. Firms will not have the incentive
to present consumers with the socially optimal amount of information,
in the form most easily processed, if consumers cannot readily predict
their satisfaction levels based on product choices. Health insurance
is, therefore, a context that is very well suited to a government
disclosure requirement meant to improve consumer decisionmaking.\3\
---------------------------------------------------------------------------
\3\ For an overview of recent scholarship concerning how government
provision of information and improved ``choice architecture'' can
facilitate better consumer decisionmaking, see Richard H. Thaler & Cass
R. Sunstein, Nudge: Improving Decisions about Health, Wealth, and
Happiness (2008).
---------------------------------------------------------------------------
Second, the rule is expected to ``benefit consumers by reducing the
time they spend searching for and compiling health plan and coverage
information.'' \4\ Search time reduction can be a substantial savings
and can be as valuable as pecuniary savings or improved health.
Collecting information about health insurance plans is not a leisure
activity; it is a form of work that carries disutility: hourly wages
serve as a reasonable proxy for the rate at which individuals are
willing to trade leisure for monetary compensation. The agencies cite
research by the National Bureau of Economic Research that shows that
making health insurance decisions, in particular, involves substantial
search costs.\5\ This type of information gathering activity is also
redundant with similar efforts undertaken across the economy by other
individuals: if a trustworthy agent can act on behalf of the American
public to compile relevant information in an easily accessible format,
it represents a real economic savings.
---------------------------------------------------------------------------
\4\ 77 Fed. Reg. 8682.
\5\ 77 Fed. Reg. 8681.
---------------------------------------------------------------------------
Third, the rule is anticipated to ``result[] in cost-savings for
some value-conscious consumers who today pay higher premiums because of
imperfect information about benefits.'' \6\ This consumer benefit could
be interpreted as a transfer from insurance companies to their
consumers, rather than a pure efficiency gain. However, the existence
of these types of rents creates incentives for firms to compete, in an
economically unproductive way, to capture them, at the very least
through advertising. Equally problematic, from an efficiency
perspective, would be attempts by insurance companies to increase these
rents through product design, which not only involves the inefficient
(from a social perspective) allocation of firm resources, but results
in a marketplace with distorted consumer choices.
---------------------------------------------------------------------------
\6\ 77 Fed. Reg. 8682-83.
---------------------------------------------------------------------------
Finally, by ``making it easier for consumers to understand the key
features of their coverage,'' the rule is anticipated to ``enhance
consumers' ability to use their coverage.'' \7\ If consumers are better
able to access health care services when they need them, it can lead to
substantial health benefits, which has obvious economic value.
Increased utilization of preventative health care services, in
particular, can lead to social value if long-term chronic or
catastrophic health outcomes can be avoided through early medical
intervention.\8\
---------------------------------------------------------------------------
\7\ 77 Fed. Reg. 8683.
\8\ Of course, some preventative care interventions are more
justified on cost-effectiveness grounds than others. See generally,
Joshua T. Cohen, Does Preventive Care Save Money? Health Economics and
the Presidential Candidates, 358 N. Engl. J. Med. 881 (2008).
---------------------------------------------------------------------------
An additional, longer-term benefit of the rule, which is alluded to
in the final rulemaking document, is that ``health insurance issuers
and employers may face less pressure to compete on price, benefits, and
quality'' if consumers lack appropriate information.\9\ The consequence
is a marketplace with a distorted set of product choices. By helping
improve consumer decisionmaking, the rule can facilitate a virtuous
circle in which consumer satisfaction is increased not only through
better choice between existing products, but also through the creation,
and offer for sale, of insurance products that better conform to
consumer preferences.
---------------------------------------------------------------------------
\9\ 77 Fed. Reg. 8681.
---------------------------------------------------------------------------
While the agencies provide a qualitative discussion of the benefits
of the rulemaking, there is no quantitative estimate of regulatory
benefits. Since President Reagan issued Executive Order 12291 in 1981,
there has been a stated policy within the Executive of quantifying and
monetizing regulatory costs and benefits, and the agencies recognize
that the current Executive Order governing regulatory review
``emphasizes the importance of quantifying both costs and benefits.''
\10\ The types of benefits anticipated by the rule, including increased
consumer satisfaction, improved health outcomes, and time savings are
all, in principle, amenable to quantification and monetization.
---------------------------------------------------------------------------
\10\ 77 Fed. Reg. 8680.
---------------------------------------------------------------------------
Although ongoing analysis of the effects of the rulemaking,
including quantification and monetization of regulatory costs and
benefits, is appropriate (as discussed below), the agencies followed a
prudent path by moving forward with this regulatory action and avoiding
unnecessary delay in the service of additional ex-ante analysis.
Executive Order 12866 (still operative) encourages agencies to utilize
``alternatives to direct regulation, including . . . providing
information upon which choices can be made by the public,'' \11\ and
Executive Order 13563 encourages agencies to ``consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public . . . includ[ing] disclosure requirements as well
as provision of information to the public in a form that is clear and
intelligible.'' \12\ The difficulty of predicting the effects of
disclosure requirements ex-ante, however, sometimes interferes with the
ability to quantify and monetize benefits in advance. Nevertheless, the
benefits of disclosure requirements will often exceed their costs,
because they are among the least restrictive forms of regulation.
Furthermore, the costs of alternative disclosure requirements are
likely to be similar: the important question is often not whether some
form of disclosure is economically justified, but how to design the
disclosure to maximize its net benefits. In these cases, the inquiry
associated with cost-benefit analysis collapses into a technical
exercise of how best to design the disclosure to improve consumer
decisionmaking.
---------------------------------------------------------------------------
\11\ 58 Fed. Reg. 51736.
\12\ 76 Fed. Reg. 3822.
---------------------------------------------------------------------------
The Rule Is Based on the Available Evidence Concerning Consumer
Decisionmaking
Extensive research in the fields of behavioral economics,
psychology, and cognition show that it is not enough to simply
``provide information.'' \13\ Consumers are known to have cognitive
biases that affect their decisionmaking. Academic research on how
individuals absorb and process information can inform the design of
government policy to deliver the best possible results for the American
Public.\14\
---------------------------------------------------------------------------
\13\ Christine Jolls et al., A Behavioral Approach to Law and
Economics, in Cass R. Sunstein, Behavioral Law and Economics 13, 42
(Cass R. Sunstein ed., 2000).
\14\ See e.g., Judith H. Hibbard, et al., Informing Consumer
Decisions in Health Care: Implications from Decision-Making Research,
75 Milbank Q. 395 (1997).
---------------------------------------------------------------------------
Professor Cass Sunstein, until recently the administrator of the
Office of Information and Regulatory Affairs, has argued that even
seemingly small alterations in presentation format can ``highlight
different aspects of options and suggest alternative heuristics'' that
have demonstrable effects on people's behavior.\15\ Interventions
taking advantage of these effects can be strikingly cost-benefit
justified, since these psychological cues typically cost very
little.\16\
---------------------------------------------------------------------------
\15\ Cass R. Sunstein, Introduction, Behavioral Law and Economics
1, 1.
\16\ Hunt Allocott, Beliefs and Consumer Choice (MIT Working Paper,
Nov. 2010), available at http://web.mit.edu/allcott/www/papers.html.
---------------------------------------------------------------------------
OIRA has issued guidance on the use of disclosure to achieve
regulatory ends.\17\ According to this guidance document, summary
disclosure should be concise and straightforward to ``highlight the
most relevant information'' and to ``increase the likelihood that
people will see it, understand it, and act in accordance with what they
have learned.'' \18\ Disclosure should avoid technical language or
extraneous information that may be inaccessible to the average reader.
OIRA has cautioned that ``[u]nduly complex and detailed disclosure
requirements may fail to inform consumers'' because the disclosure
``may not be read at all, and if it is read, it may not have an effect
on behavior'' because it is poorly understood.\19\
---------------------------------------------------------------------------
\17\ Memorandum from Cass R. Sunstein, Administrator, Office of
Information and Regulatory Affairs to Heads of Exec. Dep'ts and
Agencies 4 (June 18, 2010).
\18\ Id. at 3.
\19\ Office of Information and Regulatory Affairs, 2010 Report to
Congress on the Benefits and Costs of Federal Regulations and Unfunded
Mandates on State, Local, and Tribal Entities, Appendix D: Disclosure
and Simplification as Regulatory Tools 55 (2010).
---------------------------------------------------------------------------
Presenting information in this manner coincides with the statutory
mandate to account for linguistic and educational barriers to health
and literacy.\20\ There are large variations in the ``degree to which
individuals have the capacity to obtain, process and understand basic
health information.'' \21\ The Center for Health Care Strategies (CHCS)
notes that ``[w]hile low health literacy is found across all
demographic groups, it disproportionately affects non-white racial and
ethnic groups; the elderly; individuals with lower socioeconomic status
and education; people with physical and mental disabilities; those with
low English proficiency (LEP); and non-native speakers of English.''
\22\ Indeed, low health literacy has been estimated to cost the U.S.
economy between $106 billion and $236 billion annually. \23\ Presenting
information in a format that is easy to understand and to act on will
allow a wide range of consumers to make more informed insurance
choices. If the SBC Rule prevents even a small portion of the costs of
low health literacy, it will be extremely well justified in economic
terms.
---------------------------------------------------------------------------
\20\ Sec. 2715(b)(2).
\21\ Stephen A. Somers & Roopa Mahadevan, Health Literacy
Implications of the Affordable Care Act 4, Center for Health Care
Strategies, Inc., November 2010 (report commissioned by the National
Institute of Medicine).
\22\ Center for Health Care Strategies, Inc., Health Literacy
Implications of the Affordable Care Act 1, Missouri Foundation for
Health's Health Summit, Dec. 9, 2010, available at www.mffh.org/mm/
files/Summit_Mahadevan_handout.pdf.
\23\ Id.
---------------------------------------------------------------------------
The SBC Rule was developed after a consultation process facilitated
by a working group convened by the National Association of Insurance
Commissioners that was composed of ``a diverse group of stakeholders''
and that ``considered the results of various consumer testing sponsored
by both insurance industry and consumer associations.'' \24\ The rule
references two focus group exercises, one conducted by America's Health
Insurance Plans (a trade association) and the other conducted by
Consumers Union.\25\ This testing supports the agencies' conclusion
that the format of the disclosure information helped consumers make
informed choices about their options.
---------------------------------------------------------------------------
\24\ 77 Fed. Reg. 8670.
\25\ 77 Fed. Reg. 8674.
---------------------------------------------------------------------------
In addition to the standardized, simplified language used to
disclose plan features, two benefits scenarios are included to
illustrate plan differences. The common scenarios partially utilize the
availability heuristic--people's tendency to assess risk depending on
how readily examples come to mind. The availability heuristic can, in
this context, help counter detrimental overconfidence. Consumers tend
to be overoptimistic regarding risks to life and health, which can lead
them to select under-inclusive insurance coverage. \26\ If people can
easily think of relevant examples, they are far more likely to be
concerned about those risks than if they cannot. Presenting common
scenarios can encourage a realistic weighing of these scenarios in
insurance purchasing.
---------------------------------------------------------------------------
\26\ See generally David A. Armor and Shelley E. Taylor, When
Predictions Fail: The Dilemma of Unrealistic Optimism, in Heuristics
and Biases: The Psychology of Intuitive Judgment (Dale Griffin and
Daniel Kahneman eds., 2002).
---------------------------------------------------------------------------
The Agencies Plan to Continue Testing and Improving its Disclosure
Format
To maximize the benefits of the regulatory system, it is important
to continually monitor and update regulatory programs in light of new
information.\27\ OIRA has found that this may be particularly important
``[w]ith respect to summary disclosure [because] agencies will often be
able to learn more over time.'' \28\
---------------------------------------------------------------------------
\27\ Michael Greenstone, Toward a Culture of Persistent Regulatory
Experimentation and Evaluation, in New Perspectives on Regulation 111,
113 (David Moss and John Cisternino eds., 2009).
\28\ OIRA 2010 Report, supra note 19 at 101.
---------------------------------------------------------------------------
Section 2715 requires a continual process ``review[ing] and
update[ing]'' \29\ the effects of the SBC Rule. The agencies have
committed to measuring the effect of disclosure on behavior through
ongoing empirical analysis and to modifying the standards accordingly.
In particular, the agencies are ``taking a phased approach to
implementing the coverage examples and intend to consider additional
feedback from consumer testing in the future.'' \30\ Revisions should
be made ``to the extent. . .the evidence warrants,'' \31\ and it should
be recognized that empirical findings may support retention of the
agencies' initial design choice.
---------------------------------------------------------------------------
\29\ Sec. 2715(c).
\30\ 77 Fed. Reg. 8674.
\31\ Id.
---------------------------------------------------------------------------
Best practices require testing of potential disclosure formats,\32\
and as OIRA guidance documents make clear, testing should be a major
component of any label evaluation process.\33\ The agencies now have
the opportunity to test the SBC design in market conditions. Questions
that should be asked include ``whether users are aware of the
disclosure, whether they understand the disclosure, whether they
remember the relevant information when they need it, whether they have
changed their behavior because of the disclosure, and, if so, how.''
\34\
---------------------------------------------------------------------------
\32\ See Sunstein, supra note 17 at 6.
\33\ OIRA 2010 Report, supra note 19 at 56.
\34\ Sunstein, supra note 17 at 5.
---------------------------------------------------------------------------
Conclusion
The SBC Rule is an important move towards increased transparency in
the health insurance market, with the ultimate aim of improving
consumer welfare via informed consumer decisionmaking. Given the
relatively low costs of implementing the rule (compared to the size of
the market and potential benefits), a primary focus should continue to
be testing and improving the design of summary disclosure and labeling
to maximize the benefits of disclosing information. Consumers must be
able to select insurance policies that better match their preferences
and unique health needs if consumer satisfaction and improved health
outcomes are to be realized. The current rule is likely to yield
substantial net benefits, and the costs of delay associated with
further pre-implementation analysis is not justified: the agencies have
appropriately chosen to move forward with a rulemaking now, while
committing themselves to further ex-post study. The SBC template is
grounded in sound behavioral, economic, and psychological
understandings of how consumers make choices, and further research, and
refinement, will continue to increase the utility of this important
consumer protection measure.
The Chairman. That's it?
Mr. Livermore. Yup.
The Chairman. OK.
Mr. Livermore. Thank you.
The Chairman. All right.
Peggy O'Kane, President, National Committee for Quality
Assurance.
STATEMENT OF MARGARET O'KANE, PRESIDENT,
NATIONAL COMMITTEE FOR QUALITY ASSURANCE
Ms. O'Kane. Thank you, Mr. Chairman, and thank you, Ranking
Member Thune. And I'm very pleased to be here today for this
important hearing on increasing transparency in healthcare.
My name is Margaret O'Kane, and I'm President of the
National Committee for Quality Assurance. We're an independent
nonprofit organization founded in 1990, to improve quality and
value in healthcare through measurement, transparency, and
accountability; so it's right there in our founding reason for
being. We accredit health plans, and we measure the quality of
both the care that they preside over and the members'
experience.
Our nation is making great strides in using transparency to
improve quality and value in healthcare. And, of course, value
means quality--the amount of quality or health that you get for
your healthcare dollar. This includes public reporting of
standardized performance measures, performance-based
accreditation, and Affordable Care Act innovations, like the
standardized Summary of Benefits and Coverage, which the other
two have already spoken about so eloquently.
The ACA provision linking Medicare Advantage bonus payments
to performance has been especially effective, and recent
research shows, beneficiaries are now more likely to pick high-
value plans. In fact, we've seen Medicare Advantage plans'
quality results increasing significantly since the ACA linked
bonus payments to performance scores.
The ACA will further harness transparency to promote
quality and value through State health insurance exchanges.
Exchanges represent a unique opportunity to engage consumers in
using transparent quality and cost data together to find the
best value. And, of course, many consumers haven't had a choice
of plans for a long time, so this is actually a real
marketplace that the exchange will create.
Value means more than just low premiums, which may reflect
low quality or high cost-sharing barriers to care. Value is the
quality of the health and well-being you get for the total cost
you pay, which includes premiums, copays, and deductibles.
Helping consumers find the best value requires designing
exchanges in ways that make our cost and quality information
easy to use. If done effectively, this will also cause plans to
compete, based on value, not just cost, and further drive
consumer engagement and market performance.
The complexity of cost and quality information can quickly
overwhelm consumers. So, how exchanges present the data matters
a great deal. Groups like Consumer Reports and behavioral
economists, like Mr. Livermore's center, are uniquely skilled
in developing ways to communicate complex information
effectively to consumers. Applying lessons from the science of
behavioral economics and choice architecture can also help
consumers to get the best value plans.
In addition, the Federal Government is developing a quality
rating system for exchanges, and we have high hopes that it
will help consumers make more informed purchasing decisions. Up
until now, large employers, the Federal Government, and many
State Medicaid programs have been important users of quality
information, and have pushed for and rewarded quality results.
However, public reporting to consumers has had minimal impact.
Exchanges have enormous potential to change that. We are
particularly encouraged by our research that shows consumers,
especially the uninsured who will be shopping for exchange
coverage, want cost and quality information when they're
choosing plans.
Given the many challenges in establishing exchanges, few
states are yet actively working to use transparency to engage
patients on cost and quality, and HHS has yet to issue rules on
ACA activities to improve quality. Once exchanges are
functioning, however, Congress should closely monitor Federal
and State efforts, and require HHS to report on them, to ensure
that this important opportunity to drive a value agenda is not
lost.
Despite the progress we are making, there are still
important gaps in transparency. For example, we're not able to
compare quality in fee-for-service Medicare with Medicare
Advantage plans, as MEDPAC has recommended. We need
transparency on the prices of healthcare services that drives
costs.
I brought my Time magazine. I don't know how many----
The Chairman. Yes.
Ms. O'Kane.--of you have seen. This guy's been on every TV
show that I watch.
The Chairman. It's must-reading, isn't it?
Ms. O'Kane. It really is. And I think it's very salient to
consumers. Consumers are really shocked when they read this.
So, I think it's kind of a golden opportunity to educate people
more about what healthcare costs, and help them become part of
driving the solution.
We need to make transparency and consumer choice part of a
broader value strategy that includes payment and delivery
system reforms. We also must do more to understand how
transparency can better engage consumers in taking a more
active role in their own health.
But, at least we're heading in the right direction. And I
think transparency, to me, is foundational to everything we do
in public policy.
So, thank you so much for the opportunity to be here today.
[The prepared statement of Ms. O'Kane follows:]
Prepared Statement of Margaret O'Kane, President,
National Committee for Quality Assurance
Chairman Rockefeller, Ranking Member Thune, distinguished committee
members, thank you for inviting me to this important hearing on
increasing transparency in health care. I am Margaret O'Kane, President
of the National Committee for Quality Assurance. NCQA is an
independent, nonprofit organization founded in 1990 to improve quality
and value in health care through measurement, transparency and
accountability.
Our nation is making great strides in using transparency to improve
quality and value in health care through public reporting of
standardized performance measures, performance-based accreditation and
Affordable Care Act (ACA) innovations like the standardized Summary of
Benefits and Coverage. The ACA provision linking Medicare Advantage
bonus payments to performance has been especially effective and recent
research shows beneficiaries are more likely to pick high-performing
plans. In fact, we have seen Medicare Advantage plans' quality results
increasing significantly since the ACA linked bonus payments to
performance scores.
The ACA will further harness transparency to promote quality and
value through state health insurance Exchanges. Exchanges represent a
unique opportunity to engage consumers in using transparent quality and
cost data together to find the best value. Value means more than low
premiums, which may reflect low quality or high cost-sharing barriers
to care. Value is the quality of the health and well-being you get for
the total cost you pay, which includes premiums, copays and
deductibles.
Helping consumers find the best value requires designing Exchanges
in ways that promote competition among plans based on value, rather
than premiums alone. The ACA requires a `quality rating system' for
Exchange plans that once deployed should be a strong step towards
helping consumers find high-value plans. In addition, building
Exchanges to promote value requires Web portals and other outreach
materials that make cost and quality information easy to find and use.
The complexity of the information can quickly overwhelm consumers, so
how Exchanges present data matters a great deal. Groups like Consumer
Reports are uniquely skilled in developing approaches to communicate
this information effectively to consumers. Applying lessons from the
science of behavioral economics and ``choice architecture'' can also
help guide consumers to plans offering the best value.
Up until now, large employers, the Federal government and many
state Medicaid programs have been important users of quality
information and have pushed for quality results. However, public
reporting of cost and quality information to consumers has, thus far,
had minimal impact. Exchanges have enormous potential to change that.
We are particularly encouraged by our research finding that consumers--
especially the uninsured, who will be shopping for Exchange coverage--
want cost and quality information when choosing plans and providers.
Given the many challenges in establishing Exchanges, few states are
currently working on all the potential strategies to use transparency
to engage consumers on cost and quality. Once the Exchanges get past
the immediate job of getting enrollment systems into place, however,
Congress should encourage both Federal and state Exchanges to support
innovation and consumer engagement using the many potential strategies
available. Congress should also consider having HHS report on Exchange
progress on transparency.
Despite the progress we are making, there are still important gaps
in transparency. For example, we are not able to effectively compare
quality in Medicare fee-for-service with Medicare Advantage plans,
something MedPAC has recommended to change.\1\ We need much greater
transparency on the prices of health care services that drive costs. We
must make transparency and consumer choice part of a broader value
strategy that includes payment and delivery system reforms. We also
must do more to understand how to use transparency to better engage
consumers in taking a more active role in their own health and health
care.
---------------------------------------------------------------------------
\1\ MedPAC Report to Congress, March 2010: http://medpac.gov/
documents/Mar10_Entire
Report.pdf.
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Public Reporting of Standardized Measurement: There is now
widespread use of standardized, audited performance measures like the
Healthcare Effectiveness Data and Information Set (HEDIS)\2\ and the
Consumer Assessment of Healthcare Providers and Systems Survey
(CAHPS).\3\ For 20 years, we have publicly reported results from
HEDIS, the most widely used and respected performance measurement set
in health care. HEDIS includes more than 70 measures of proven,
effective care--and of waste that increases costs and harms patients.
CAHPS measures patient experience, such as whether patients get care
when they need it; whether physicians listen to patients and explain
things in a way they can understand; and whether customer service is
helpful and respectful.
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\2\ HEDIS is a registered trademark of NCQA.
\3\ CAHPS is a registered trademark of the Agency for Healthcare
Research and Quality (AHRQ), which oversees the survey.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
More than 125 million enrollees (2 of every 5 Americans) are
enrolled in a health plan that submits audited clinical quality and
patient customer experience data to NCQA. NCQA translates that data
into health plan ``report cards'' that everyone can see for free on the
www.ncqa.org website. We also use the data to publish plan rankings in
Consumer Reports magazine and to develop our annual State of Health
Care Quality Report.\4\ Measuring and publicly reporting results are
essential for driving, and holding plans accountable for, needed
improvement in quality and cost. The result is dramatic improvement
over time in areas like optimal care for diabetes and hypertension--
saving both lives and money.
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\4\ http://www.ncqa.org/Portals/0/State%20of%20Health%20Care/2012/
SOHC%20Report%20
Web.pdf
Estimated Savings if All Plans Performed as Well as the Top 10%
------------------------------------------------------------------------
MEASURE AVOIDABLE HOSPITAL COSTS
------------------------------------------------------------------------
Breast Cancer Screening $329 million-$332 million
------------------------------------------------------------------------
Cholesterol Management $935 million-$2.1 billion
------------------------------------------------------------------------
Controlling High Blood Pressure $1.4 million-$2.5 billion
------------------------------------------------------------------------
Diabetes Care--HbA1c Control $294 million-$614 million
------------------------------------------------------------------------
Osteoporosis Management $12.4 million-$32 million
------------------------------------------------------------------------
Persistent Beta-Blocker Treatment $5.5 million-$30 million
------------------------------------------------------------------------
Smoking Cessation $831 million-$900 million
------------------------------------------------------------------------
TOTAL $2.4 billion-$6.5 billion
------------------------------------------------------------------------
Performance-Based Accreditation: HEDIS and CAHPS are essential
components of NCQA's performance-based Health Plan Accreditation
program that measures and publicly reports on the quality of care and
patient experience that plans deliver. More than 136 million Americans
are in NCQA-Accredited plans, a 30 percent increase since 2009. Most
state Medicaid programs also require or recognize NCQA Accreditation,
as does the Medicare Advantage program and the Federal Employees Health
Benefit Program. The ACA specifically requires all Exchange plans to
have accreditation, based on the NCQA model.
Transparency & the Affordable Care Act
The ACA includes several important transparency advances that will
promote quality and value. The standardized Summary of Benefits and
Coverage is already making it easier for consumers to compare plan
benefits and costs to identify affordable coverage, a critical first
step toward quality care. The ACA further promotes transparency through
Medicare Advantage performance-based bonuses, state Exchange
accreditation and public reporting requirements.
Medicare Advantage Star Ratings: The ACA requires using
transparency to drive Medicare Advantage improvements through bonuses
to plans based on a publicly reported 5-Star Rating system of clinical
quality and patient experience. Most states also now use pay-for-
performance systems to drive improvements in Medicaid. In just the two
first years of the Medicare Advantage bonus system, more than 25
percent of plans have improved their HEDIS scores and the number of
highest-rated 5-Star plans has increased from 3 to 11. Medicare posts
Star Ratings on the www.medicare.gov plan finder to help beneficiaries
make informed enrollment decisions. The plan finder also flags
consistently poor performing plans and discourages beneficiaries from
enrolling in them.
Recent research shows that Medicare beneficiaries are more likely
to pick plans with higher star ratings. The study found that a one star
increase was linked to a 9.5 percent greater likelihood of enrollment
for new beneficiaries and a 4.5 percent greater likelihood for those
switching plans.\5\ In short, public reporting is helping consumers
find high value plans, which should lead to better care for
beneficiaries and will further encourage those plans to improve quality
and lower costs.
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\5\ Howell, Reid, Shrank, Association Between Medicare Advantage
Plan Star Ratings and Enrollment, Journal of the American Medical
Association, January 2013 http://jama.jamanet
work.com/article.aspx?articleid=1557733
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We believe Star Ratings could have more impact if the plan finder
listed highest quality plans first instead of listing plans with the
lowest estimated beneficiary costs first, as it does now. Research
shows ``what consumers see first will frame their understanding of the
rest of information--in effect, creating a mental model for them . . .
(that) influences the consumer's final decision.'' \6\
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\6\ Choice Architecture: Design Decisions that Affect Consumers'
Health Plan Choices, Kleimann Communication Group and Consumers Union,
July 2012, http://www.con
sumersunion.org/pdf/Choice_Architecture_Report.pdf
---------------------------------------------------------------------------
Building State Health Insurance Exchanges to Promote Value: One of
the ACA's most important transparency advances begins this fall, when
health insurance Exchanges open for enrollment. Exchanges have great
potential to realign market forces if designed to promote competition
among plans based on value.\7\ This marks substantial change from the
current insurance market, which encourages competition based on low
premiums alone that may reflect poor quality or high cost-sharing
barriers to care.
---------------------------------------------------------------------------
\7\ Building State Exchanges To Get Better Value, National
Committee for Quality Assurance, 2012, http://www.ncqa.org/
PublicPolicy/Exchanges.aspx
---------------------------------------------------------------------------
Importantly, the law also requires the Secretary to develop a
`Quality Rating System' for Exchange plans. NCQA is supporting CMS in
the work on this new rating system--under the leadership of Booz Allen
Hamilton and in collaboration with Pacific Business Group on Health. We
have high hopes that it will be a critical tool for Exchanges to help
consumers make more informed purchasing decisions.
Health plans have many tools they can use to promote quality.
They can use ``value-based insurance design,'' or ``smart
cost-sharing'' that reduces barriers to prevention and good
management of chronic conditions, averting costly
complications.
They can develop networks and encourage enrollees to use
high-quality providers.
They can remind enrollees and providers about important
needs like routine screening and prescription refills.
They can promote shared decision making to encourage
patients and providers to make informed treatment choices
together, based on objective, current science on the pros and
cons of various options.
They can promote quality by supporting and encouraging
enrollees to get care in recognized PCMHs and ACOs, delivery
system reforms focused on improving cost and quality.
Today, cost and quality vary widely among health plans because
people rarely help understanding plan value. The problem is compounded
because people often believe that more services automatically mean
better care (rather than waste and the potential for harm), or that
more expensive care is always more effective. This is not true. High
quality care is not always the most expensive care for a number of
reasons. Expenses may be driven up by unnecessary utilization or by
high prices.
Because higher costs do not necessarily lead to higher quality, it
is critical to educate consumers on the concept of value and to
encourage them to consider both cost and quality data when selecting
plans and providers. Informed consumers can help elevate the importance
of value in health care by shopping for and choosing plans and
providers with the highest quality and lowest costs.
Consumers Want Transparent Cost & Quality Information: NCQA
research with the California Healthcare Foundation found that with
help, consumers quickly understand that quality does not necessarily
cost more--and that it can cost less.\8\ Consumers generally need help
to understand this, as it is not intuitive for most people. However,
once consumers do understand it, they are greatly interested in using
cost and quality information together to help them select a health plan
or physician organization. We also found that the people most
interested in this information are the uninsured who will be accessing
health care coverage through the Exchanges.
---------------------------------------------------------------------------
\8\ Value Judgment: Helping Health care Consumers Use Quality and
Cost Information, http://www.ncqa.org/Portals/0/Public%20Policy/
CHCF%20ValueJudgmentQualityCostInformation
.pdf
---------------------------------------------------------------------------
Exchanges can advance transparency on cost and quality by:
Helping Exchange shoppers understand value.
Helping Exchange shoppers find high-value plans.
There are additional important principles Exchanges should follow
to help consumers make the most of transparent cost and quality
information. Exchanges need to:
Present information to consumers as simply as possible.
Studies and experience shows that too much information can bog
down the enrollment process or prevent someone from choosing a
plan.
Build from existing measures and data collection systems to
ensure straightforward and efficient implementation. This will
help align efforts to improve quality and provide information
on performance to consumers and regulators, limiting the burden
on states, plans and the federal government.
Limit data collection to data that has a clear use; there is
considerable cost for reporting unused data.
Add more information, new measures and quality improvement
and assurance strategies over time. Give stakeholders the
opportunity to comment on direction, and give plans and states
the opportunity to implement system changes.
Helping Exchange Shoppers Understand Value: One of the most
important things Exchanges can do to promote value is help shoppers
understand the need to look beyond premiums to total out-of-pocket
costs and quality ratings. Many Exchange shoppers do not currently have
insurance and may have low health literacy and scant knowledge about
total coverage costs or how to evaluate plan quality. Exchanges that
address this information gap will help people find plans that produce
better outcomes at lower costs.
Exchange shoppers need to understand copays and deductibles in
addition to premiums. In the Massachusetts health Exchange, for
example, many enrollees chose plans based on low premiums alone, only
to discover when seeking care that they must also pay deductibles and
copays. Cost sharing may be significant in the lower-premium Silver and
Bronze plans that will attract many modest-income Exchange shoppers,
but high cost sharing discourages people, especially those with modest
incomes, from getting care.\9\ \10\ When cost sharing discourages use
of necessary, cost-effective care, the result can be expensive,
preventable problems. The failure to treat preventable problems up
front will continue to drive up health care costs and make coverage
difficult to afford.
---------------------------------------------------------------------------
\9\ Healthcare Spending and Preventive Care in High-Deductible and
Consumer-Directed Health Plans, Buntin et al, American Journal of
Managed Care, March 2011.
\10\ Nearly Half of Families In High-Deductible Health Plans Whose
Members Have Chronic Conditions Face Substantial Financial Burden,
Galbraith et al, Health Affairs, May 2011.
---------------------------------------------------------------------------
Shoppers also are not likely to know that Exchange plans must
report on measures of clinical quality (like the HEDIS measures) and on
``experience of care'' measures (like the CAHPS measures). Exchanges
that help consumers understand how to use total cost and quality data
will see more of them choosing high-value plans, and encourage insurers
to compete on improving both cost and quality scores. That will
maximize consumer-driven market forces to promote better value.
Helping Exchange Shoppers Find Value: Once Exchange shoppers
understand the importance of total cost and quality, the next step is
making it easy for shoppers to find and use this information when they
choose a health plan. Exchanges can accomplish this by using Web
portals and report cards that employ choice architecture.
Most shoppers will not know how to assess complex cost and quality
data, even if they understand the importance of total cost and quality.
Nor will they want to spend a lot of time evaluating plan choices. By
structuring choices properly using choice architecture, shoppers will
not need to understand every detail and still end up in high-value
plans.
Report Cards and Web Portals: Exchanges Web portals and other tools
will help shoppers evaluate plans. How Exchanges craft these tools can
have an enormous impact on whether shoppers choose high-value plans.
Exchanges should ``feature quality information as prominently as
costs,'' says Informed Patient Institute Executive Director Carol
Cronin. Cronin analyzed 70 health plan report cards for AARP and found
that the most useful ones ``roll up'' quality measures into a single
score that consumer can interpret ``at a glance.'' \11\ They also offer
more details for consumers who want to dig deeper.
---------------------------------------------------------------------------
\11\ http://www.aarp.org/content/dam/aarp/health/
medicare_insurance/2011-07/2011-cro
nin-report-final.pdf
---------------------------------------------------------------------------
To ensure that Web portals and report cards promote value,
Exchanges should:
Present easy-to-understand plan ratings that combine quality
and cost rankings (e.g., through the to-be-developed Federal
Quality Rating System).
Provide detailed (but easy to understand) plan ratings
(e.g., how well plans help enrollees ``Stay Healthy,'' ``Get
Better'' and ``Live With Illness'').
Make it easy to see which plans are better at providing
high-quality care, like prevention and care management, so
consumers can avoid care they do not want, like preventable
hospital stays and surgeries. (This information is included in
HEDIS data.)
Estimate total costs for care of common chronic conditions,
like diabetes, and high-cost situations, like childbirth, so
low premiums do not lure people into plans with high cost
sharing.
Create tools to recommend high-value plans based on consumer
preference (e.g., doctors they want to keep, plans that manage
a specific chronic condition well).
Recommend high-value plans or automatically enroll people in
high-value plans if they do not choose a plan on their own.
Default enrollment is a powerful financial incentive for plans
to improve their ratings.\12\
---------------------------------------------------------------------------
\12\ For more information on ratings and decision support, see
``Exchange Quality Solutions: Ratings and Decision Support Tools.''
http://www.ncqa.org/LinkClick.aspx?fileticket=RNqdq-GjOnU%3D&tabid=61
Choice Architecture: Marketers have long used choice architecture
to influence shoppers, which is why candy bars and other impulse-
purchase items are in checkout lanes. School cafeterias are now using
choice architecture to promote healthier choices: making it easier to
reach fruits and vegetables than French fries and desserts sells more
fruits and vegetables, even though fries and desserts are still
available. Exchanges that make high-value plans ``easier to reach''
will also see more shoppers choose high-value plans, even with other
options available.
Consumers Union's Lynn Quincy says Exchange planners should
``abandon the image of a careful shopper capable of weighing the myriad
costs and benefits of their health insurance options.'' Her research on
how consumers make health plan choices shows they want value
information, but need help finding it.\13\ Exchanges should provide
shortcuts that make it easy to compare value and avoid jargon and
complex math.
---------------------------------------------------------------------------
\13\ Early Consumer Testing of the Coverage Facts Label: A New Way
of Comparing Health Insurance http://www.consumersunion.org/health.html
---------------------------------------------------------------------------
Understanding how people make choices is critical when designing
Web portals and report cards to promote value. The standard economic
assumption that rational self-interest guides choice is often not the
case, says Harvard School of Public Health professor, Katherine
Baicker. Consumers instead ``have fallible judgment, malleable
preferences, make mistakes, and can be myopic or impatient.'' \14\
---------------------------------------------------------------------------
\14\ http://www.hsph.harvard.edu/faculty/katherine-baicker/
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Choice architecture considers these realities in order to present
information better, to ensure that information is meaningful and to
make high-value options an easy choice. This is especially important
for Exchanges that let all qualified plans participate. Baicker says
presenting too many options can lead to ``choice paralysis'' that
causes people to either give up or make choices based on bias or bad
information.
Conclusion: While we are making great strides in using transparency
to improve quality and value in health care, we still have a long way
to go. We must build on the substantial progress to date, including the
recent advances with the standardized Summary of Benefits and Coverage
and performance-based bonuses in Medicare Advantage. Transparency in
delivery system reforms is crucial to their success; we must be
vigilant in using transparency to its greatest potential. We must also
work together to ensure that state health insurance Exchanges make the
most of their potential for using market forces to promote better
value.
Transparency and consumer choice are tools that should be part of a
multifaceted strategy that includes payment and delivery system reforms
and greater emphasis on patient engagement in their own health and
health care.
Of course, success depends on thoughtful implementation, on
tailoring to local preferences and on building strong stakeholder
consensus for the best approach in each state and for each program. But
the value of health care provided in the U.S. will not improve without
employing the strategies discussed above.
The Chairman. Thank you very much, Ms. O'Kane.
And now, Neil Trautwein. We're very happy that you're here,
sir.
STATEMENT OF E. NEIL TRAUTWEIN, VICE PRESIDENT AND EMPLOYEE
BENEFITS POLICY COUNSEL, NATIONAL RETAIL FEDERATION
Mr. Trautwein. Thank you, Chairman Rockefeller, Ranking
Member Thune, members of the Committee. I appreciate the
opportunity to appear before you today.
I'm a Vice President with the National Retail Federation,
and I'm pleased to appear on behalf of NRF, which is the voice
of all channels of retail distribution.
Retail supports one out of every four jobs in the American
economy. We support effective implementation of the Affordable
Care Act, despite our continued concerns on the law, itself.
We've met, numerous times, with the administration on specific
regulatory issues, and we have submitted written comments on
key issues. We appreciate the administration's attention to
retail concerns. Many retail employees don't fit neatly into
full-time or part-time categories, and so, the--certainly, the
flexibility issues are important.
Our members are struggling to keep abreast of all the
different requirements that are coming up to that 2014
deadline. This is where we really find the hard intersection
between the promise of transparency and the burden that
employers are carrying, in terms of coming up to speed on
compliance on the Affordable Care Act. I fear there's a danger
of crowding out employer enthusiasm for movements toward
greater focus on quality and cost consciousness in healthcare
as a consequence of this. I hope not, because I think the
initiatives that NCQA and others have taken in this area, which
employers have long been involved in, are very important to
driving lower cost, better quality healthcare.
We think it's important that we strengthen these efforts
even in the midst of implementation of the ACA. It's not going
to be easy. We're seeking to retrain people to seek out the
quality options in healthcare. Sometimes less care, or more
effective care, is better than more care. And that's a tough
lesson for a lot of people to learn. Unfortunately, people are
very stubborn in our habits, and we don't change quickly or
easily.
Transparency and awareness of better interests, quality and
cost, both, are likely the best impetus to changing consumer
behavior. Still, it's not easy. We employers have conducted
employee briefings, we've brought in outside experts, we've
tried to explain the coverage, and we've really gone the extra
mile. Many of us weren't sure, on first impression, whether the
Summary of Benefit and Coverage provision made sense as an
addition to that, and was not just duplicative of the existing
Summary Plan Description. Still, the SBC, with coverage
examples and the uniform glossary, can be helpful tools for
employers and employees toward employee education.
Flexibility in the distribution of the SBC is important.
Availability is one issue, comprehension is another issue. How
do we entice employees to read the information we provide, we
deliver in the SBC, or make available in other contexts? So,
transparency is clearly important, but it's not sufficient.
Retailers and other employers are particularly concerned by
one element of the SBC, and that is the penalties attached to
the SBC for employers who willfully miss delivery of that
document. It's very important to get it out to consumers as
part of their owner's manual. It's very important to post it
where they can get to that when they need it. But, the
particular penalties are causing concern in the employer
communities. We encourage you to rethink this element of the
SBC.
We've received a lot of guidance on the ACA--as Ranking
Member Thune indicated, almost 18,000 pages of regulations
through this. Two significant regulations just came out last
week on the essential health benefits and the insurance market
reform. Both will add cost of coverage, perhaps even
significantly to coverage. That's a real problem, because
people have to be able to afford the coverage we offer. We're
working hard to help our members over this communication gap
and to figure out how they manage to provide coverage.
In sum, I ask you to continue to encourage greater
transparency in healthcare. I think it's a positive element to
help drive better-quality and lower-cost care. At the same
time, I urge you to be wary and cognizant of the regulatory
burden that employers are laboring over as we meet the
transition in 2014. Retailers and other employers should be,
and can be, powerful advocates for positive change, but the
ACA's going to put some pressure on that ability and that
willingness to move in that direction. We hope to work with you
to help mitigate those effects, and hope to help improve the
implementation of the ACA.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Trautwein follows:]
Prepared Statement of E. Neil Trautwein, Vice President and Employee
Benefits Policy Counsel, National Retail Federation
Chairman Rockefeller, Ranking Member Thune and honored members of
the Committee, I thank you for the opportunity to appear before you
today and to share our views regarding the Affordable Care Act (ACA),
the need for greater transparency and the ACA's Summary of Benefits and
Coverage (SBC), Coverage Examples and Uniform Glossary provisions. My
name is Neil Trautwein and I am a vice president and Employee Benefits
Policy Counsel with the National Retail Federation (NRF).
As the world's largest retail trade association and the voice of
retail worldwide, NRF represents retailers of all types and sizes,
including chain restaurants and industry partners, from the United
States and more than 45 countries abroad. Retailers operate more than
3.6 million U.S. establishments that support one in four U.S. jobs--42
million working Americans. Contributing $2.5 trillion to annual GDP,
retail is a daily barometer for the Nation's economy. NRF's Retail
Means Jobs campaign emphasizes the economic importance of retail and
encourages policymakers to support a Jobs, Innovation and Consumer
Value Agenda aimed at boosting economic growth and job creation.
www.nrf.com
NRF supports effective implementation of the Affordable Care Act,
despite our continued concerns about the law itself. We remain greatly
worried by the fast-approaching deadlines for key issues affecting
coverage in every market, especially in light of the steady torrent of
regulations from the Administration. Our nation cannot afford for the
ACA to stumble out of the starting gate. We fear that as time
diminishes between now and January 2014, a cascade of last minute
regulations will create confusion and thus could encourage more
employers to back out of coverage.
NRF and ACA Implementation
NRF has been closely engaged in the regulatory process ever since
the ACA was signed into law. We have met numerous times with regulators
and have submitted written comments on key concerns. We have assisted
in submitting joint coalition comments as well. We have not been
litigants against the ACA and also did not submit amicus comments in
the ACA case before the Supreme Court.
We credit the regulatory agencies \1\ for working hard and fairly
cooperatively to implement the ACA, a difficult task by any measure.
The Administration has been properly solicitous of the greater retail
industry, both because of our industry's important role in the economy
as well as the nature of retail employment. Many retail and restaurant
employees do not fit neatly into full and part-time categories and
compliance with the unprecedented levels of change under the ACA will
be particularly challenging.
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\1\ Departments of Health and Human Services, Labor and Treasury.
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This is where we find the hard intersection between the promise of
transparency to help employers and consumers find better value in
health care and coverage and employers straining to their new
responsibilities under the ACA, some beginning as soon as June this
year. There is the danger of crowding out employer enthusiasm for
driving better quality and lower cost health care through initiatives
from the Pacific Business Group on Health, along with my fellow
panelist from NCQA and many others. NRF strongly supports these
initiatives. It is important in our view to preserve and strengthen
these employer-led reform efforts, even as implementation of the ACA
continues.
Changing Behavior
Change at any level is difficult. We are attempting to retrain
people to seek the better quality health care options. Sometimes, less
(but more effective) care is better than more care. I recall the
frustration of a former member of mine in a different association
(Francois de Brantes, then of GE, now of Bridges to Excellence) saying
that he could place neon exit signs leading to better quality health
care providers, but most employees would rather stick with their old,
inferior quality and more expensive providers instead.
We humans are stubborn in our habits, good or bad. Transparency and
awareness of better interest--quality and cost both--is likely the best
tool toward building better consumers of health care and coverage.
Summary of Benefits and Coverage
Health benefits are the biggest component (next to wages) in
employee compensation. Employers have struggled mightily to help
employees understand and get the best value from their benefits.
Distribution of Summary Plan Description (SPD) documents are just the
beginning. Employers have conducted countless employee briefings (both
by company staff and outside experts, such as agents and brokers) among
other efforts to help educate eligible employees. Many employers have
built web-based resources to help guide employees through benefits
issues.
The new Summary of Benefits and Coverage (SBC) requirement and
Uniform Glossary are the latest manifestation of this employer
objective: to help employees and dependents understand the content and
extent of their coverage options. Employers were not entirely sure that
the SBC was necessary and not just duplicative of the SPD. Still, the
SBC with coverage examples and Uniform Glossary can be helpful tools
for employers toward employee education.
Flexibility in distribution of the SBC is helpful. The ability to
post electronically and to e-mail SBC's (subject to notice and on-
demand availability of paper copies) is efficient. Nevertheless,
availability is one issue and comprehension is entirely another. How do
we entice or compel employees and dependents to read and understand
their benefits?
Some benefit designs seek to use financial interest--our wallets--
to help lead our brains to better health care decisions. Results are
encouraging but inconclusive. Ultimately though, we may need to look to
our children and grandchildren to take this closer to heart and better
interest. That awareness just might be forged in a generational
crucible built as a consequence of the graying of America. It will not
be a pain free process, unfortunately.
Retailers and other employers are particularly concerned by one
element of unwarranted SBC compulsion: employer penalties for willful
failure to distribute SBCs. These penalties are expensive--at $1,000
per willful failure with daily penalties of $100--and when added to
myriad other potential penalties and fees under the ACA, could tend to
discourage employers from offering coverage. We recommend that this
Committee and the Congress rethink this portion of the SBC requirement.
In addition, we are concerned by the SBC requirement that SBC be
made linguistically appropriate for populations where 10 percent or
more are literate in a non-English language. This is an expansion of an
old SPD requirement and in practice employers have adapted where
necessary, for example to hold Spanish language briefings. Still, we
fear that the new SBC requirements will add to carrier cost and thus to
coverage cost, too.
Affordable Care Act and Employers
Change is coming to employer-sponsored health plans at a torrential
pace. In testimony \2\ last year to the House Ways and Means
Subcommittee on Health, I warned that definitive regulatory guidance
was needed at least by the first quarter of 2013. The regulatory pace
has definitely picked up after November 2012.
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\2\ September 12, 2012
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We have received a lot of regulatory guidance--some 18,000 pages of
regulations by some estimates--with two significant regulations on
essential health benefits and health insurance market reform coming out
just last week. Both the EHB and market reform provisions (especially
the compression of age bands) very likely will add to coverage costs.
NRF has worked hard to help our members understand what their
options and future responsibilities will be. I provided both majority
and minority staff with a copy of the slides from a recent NRF webinar
presentation on ACA compliance. Another is planned for March and likely
will continue throughout the year. I spend a lot of time speaking to
diverse retail and other employer audiences as well. The learning curve
among retailers and other employers is steep and still growing.
NRF, Allied Coalitions and the Affordable Care Act
NRF has actively encouraged the fair and effective implementation
of the ACA, despite our continued opposition to the law itself. We see
no inconsistency between the two positions; we owe it to our members to
help make the law as workable as possible so long as it remains the law
of this land. We stand ready to assist any effort to improve upon
implementation of the ACA.
We are engaged in a number of allied coalition efforts on ACA
implementation. For example, NRF chairs the Essential Health Benefits
Coalition \3\ (EHBC) and participates in the leadership of the
Coalition for Choice and Competition \4\ (CCC) and Employers for
Flexibility in Health Care (EFHC). The number of coalitions addressing
aspects of ACA implementation has grown so much as to require a degree
of coordination between them. NRF established and chairs the Employers'
Health Care Clearinghouse, which meets on a monthly basis to do just
that.
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\3\ www.ehbcoalition.org
\4\ www.choiceandcompetitioncoalition.org
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These coalitions are deeply substantive and deal with specific ACA
implementation concerns. They also have served a useful role in
developing and coordinating views and comments among allied employer
interests.
Conclusion
Again, NRF greatly appreciates the opportunity to appear before you
today. In sum, we urge this Committee and Congress to continue to
encourage transparency in health care to help drive better quality and
lower cost care and coverage.
At the same time, we urge you to guard against the pace of ACA
implementation and the consequent potential to drive employers away
from providing coverage. Retailers and other employers can and should
be powerful advocates for positive change. But, in most cases, health
care and health benefits are not our stock in trade or business. It is
in our best interest to keep our employees healthy and at work, but not
at any cost. The ACA will--at a minimum--pressure our ability to
continue to provide coverage and help drive positive change.
We hope to work with you to help mitigate these effects. NRF stands
ready to help the Administration and Congress make the ACA more
workable, so long as it remains the law of this land.
The Chairman. Thank you very much, sir.
It seems to me that, in preparing for this, I read that--
and you were concerned, Ms. Quincy--that we have to get to 170
million people. And we're not. And I think that's partly
because it's still new, and, you know, all this kind of stuff.
But, my impression was that, if you took the cost, which you
referred to, of doing all of this transparency, et cetera, it
is large and burdensome--I think that it came out that it was
about 50 cents a person per year. And that actually does add up
to $70 million, or whatever it is. But, in terms of the
individual, if that's what it costs, it would seem to me that
the tradeoff for knowing more about what you're getting--I
mean, I really get an amazing feeling, just looking at this
thing.
Senator Thune, I've been doing this.
And you--you know, it just--it's just so sensible. You look
down at--well, having a baby. And you get the sample care
costs. Now, I assume--and it gives--it says, the amount owed to
providers is going to be 7-and-a-half-thousand dollars; plan
pays 5,000-and-a-half, patient pays 2,000. But, it gets all--
radiology, prescriptions--it gets all those things. And then it
says what the patient has to pay--and it says ``deductibles,''
gives the amount; ``copays,'' gives the amount;
``coinsurance,'' and gives the amount. What it does not say,
and what I want to bring up in a question, is--and I don't know
why it's left out--is that we don't include premiums. And it
seems to me that premiums ought to be a part of the SBC. It's--
I think it's only fair. And so, therefore, it doesn't show up
here, and, therefore, it's a--that's, I think, one area where
we could be--we could improve.
But, I understand your point, and I--I had a--spent an hour
and a half yesterday, somebody, in HHS, who had just put out
600 pages of new rules and regulations for something, and I was
just flying around the ceiling, in anger. And, of course, there
was a strong defense on her side, which she felt was OK, and I
just didn't. So, I mean, I think that's constantly a problem.
I think it's going to--I think it's going to be a problem,
too, as we settle into--I mean, in effect, it was last year--
October 31, I think--when the Affordable Care Act actually went
into business, became operational. But, in fact, it isn't, and
it's really 2014.
Now, there's a lot that's already been done, but it's when
you--when you get the exchanges, and getting them set up, and
having the states figure out what they're going to do about
that. And some things--again, medical loss ratio and, you know,
preexisting conditions--those things are already in play and in
effect. But, I suspect that there will be a period, probably of
a decade or so, where we will be adjusting this bill according
to, you know, common sense and reasonableness, while still
driving toward the purpose of transparency.
I don't have much time left.
The--I really like the idea, I have to say, of real-life
examples, because I think if somebody picks this up, and they
look at having a baby or diabetes 2, et cetera, and they really
get a sense of what it is--and I mentioned, in my opening
statement, breast cancer. And the breast cancer was excluded as
part of this list by, oddly enough, IRS, the Department of the
Treasury, and Department of Labor. I have absolutely no idea of
how they got to do that. Do any of you? Because, to me, breast
cancer is something that has to be faced by so many people that
it would really be good, as a real-life experience, in the cost
of care. And----
Yes, ma'am.
Ms. O'Kane. Well, I'm speculating, but breast cancer, as
you're probably aware, it depends on how serious the breast
cancer is, what the costs are going to be. So, it's probably
hard to have sort of a generic example of what it would cost.
That's--that would just be my speculation. You know, so if
you're--if you were--had your breast cancer on a mammogram at a
very early stage, there would be a lumpectomy, there might not
be any chemo, there might not be any radiation. And that would
be a--sort of a low-cost event. Whereas, if it were something
more advanced, there would be much higher costs of treatments,
and so forth, so----
The Chairman. Well, it would be my assumption--and then
I'll go right to you, Ms. Quincy--that this would be based upon
the average cost. This wouldn't be individual breast cancer,
but writ large, and then cut right across the middle.
Ms. O'Kane. I just think, because there's a big range of
variation that feeds into that average, it might not be as
useful as having a baby. I'm just----
The Chairman. Yes.
Ms. O'Kane.--thinking out loud, here----
The Chairman. Yes, ma'am.
Ms. Quincy. We are so fortunate, with this particular
provision of the law, because we have so much evidence. We did
test a breast cancer example when we were testing the form. It
was for a year's treatment that totaled to about $100,000. And
two things I might mention. One, it's--this was the most
persuasive example, because that's where it really reminded
people that, ``Oh, a very expensive and unexpected medical
event could happen to me.'' Even the men, who can't get breast
cancer. Still, it reminded them why they need to go out and buy
health insurance. And, frankly, I said to the health plans,
``This is--should be your marketing tool. You know, drum up
some business with these examples.''
And it doesn't matter if it is your exact breast cancer
experience. What matters is, you can compare it across health
plans, because it was calculated in the same way--just like
EPA's miles-per-gallon sticker on cars. That's what is
important, at the end of the day. And hope that an expensive
example, like breast cancer, will be brought back. So, thank
you for mentioning it.
The Chairman. Thank you. My time is up.
The Ranking Member, Senator Thune.
Senator Thune. Mr. Chairman, thank you.
And thank you all for sharing your thoughts and your
insights. I very much appreciate that.
I'd like to direct this question, if I might, to Ms.
Quincy. And it has to do with the agency's final rule, which
was jointly issued by HHS, Labor, and Treasury, which does not
require that the SBC include premium disclosures or additional
facts that may affect premium rates. The only way that an
issuer can comply with other sections of Federal law and
premium rate changes is to issue disclosures on multiple forms.
Now, we've heard, today, that multiple disclosures can add
to consumer confusion. So, to your knowledge, as a consumer
representative with the National Association of Insurance
Commissioners, tell me about NAIC and any efforts they made to
consolidate these disclosure requirements. And is this a
concern that the agency should revisit as they work to improve
the SBC disclosure process?
Ms. Quincy. Thank you very much for that question.
When the NAIC was working to develop the form, it included
a line--the very first line on page 1 was for the premium,
because that's the natural thing that you would want to know,
in addition to how much coverage you're getting, if you're
trying to compare health plans. And that's the intent of this
form.
So, we did test a premium line on there. And that was, as
you can imagine, very well received. The NAIC had extensive
discussions about how to accommodate the fact that, when there
is underwriting, you might not actually know the final premium,
and they provided, to HHS, a set of rules for how to
accommodate those circumstances.
Just as an example: on Healthcare.gov, you don't see your
specific premium, you see a standard premium rate. That's one
of the ways you could fill in that line.
I think this would be an excellent area for some statutory
revision, because I think consumers would love to see premium
on that form.
And let me know if that didn't answer your question.
Senator Thune. How do you take into consideration regional
differences, in the disclosure process? Getting treated in
someplace like Sioux Falls, South Dakota, is very different
than getting treated in New York City. I hope implementation of
this provision doesn't have the unintended effect of confusing
consumers. Can you explain how regional differences in the cost
of care are going to be addressed?
Ms. Quincy. Absolutely. The--first of all, I--for what it's
worth, I have no concerns that it would confuse consumers. You
already have regional differences in the coverage provisions;
you know, so you already are designing an SBC form for the
exact product that's be licensed--been licensed in South
Dakota, as opposed to--I forgot, was New York the other
state?--as opposed to the second State. So, you're already
preparing a form that reflects the product that you had
approved by your local State insurance department.
But, that--your question is still a valid one, because we
know, in 2014 and forward, there are still some remaining
premium rating factors, such as geography and age. And I think
the question is, How do you accommodate them? And I think there
are a number of things that can be done:
One, you can put the premium line back on the form, label
it as ``Premium,'' and leave it blank, to be filled in. If--
let's say a consumer's working with a broker. Sooner or later,
a premium will be calculated for that person, and it can be
written on the form so that they can take it home and compare
it to other plans.
There's a number--this is the exact question the NAIC dealt
with, and I would be happy to send to the Committee their
proposal for how that would be addressed, if--rather than go on
and on--if--would that be helpful?
Senator Thune. That'd be fine, yes, thank you.
Mr. Trautwein, in your testimony today, you mentioned your
concern with the pace of implementation of provisions in the
Affordable Care Act. And specifically, you state your concern
that last-minute regulations, on top of penalties and
regulatory burden of existing ACA regulations, might cause of
your members to, and I quote, ``back out of coverage.'' This a
very troubling suggestion. Provisions, such as the SBC, are
intended to increase choice and competition in the healthcare
insurance industry, with insuring benefits to the consumer. But
the way in which the statute and other mandates fund the law,
or implement it, could drive employers away from offering
health benefits altogether. It would seem that the opposite
could be true. I wonder if you could expand on that statement
that you made in your remarks.
Mr. Trautwein. Thank you, Senator.
There is a lot of frustration out there in the employer
community as they look forward across the horizon to 2014. I'm
spending a lot of time on Webinar presentations and other
methods of explaining this to them.
When they look at the combination of different factors--
they look at the size limitations, the redefinition of the
``full-time employee,'' some of these concerns--then it gets to
be--there's--there starts to be some focus on, ``Well, is it--
can I look to offload my employees onto the exchange? Is it
mathematically cheaper? Does it make sense, in today's economy,
to do that? Or do I continue to soldier through and continue to
offer coverage?''
So, what I particularly fear--one of the things employers
hate more than anything is having multiple requirements put on
them at once so they're trying to do a bunch of different
things at the same time. That's what the quick horizon to 2014
threatens--I fear, threatens--because we don't want to undercut
employer-sponsored coverage, but I think that could be the
practical effect.
Senator Thune. I see my time has expired, Mr. Chairman.
Thank you.
The Chairman. All right.
Senator Pryor.
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Thank you, Mr. Chairman.
And I'd like to start with you, Ms. Quincy, if I could. One
of the amendments that I offered, and it was adopted into the
ACA, was an amendment on a customer satisfaction survey. And
I'm assuming, you know, it'll take a little time, maybe a year
or so, before the exchange is running, and all that, before the
surveys really mean a lot. But, do you think that information
will be helpful to consumers as they are weighing their various
options in the exchange?
Ms. Quincy. Yes, I do. And just so I give you a responsive
answer, are you talking about satisfaction with the exchange or
with health plans?
Senator Pryor. Well----
Ms. Quincy. Or both?
Senator Pryor. What--I was thinking about with the health
plan.
Ms. Quincy. OK. In the testing and discussions we've had
with consumers, they're very interested in what other people,
like themselves, think of a given health plan, a given doctor,
a given hospital. This is a primary piece of information that
they're interested in. And I think that, referring back to
Peggy's testimony, if we can do the survey and convey the
results in a way, to consumers, so that it's usable and they
feel this reflects people who are just like them, they would
find it very, very valuable.
Senator Pryor. Right.
Mr. Livermore--oh, yes, ma'am. Ms. O'Kane.
Ms. O'Kane. Just on that point. We accredit health plans,
and every health plan has to submit results of their consumer
satisfaction survey, which is then used to benchmark and
compare, and it leads into the rating that the plan gets. And
then we take the data, and we do ratings with Consumer Reports.
Senator Pryor. Oh, good. Seems to me that it's--that's a
good way to go. It, you know, lets consumers get a read of, you
know, how the plan is actually working in the real world.
Mr. Livermore, let me ask you a question. And it's really a
concern I have. And that is--my concern would be that there
will be a lot of people, especially in the early days of this,
that aren't really familiar with shopping for their own
healthcare plan, and they may just look at the premium, and
then nothing really beyond that. You know, they may not look at
all the copays and all the other--what folks who know about it
wouldn't consider ``hidden expenses,'' but, if you're not
careful, they might be considered hidden expenses. So, do you
share that concern? And, kind of, what are our best practices
that we can implement that would make sure that that's not a
big problem?
Mr. Livermore. Yes, I absolutely--thank you for the
question--I absolutely do share that concern. I think that it
really points to the need for evidenced-based models and
testing of how the label actually works. In the abstract, as
experts, you can look at it and say, ``This is all perfectly
clear; it's obvious,'' but that doesn't mean that that's how
consumers are responding to it. So, I think that that really, I
see, is the key--a key feature for improving and continually,
you know, expanding this--the use of this label, is that
ongoing testing and procedure.
Now, there are certain things that you can do to make sure
you're using best practices. Right? So, information that you
present first is going to have a large cognitive impact, you
know, on someone that's interacting with this document. So, you
know, you can use color, simplify language, not overwhelm the
consumers with too much information, so you have the most
salient information. Coverage examples are an important--can be
an important counterbalancing influence. So, all of these are
features. But, at the end of the day, testing is what we
ultimately--and improving, based on that information--is
ultimately how we answer that concern.
Senator Pryor. One of the things that you mentioned in your
testimony is ``low health literacy'' in the U.S. And apparently
there's a pretty substantial cost connected with the
illiteracy, I guess you can say, of--in healthcare, for
Americans. So, what's the low hanging fruit there? What can we
do to make the American public more literate when it comes to
choosing healthcare?
Mr. Livermore. Well, I think that, in terms of steps
forward, expanding the coverage examples are a very useful low
hanging fruit; in particular, a high-impact event, because
that's something that consumers are not going to be familiar
with, by its very nature. These are low-probability events, and
then they're extremely high-impact. And, you know, a consumer
making the decision is not familiar with that. They might not
even have family members that are--where they can utilize that
experience. So, I think that that is a simple thing that can be
done, and it's low hanging for us.
Senator Pryor. Yes, ma'am.
Ms. O'Kane. We heard a presentation from somebody that was
experimenting with how to present the information to consumers,
and they found that just giving a little tutorial up front
about, you know, what to think about before you get into it was
helpful. And then, there are choice tools, as well, that help
you calculate what your total expenditure for the year might
be. Those have been used.
So, I think that, actually, the experience of shopping in
exchanges can be something that will improve people's health
literacy just in time, if we do it the right way.
Senator Pryor. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Pryor.
Senator Cruz. And welcome.
STATEMENT OF HON. TED CRUZ,
U.S. SENATOR FROM TEXAS
Senator Cruz. Thank you, Mr. Chairman. And it is a pleasure
to be at that--the first hearing that I've had the opportunity
to serve on this committee.
Of all of the economic data that swirl about, the one I
find most troubling is 0.8 percent, which is what our economic
growth has been, each of the last 4 years. It seems to me, if
we're going to make progress, in terms of restoring our
economic strength, if we're going to make progress, in terms of
seeing the 23 million people struggling to find work, getting
back to work, we've got to restore economic growth, we've got
to get back to historic levels of growths--3, 4, 5 percent--and
not sub 1 percent economic growth.
And so, Mr. Trautwein, I would like to ask you a question
about the impact of the President's healthcare law on small
businesses, in particular. There have been a number of
estimates that small businesses typically produce two-thirds of
all new jobs. And the House Energy--Commerce Committee has
recently estimated the compliance cost of Obamacare has
exceeded 127 million man hours. And the question I'd like to
ask is if you could share your experience, and the experience
of your members, in terms of the impact of compliance costs,
and how that is affecting their ability to survive in this
challenging economic times, and their ability to create and
maintain jobs.
Mr. Trautwein. Thank you for the question, Senator.
The small business is struggling to understand their
responsibilities under the new law. They're coping with
questions about how you're defining ``full-time employee.'' How
many employees can you have before you're over the top? Do you
count partial employees to get up to that 50 limit of full-
time-equivalent employees? So, there are a lot of issues, at
present.
We do know that it's had an effect of discouraging growth
at companies near that threshold, and it may have an effect--in
fact, somebody called them the ``29ers''--of redefining many
employees below that threshold. And that could be an issue, as
well.
Counterposed against that are the small business tax
credit, limited or--and complicated though it be. And there are
also subsidies potentially available, by income, in the
exchange, though those ramp out pretty quickly.
So, it's--so, to sum, there's a lot of frustration with the
complexity of the Affordable Care Act. It may be having an
effect on job growth, particularly in small business. And
they're very nervous about this transition.
Senator Cruz. What has been the experience of your members,
to date, in terms of small businesses dropping coverage
altogether? Have you seen that as a significant pattern since
the passage of this law?
Mr. Trautwein. It's been more of a episodic adventure,
Senator--or feature. From what I can tell, the--even though
we're in 2013, as of June, counting back for the look-back
period, really that the penalties are not effective until 2014,
forward. So, I've encouraged many employers, some who are
grandfathered status and some who are not, to ride it out, for
now, and to keep coverage intact. But, there are a lot--as I
mentioned, there's a lot of frustration, a lot of--particularly
in small business--who say, ``My business is X, not
healthcare.'' And so, there's a lot of frustration there.
Senator Cruz. My last question concerns the cost of
coverage; and, in particular, the cost for those struggling to
climb the economic ladder--young people coming out of school,
getting their first jobs.
A recent study by the American Academy of Actuaries found
that insurance premiums in the individual insurance market will
increase, on average, by 10 to 20 percent, and approximately 4
million uninsured individuals age 21 to 29, or roughly 36
percent of those currently uninsured, can expect to pay more
out of pocket for single coverage than they otherwise would
have.
Has that been the experience you've been seeing in the
market? That the impact has been coverage costs increasing and
impacting, in particular, those struggling to climb the
economic ladder?
Mr. Trautwein. There's been some, but a limited, increase
already reflected in the market. One of the things I worry
about is the regulation released on Friday on health insurance
market reform, and the compression of age rating bands from,
commonly, 5-to-1 to 3-to-1. That's going to increase premiums
for younger, healthier employees, the kind that you want in
your group, three times or more. And that could have an effect
on overall group coverage.
We advocate--and the administration said they lacked
authority to do this--but, a more effective way might be to
allow the States to come up a plan--with a plan, maybe 5-year
plan, to get to that target amount. But, hopefully that's
something that the Congress will come back to, because that
potential rate shock could be an issue--substantial issue in
2014 and beyond.
Senator Cruz. Thank you very much, Mr. Trautwein. And thank
you, to all of the witnesses.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Senator McCaskill.
STATEMENT OF HON. CLAIRE McCASKILL,
U.S. SENATOR FROM MISSOURI
Senator McCaskill. Thank you.
I know that there are competing arguments on the rate-shock
argument, also. I mean, we have a huge number of our young
people that are now on parents' policies until they're 26 years
old. Obviously, if this reform went away, they would be back on
the market. That's quite a rate shock.
And also, the catastrophic--if any of you want to speak to
the catastrophic coverage that will be available to young
people, that currently has not been readily to consumers, and
what impact you think that might have on this reputed rate
shock that's going to occur for young people.
Ms. Quincy?
Ms. Quincy. I'd be happy to speak very briefly. I mean,
excellent comments. But, the Wyman study and the Society of
Actuaries study--there are some other studies out there that
show that this rate shock concerns are going to be mitigated by
the availability of subsidies to help afford coverage and, as
you mentioned, by the availability of a catastrophic plan. And
this catastrophic plan is essentially going to be full of young
people. They're their own pool; they're not pooled with others.
So, this is going to mitigate, greatly, the impact of the rate
shock, because--some of the other studies didn't take that into
account; like, I don't think the Wyman study did.
I'd be very happy to send over to this committee a study by
the Kaiser Family Foundation and another one by the Urban
Institute showing that maybe we don't need to be quite as
worried as some have suggested.
Ms. Quincy. And I'm not trying to say that there will not
be some people for whom their rates go up. Sometimes it's
because their coverage was so much better. But, I don't think
the problem is necessarily as great as some of the reports
show.
Senator McCaskill. Thank you.
I have also read the Time magazine article, and I will tell
you, I think that there is a rebuttal that is--needs to be put
out there on some of the things that are in that article. You
know, points were well made in the article, but there is
another view on some of these issues around the not-for-
profits, especially those that are serving the most difficult
populations, in terms of underinsured and uninsured. And I want
to make sure that the policy discussions around this are fair
and measured.
Now, one thing that was in that article that is fascinating
is the charge master. The charge master, obviously, came about
for a purely commercial reason, and that was: insurance
companies wanted to go to employers and say, ``We're getting
you a big discount.'' So, in order for them to get a big
discount, the charge master had to increase what the charge was
for the service.
So, let's say an MRI was going to be $400. That's what the
costs really were going to be. And the insurance company said
to the hospital, ``Well, we really need to tell our employers
that we're getting you a better price, so we need to say we got
you a discount,'' and they said, ``OK, we'll have a charge
master say the charge was $800, and you're getting a 50-percent
discount.'' So, it was all illusory. It was all kind of made
up. And----
But, the point that the article wasn't very good about
pointing out is that that is really only being used for
outliers now, because the vast majority of the charges now are,
in fact, for procedures. There is a set amount for procedures.
And if any of you would comment on what we need to do, in
the transparency world, to get companies out of the habit of
creating discounts that totally jack around with the ability of
a consumer to ever figure out what something really costs. And,
you know, maybe we need to look at this issue of--I think
they've outlived their usefulness, charge masters; I don't
think they are being used as often as they were when this first
began as a practice. And I would like any of you who feel
knowledgeable about this subject to speak to that.
Ms. O'Kane. I don't think I'm an expert on this, but I
think--your point is really well taken. It's really hard to
figure out. Right? And different payers pay different amounts,
which have nothing to do with the underlying value of the
product. We have markets where there's so much consolidation in
the provider sector that they kind of name their prices, and
that goes right through to the consumer.
So, I think that there is a big issue around price. There's
a big issue around what we do, as well. But, you know, the
issues that he identified in the article, I think really do
call for some public-policy response. And, you know, there's a
range of possible responses, like you could set prices. That
seems sort of--kind of politically unlikely, to me. But,
certainly, I think that the current----
Senator McCaskill. We have set prices for Medicare and----
Ms. O'Kane. Yes, exactly.
Senator McCaskill.--Medicaid, right?
Ms. O'Kane. Exactly.
Senator McCaskill. I mean, that's what they've done----
Ms. O'Kane. Yes. But, then----
Senator McCaskill.--is set prices.
Ms. O'Kane. But, then we find that providers then shift
those costs over to the private sector, driving up the cost of
private health insurance. And----
Senator McCaskill. Yes. I mean, I believe that if you look
at it--if you back up, you've got a population that's paying 70
percent of what the costs actually are, and another population
that's paying 130 percent of what the costs actually are.
Ms. O'Kane. Right.
Senator McCaskill. Well, that's certainly not fair to the
people who are paying 130.
Ms. O'Kane. Right.
Senator McCaskill. But, it's a great value for the
government, that's getting the 70.
Ms. O'Kane. Yes.
Senator McCaskill. And so, how we figure that out--and
people who are in large companies that have lots of employees
are getting the 70.
Ms. O'Kane. Well, no, actually, they're--they're paying
higher--they're paying higher rates, because they're buying--I
mean, they're self-insured, but they're only able to get the
rates that their intermediaries are able to negotiate, which
are not as low as Medicare rates. They do better, though, than
the small businesses----
Senator McCaskill. Right.
Ms. O'Kane.--which are really at the end of the----
Senator McCaskill. They're not at the 130, but they're not
at the 70.
Ms. O'Kane. Right.
Senator McCaskill. They're somewhere in between.
Ms. O'Kane. Right. Right. But, I think it's a mess, and
it's certainly--you can't have a market that actually works,
when you have this kind of disinformation out there.
Senator McCaskill. Well, I'm a big--I know my time is up,
and I appreciate you being here--I'm a big believer that one of
the most important things we have to do in the healthcare area
is unleash the American consumer. I mean, we are good shoppers.
We know how to shop. I mean, you give me enough coupons, and
I'll drive 15 extra minutes and get that value.
You know, look at Groupon. I mean, look at the successes
that we've had by--you know, I mean, look at Wal-Mart, for gosh
sakes. So, I think we've got to figure out a way that the
American consumer feels entitled to consumer information about
buying healthcare. Right now, they just see it as something
they either get for free or they don't have it and somebody
else is going to pay for it----
Ms. O'Kane. Right.
Senator McCaskill.--instead of really feeling invested in a
consumer-based decision. And a lot of that is just around the
area of can they get enough information to become a good
consumer?
So, I think this is a great hearing, Mr. Chairman, and I'll
look forward to hundreds of other great hearings, with--under
your leadership, over the next several years.
The Chairman. Hundreds.
Senator McCaskill. Hundreds.
[Laughter.]
The Chairman. Senator Schatz.
STATEMENT OF HON. BRIAN SCHATZ,
U.S. SENATOR FROM HAWAII
Senator Schatz. Thank you, Mr. Chairman. And thank you for
holding a hearing on this--OK, excuse me. Here we go.
Thank you, Mr. Chairman, and thank you for holding a
hearing on this important topic.
I want to thank the witnesses for being here.
And I share your view, Mr. Chairman, that greater
transparency in health insurance policies is needed for
consumers to better make choices.
I have a couple of questions that have to do with the
process of making choices. Mr. Livermore, in particular.
According to Census data, approximately 25 million adults
in the United States don't speak English well. And in Hawaii,
limited-English-proficiency individuals account for almost 12
percent of the State's population, including my mother- and
father-in-law. Health insurance companies have to communicate
effectively with this percentage of the population in order for
this enterprise to work. So, what steps can be taken to make
sure that those folks who are having difficulty with English
can get access to plain and simple information so they can make
the right choices?
Mr. Livermore. Yes. Well, thank you very much for that
question.
I think there are two elements to this. One is making sure
that we're providing the information in the languages that
people speak and they can actually understand, but the second
part has to do with making sure that folks are aware, within
these communities, that this information exists and is
accessible to them. So, there's the provision, but there's
also, kind of, outreach--there's an outreach element to that.
And, actually, Ms. Quincy mentioned, earlier, that an
unfortunately low percentage of people are aware that the SBC
exists. I don't have data on this; she may. But, my--I suspect
that, within particular linguistic communities, that number is
even worse. Right? And so, we have to think about how to do
that outreach.
That would be my primary recommendation, would be, not just
the provision of information, but making sure that folks are
aware that the information is out there and accessible.
Senator Schatz. Ms. Quincy?
Ms. Quincy. An excellent question. I think--a couple of
additional observations. One, the fact, with the SBC, that
we're talking about a standard form helps, because even if you
struggle a little bit with--maybe it's--hasn't been translated
into your language, you can learn, because it's always
standard, where the given information is. Somebody could help
you with that. So, we're a little bit ahead of the game by
having a standard form.
I would pile onto what Mr. Livermore said by saying, in
addition to translating these documents, we need to test them
with people who speak that language, because you never know
what cultural references may not come through.
I did a study, years ago, and they were trying to explain
what ``radiology'' was to someone who didn't speak English, and
they said, ``It's like a fire going through your body,'' and
that did not go over well.
So, there you go.
Senator Schatz. Thank you very much. And I appreciate the
cultural-competency layer to this, because it's not just
language translation, but it's understanding the dialects
within ethnic communities, and just understanding that there
may be different attitudes toward healthcare and the provision
of health services, that all needs to be baked into this
process.
I have another question about accessing this information.
You know, the first draft of SBC is in print format. And, as
you know, many low-income individuals, and individuals at all
income levels, are going to be accessing this decisionmaking
process via the Internet. So, I'd like you to talk a little bit
about the usability thought process, not just for the Internet,
generally, but also the potential differences between desktop
and laptop computers and PDAs. Increasingly, especially in low-
income communities, because they don't want to pay the monthly
for their Wi-Fi or their Ethernet connection, the only way
they're going to get information such as this is via an iPhone
or some other Smart phone.
So, what thought process is being undertaken to making sure
that this information, which is extraordinarily complicated,
gets distilled into this little 2x4 screen?
Mr. Livermore. Just as an initial take, I think that
distilling information is, at some level, the first cut--
getting it down into, you know, the compact information you
want to--that you want to communicate to consumers, and then
making sure that it's available on a wide range of platforms.
All right? So, this is kind of a two-step process, and I think
we're in the midst of that second stage of making sure that
it's, kind of, platform availability, in addition to the
information.
Ms. Quincy. If I can pile on--my favorite occupation--I
think--I may just not be creative enough, but I can't conceive
of how you would actually get, like, the full content, that you
would expect to see, for example, at an exchange, on a little
phone. But, I think that it could play a very useful role, in
terms of raising awareness and providing preliminary
information that then links people to help. You know, it links
them back to a full Website, it links them to live assistance.
And that's what I see as the role for this very small screen.
Senator Schatz. Right. I--and I agree. I actually think the
Web-based and the PDA-based decisionmaking tools ought to be
used as an interactive decisionmaking tool, because, you're
right, you can't load all the information onto one or several
pages. But, in a way, it could be even more useful, because you
could take someone through their decisionmaking process in a
way that is step-by-step, and, therefore, more user-friendly,
rather than giving them a document and asking them to digest
it.
Thank you.
Thank you, Mr. Chair.
The Chairman. Thank you very much, Senator.
I'd like to make a comment or two, I guess, emanating out
of some of the things that Senator Cruz said, and also that you
have said, Mr. Trautwein.
And I think we've all been through this before. You get the
situation where--Senator Thune and I are working on this--
that--called cybersecurity, when it's the greatest national
security threat, it is greatly in advance of terrorism of 11--
you know, 9/11s, et cetera, but somehow it doesn't get through
to the American people, so we're trying to do something about
it. And then you get a deluge from the Chamber of Commerce,
the--by their paid lobbyists, here in Washington, which crushes
any attempt to get any amendments passed. We couldn't get
anything done.
So, I wrote a letter to 500 of the top, you know,
individual companies in America, and the majority of them said,
``No, we're not protected. We don't know what to do. We need
help.'' These are big companies. ``And we don't know where to
turn.''
And then, the Chamber of Commerce turned on them--you know,
the GEs of this world, or whatever--and said, ``Well, they
don't really know what they're talking about.''
And I have, a little bit, this feeling on this healthcare
discussion, that this behemoth--I think you have to start with
the knowledge of what an absolute disaster of cost, waste,
fraud, and abuse, of duplication, that our present healthcare
system is. Let's start with what we've got.
I still remember Richard Darman. Do you remember Richard
Darman? Yes. He was head of OMB under Ronald Reagan, and he
came and testified for the Finance Committee, and he went into
sort of a seclusion for a week before he testified, and he
appeared, sheet white, not because he wasn't feeling well, but
because of what he'd learned. And he basically told us--this
was, what, 15-20 years ago--that healthcare was going to
decimate the American economy; it was just going to eat it up;
there would be no money left for even a single Tootsie Roll.
And I always remember that, because the healthcare system was
in a mess then; it's in a greater mess now, while, at the same
time, not providing insurance for a whole lot of people who
really need it.
So, when people start talking to me about, ``This is just
going to be the downfall''--I was very intimately involved with
the writing of this bill, and there certainly are areas where
we can make improvements, but, you know, where--you were
talking about small business. Ninety-six percent of the
businesses in this country with more than 50 employees already
offer health insurance to their employees. And RAND, the Urban
Institute, the CBO, and Mercer, which is a county in West
Virginia--and otherwise, I guess, a research firm--have found
that the vast majority of those employers will continue to
offer their employees health insurance in 2014. In other words,
they listened to all of these comments about--the end-of-the-
world comments, and--but then they look at what they have, and
they said, ``My gosh, it can't be worse than what we've got.''
Plus, they aren't providing health insurance to the people that
they would like to.
Then you look at the law, at the Act. Starting in 2014,
businesses with fewer than 50 employees will have a new option
available to them. To all of them. And it's called the state
exchanges. So, anybody can go get health insurance; again,
using these new slimmed-down reading materials and information.
And then, if you're--if you have fewer than 25 employees, you
already get a--you already get a deduction--a credit, I guess
it is, isn't it?--for 30 percent of the cost of--the government
helps, in the bill, already law, with the--with 30 percent of
the cost of providing health insurance. And in 2014, that goes
to 50 percent. And it stays there.
And then I think of the fact that, well, there's going to
be 32 million uninsured Americans--which doesn't get to the
underinsured Americans--who are going to be plowing money into
the insurance companies, because they're--they now have
insurance coverage--they have health insurance coverage; and
all kinds of things happen. And then, I think of, oh, yes, and
they're going to take those Medicaid doctors, who everybody
says are going to stop serving Medicaid patients, but, lo and
behold, what does the Act do? The Act brings it--for
practitioners out there, it--Medicaid, and particularly in
rural areas, which would be of interest to South Dakota and
West Virginia, their payment levels will go up where Medicaid
is now--Medicare is now. So, that may not sound sensational,
but if you're getting Medicaid reimbursement levels, that's
just about the best news you've ever heard.
And we're--there's--money's already in there, already paid
for, for building--is it 1,000 or 10,000 new healthcare
centers? 1,000, OK. Nuts.
[Laughter.]
The Chairman. But, in other words, when I went to West
Virginia as a VISTA volunteer, I'd--and the people I was
working with lived off of a rural healthcare center, across a
couple of swinging bridges in a neighboring rural county. And
there they got grassroots--you know, an old Wal-Mart, except it
wasn't as big as that, but, you know, ground-floor stuff, like
Vet Centers for veterans--ground floor. Not VA hospitals; they
don't like that. Go to a ground-floor thing, they're--you get
friendly folks there.
And so that all these--you know, ways to be helpful. And
the fact that people who are finding healthcare difficult to
navigate, even with this four-page thing that I'm overtouting--
there's going to be--there are going to be people who help,
people specifically provided for in the bill who help people
work their way through getting healthcare. That can be to a
company--small company, large company--that can be do an
individual. They're a part of the healthcare bill.
So, I just--I would just say that, before we just
obliterate an Act which has been validated by the Supreme Court
and is going to stay--I always kind of prefer to get on the
side of what makes things better. And, yes, when you do
something as big as this, affecting 16-17 percent of the
economy, there's going to be some sticker shock and some
changes that have to be made, and everybody gets nervous,
because it hasn't happened yet.
But, all those folks who aren't getting nervous, in the
business community, about something called cybersecurity, when
they get attacked--which most of them have been, actually--when
they get attacked in a major way, and we shut down air traffic
control systems and towers and grids and things of that sort,
then people are saying, ``Oh, my heavens, why didn't we pay
attention to this when we had a chance to do something about
it?''
Now, that sounds a little bit like a lecture, and I
apologize for that. That's--is that my nature?
[Laughter.]
The Chairman. But, I really mean that. It's not just what--
where we're going, it's where we are; and you have to look at
both of those things. And I would just beg for that kind of--
it's sort of automatic opposition. I think there's going to be
a far simpler way of doing the healthcare system.
My time is way over.
Senator Thune.
Senator Thune. Mr. Chairman, if I might--I think the one
area, although you and I have different positions on the
Affordable Care Act, in its passage--one thing that I think we
all agree on is that more transparency is a good thing. I think
the efforts that you've made to try and get more information
out there is good, because it does help consumers make informed
decisions.
I've always believed that the more the consumers have an
opportunity to weigh what the competitive opportunities are out
there, they will choose the lowest-cost option that still gives
them the coverage, if it's insurance, or in the case of
healthcare itself, the healthcare that they want, that delivers
the quality product at the most affordable price. That's why I
do think more information transparency is a good thing. And I
think that having more skin in the game, so to speak, is a good
thing, too, because it forces less utilization.
One of the things, I think, that really drives healthcare
costs in this country is that we have an insatiable demand for
healthcare. We've got some great technology out there, the best
in the world. And people want to take advantage of that
technology and that healthcare. But, we also have some
duplication out there. A lot of things can be improved upon, in
terms of delivery of healthcare. I do believe that transparency
and disclosure is helpful, with regard to trying to keep prices
affordable, something that most people in this country can
appreciate.
Let me if I might, seek just one final comment and reaction
from Mr. Trautwein--because I do think that, notwithstanding
some of the elements, like the transparency provisions that you
fought to get in here, and some of the things that we're
addressing today, there are a lot of mandates in the bill, and
a lot of requirements. I think Mr. Trautwein addressed a few of
those. This is one requirement, which I think is very popular,
and one which I think, in the end, will get more information
out there. But, there are other mandates that I believe are
also going to put upward pressure on the cost and the price of
healthcare in this country. There are about 60 percent of
American workers that are in self-insured plans, which are
governed by ERISA.
One of the things that I'm interested in knowing is whether
Title I of ERISA already are mandates of distribution of
Summaries of Plan Description. How are, I would say to Mr.
Trautwein, your self-insured members dealing with what could be
duplicative mandates from both ERISA and the new healthcare
law?
Mr. Trautwein. Thank you, Senator.
From--it's not clear to me that they're not required to
produce both documents. And, in fact, all group health plans
are required to produce an SBD as well as the new SBC
requirement. So, that's something that stretched beyond the
self-funded plans, in terms of the obligation.
Briefly addressing the Chairman's remarks, I would note
that the NRF was an opponent of this law. We were for reform
before passage; we continued to be for reform. Once the ink was
dried on the law, we've been working with the regulators, in
good faith, to try to ease compliance, make it easier for our
members to comply with the law. It's a very complicated law,
and some of the work with Treasury, or with HHS, in particular,
in implementing it, there are going to be a lot of hoops to
jump through, and employers don't like that.
But, from our perspective, we're all about compliance. We
didn't sue anybody on the Affordable Care Act. We didn't submit
amicus comments in the Supreme Court. We're all about
compliance, right now, Mr. Chairman.
The Chairman. Well, I appreciate that.
And let me just say, in closing this--I had about 20
questions I wanted to ask, but didn't--that what you're going
to see from Senator Thune and Senator Rockefeller is a fair and
balanced leadership of the Commerce Committee, because we both
have common values. We both come from the same kinds of States,
with the same kinds of problems. But, we're different, you
know, and we view the Act differently. And so be it. That's
what democracy is all about.
I remain optimistic on all of this. And I think sessions
like this one, where people can voice their frustrations, and
where others can come back and argue, where you have people,
all of whom are very knowledgeable, and the fact that--are you
in the Business Roundtable? Yes. And so the--and then--you're
for it; I didn't know that, and so, I apologize to you for
that.
But, these are the struggles we will be going through. I
mean, if we're trying to figure out how to make a--how do you
get a fair explanation of a deductible that crosses all
healthcare--I mean, you know, there's going to be hard stuff,
and it'll take time. And let's just try and be honest with each
and do it the best that we possibly can.
In any event, you've all been terrific, and I thank you
very much.
And this hearing is adjourned.
[Whereupon, at 3:58 p.m., the hearing was adjourned.]
A P P E N D I X
Response to Written Question Submitted by Hon. John D. Rockefeller IV
to Lynn Quincy
Question. Ms. Quincy, after the Summary of Benefits and Coverage
(SBC) because law in March 2010, AHIP (American's Health Insurance
Plans) and then later AHIP together with the Blue Cross Blue Shield
Association (BCBSA) paid for two separate consumer focus group studies
to test early versions of the SBC forms. We have attached these studies
to test early versions of the SBC forms. We have attaches these studies
for your review. The first round of consumer testing AHIP did focused
on how consumers interacted with the SBC forms. AHIP's testing found
that the SBC was ``valued by consumers,'' and that:
The idea that there might be a standard form or common template
that health insurance companies would use to summarize costs
and benefits was universally hailed as a great move. All
participants felt that they personally would benefit by having
a quick read of any given plan and being better able to compare
plans. A common template would provide consistency and
uniformity.
In their second round of testing AHIP and BCBSA focused on how
consumers interacted with the SBC's Coverage Examples. The researchers
found that:
[A] majority of participants felt the inclusion of examples was
helpful in that it gave them a different way to view, compare,
and understand the cost implications of various plans.
Ms. Quincy, your organization, Consumers Union, also conducted
focus group with consumers. Were the findings of your research
consistent with the findings of AHIP and the BCBSA?
Answer. Thank you for this question. I think it is remarkable how
similar the findings were between the AHIP/BCBSA studies and the
Consumers Union studies. This commonality underscores the robustness of
the findings. All reports are public documents. In the case of
Consumers Union's testing, outside observers were invited to view the
consumer testing, lending further transparency to the process and
findings.
Our written testimony and the study reports provide a strong
written record of these findings. I will not reiterate the major
findings here except to state that they comport with and even build
upon the AHIP and BCBSA findings. Policymakers can act upon this
information, increasing and extending consumer access to timely and
accurately completed SBCs, with complete confidence that these new
documents help consumers.
______
Response to Written Questions Submitted by Hon. Amy Klobuchar to
Lynn Quincy
Question 1. I really believe in paying for quality. During the
hearing in 2009, I asked how to incorporate quality measures into
transparency materials and the response I got was that's 300 level
learning, we're still at insurance 101. Was there any discussion during
the development process to incorporate various quality measures?
Answer. I don't believe so. The NAIC felt it was all they could do
to use their multi-stakeholder process to meet the statutory
requirements for the SBC. These requirements don't include quality
measures, although the Affordable Care Act (ACA) clearly places great
importance on quality measures in other sections. For example, core
functions an Exchange must provide include assignment of a price and
quality rating to plans and the presentation of enrollee satisfaction
survey results.
Question 2. With the lessons learned from the NAIC process, the
feedback from focus groups and the industry, are there steps we can
take to also start providing consumers with information on quality?
Answer. Absolutely! The new quality reporting requirements in the
ACA, and heightened consumer awareness of new health plan options and
ways to buy coverage, are a golden opportunity to put better measures
in front of consumers. However, current research suggests that more
consumer testing of quality measures may be needed to ensure wide-
spread and appropriate use of the measures.
While quality was not the focus of our own testing, we did solicit
consumers' views on quality directly and indirectly. Many consumers
associate health plan quality with (a) comprehensive coverage and/or
(b) high quality providers in the network. This doesn't mean we can't
be successful build plan and provider quality measures in other
domains, but it does caution us that such measures must be carefully
tested and artfully named so that there use is intuitive and
appropriate.
We highly recommend a robust course of consumer testing to see
which quality measures, broadly defined, will most benefit consumers.
The broad range of measures to be tested should include a rigorous,
standard way to measure provider network adequacy and a summary measure
indicating how providers perform with respect to patient safety, as
well as the conventional measures used today.
Research has shown that the performance of individual physicians
and hospital service lines is strongly preferred by consumers over
performance information aggregated at physician group of hospital wide
levels. Work should be done to overcome current barriers to the
provision of this information.
Getting quality information into the hands of consumers is
critically important but much remains to be done to identify the best
consumer facing measures and make these accessible, understandable, and
relevant.
Question 3. Do you think that this would be a useful addition to
the summary of benefits and coverage documents?
Answer. We recommend using consumer testing to rigorously answer
this question. While we are confident that well tested quality measures
will help consumers, the question of which ones and how to include
would need to be answered. For example, it is possible that only one or
two summary measures are appropriate to use in the SBC, with additional
detail available on health plan comparison websites.
Question 4. Are there other ways you think these documents can be
strengthened?
Answer. Yes! I strongly recommend the following
Getting the SBC form ``designed'' by a graphic designer
versed in these types of communications. My written testimony
includes an example of how design changes could improve the
form. Consumer testing should be used to ensure that the
revisions enhance the experience for the consumer, without
reducing the value of the current version.
Bringing back a row for premium information on the first
page, as was included in the original NAIC recommendations.
These recommendations provided a robust mechanism for the
provision of premium information on the SBC, and reflect input
from a wide variety of stakeholders.
Including more coverage examples as soon as possible, and
experimenting with moving this information forward in the
document.
Abandon the use of national Medicare prices as the basis for
the coverage example calculations and instead substituting
realistic private sector prices; trended to accurate represent
costs for the year that coverage will be effective.
My written testimony contains further suggestions.
______
Response to Written Question Submitted by Hon. Amy Klobuchar to
Margaret E. O'Kane
Question. I really believe in paying for quality. During the
hearing in 2009, I asked how to incorporate quality measures into
transparency materials and the response I got was that's 300 level
learning, we're still at insurance 101.
Was there any discussion during the development process to
incorporate various quality measures?
With the lessons learned from the NAIC process, the feedback
from focus groups and the industry, are there steps we can take
to also start providing consumers with information on quality?
Do you think that this would be a useful addition to the
summary of benefits and coverage documents?
Are there other ways you think these documents can be
strengthened?
Answer. I also believe strongly in paying for quality and making
quality information transparent and easy for consumers to use. Focus
groups that we conducted with the California Healthcare Foundation
found that with help, consumers quickly understand that quality does
not necessarily cost more--and that it can cost less. Consumers
generally do need help to understand this, as it is not intuitive for
most people. However, once consumers do understand it, they want to use
cost and quality information together to help them select a high
quality, low-cost health plan or physician organization. We also found
that the people most interested in this information are the uninsured
who will be accessing health care coverage through State Health
Insurance Exchanges.
Our report on these focus group findings, Value Judgment: Helping
Health care Consumers Use Quality and Cost Information, \1\ includes
important lessons on how to make this information meaningful to
consumers and move beyond the ``insurance 101'' stage.
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\1\ http://www.ncqa.org/Portals/0/Public%20Policy/
CHCF%20ValueJudgmentQualityCostIn
formation.pdf
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For example, most people prefer simpler formats that use a symbol
to indicate overall value, and they want to know the source of the data
in order to assess its credibility.
It is not clear whether the standardized Summary of Benefits and
Coverage would be a good place to provide consumers with quality
information. Specific testing would be needed to determine if consumers
wanted quality information there and, if so, how to make it useful to
them.
State Health Insurance Exchange web portals, however, are an ideal
place to give consumers information on quality, along with total cost
of care. Minnesota's Exchange already has a specific work group
focusing on this important opportunity. It takes time to measure and
report on the actual quality of care that plans provide, so Exchange
plans' quality information at first will be limited to accreditation
status and patient experience ratings for similar plans offered by the
same sponsors. Once we can collect and report on performance measures
for care provided in Exchange plans, we will be able to give consumers
robust information on the actually quality of care, patient experience,
and total costs of care in each Exchange plan. This will greatly
increase consumers' ability identify and enroll in plans that provide
the best value for their health care dollars.
To make the most of this opportunity, there are important
principles Exchanges should follow to help consumers make the most of
transparent cost and quality information. Exchanges need to:
Apply lessons from the science of behavioral economics and
``choice architecture'' to help guide consumers to plans
offering the best value.
Present information to consumers as simply as possible.
Studies and experience shows that too much information can bog
down the enrollment process or prevent someone from choosing a
plan.
Build from existing measures and collection systems to
ensure straightforward, efficient implementation.
Limit collection to data that has a clear use; there is
considerable cost for reporting unused data.
Add more information, new measures and quality improvement
and assurance strategies over time. Give stakeholders the
opportunity to comment on direction, and give plans and states
the opportunity to implement system changes.