[Senate Hearing 115-238]
[From the U.S. Government Publishing Office]







                                                        S. Hrg. 115-238

OBAMACARE EMERGENCY: STABILIZING THE INDIVIDUAL HEALTH INSURANCE MARKET

=======================================================================

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                                   ON

    EXAMINING THE AFFORDABLE CARE ACT, FOCUSING ON STABILIZING THE 
                      INDIVIDUAL HEALTH INSURANCE

                               __________

                            FEBRUARY 1, 2017

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions



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      Available via the World Wide Web: http://www.gpo.gov/fdsys/



                         U.S. GOVERNMENT PUBLISHING OFFICE 

24-145 PDF                     WASHINGTON : 2018 















          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                  LAMAR ALEXANDER, Tennessee, Chairman

MICHAEL B. ENZI, Wyoming           PATTY MURRAY, Washington
RICHARD BURR, North Carolina       BERNARD SANDERS (I), Vermont
JOHNNY ISAKSON, Georgia            ROBERT P. CASEY, JR., Pennsylvania
RAND PAUL, Kentucky                AL FRANKEN, Minnesota
SUSAN M. COLLINS, Maine            MICHAEL F. BENNET, Colorado
BILL CASSIDY, M.D., Louisiana      SHELDON WHITEHOUSE, Rhode Island
TODD YOUNG, Indiana                TAMMY BALDWIN, Wisconsin
ORRIN G. HATCH, Utah               CHRISTOPHER S. MURPHY, Connecticut
PAT ROBERTS, Kansas                ELIZABETH WARREN, Massachusetts
LISA MURKOWSKI, Alaska             TIM KAINE, Virginia  
TIM SCOTT, South Carolina          MAGGIE HASSAN, New Hampshire  

               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                  Evan Schatz, Minority Staff Director
              John Righter, Minority Deputy Staff Director

                                  (ii)






















                            C O N T E N T S

                               __________

                               STATEMENTS

                      WEDNESDAY, FEBRUARY 1, 2017

                                                                   Page

                           Committee Members

Alexander, Hon. Lamar, Chairman, Committee on Health, Education, 
  Labor, and Pensions, opening Statement.........................     1
Murray, Hon. Patty, a U.S. Senator from the State of Washington, 
  opening statement..............................................     4
Collins, Hon. Susan M., a U.S. Senator from the State of Maine...    40
Murphy, Hon. Christopher, a U.S. Senator from the State of 
  Connecticut....................................................    41
Cassidy, Hon. Bill, a U.S. Senator from the State of Louisiana...    43
Warren, Hon. Elizabeth, a U.S. Senator from the State of 
  Massachusetts..................................................    46
Scott, Hon. Tim, a U.S. Senator from the State of South Carolina.    47
Franken, Hon. Al, a U.S. Senator from the State of Minnesota.....    50
Young, Hon. Todd, a U.S. Senator from the State of Indiana.......    51
Kaine, Hon. Tim, a U.S. Senator from the State of Virginia.......    53
Murkowski, Hon. Lisa, a U.S. Senator from the State of Alaska....    55
Baldwin, Hon. Tammy, a U.S. Senator from the State of Wisconsin..    57
Hassan, Hon. Maggie, a U.S. Senator from the State of New 
  Hampshire......................................................    58
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of 
  Pennsylvania...................................................    60
Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode 
  Island.........................................................    62

                           Witnesses--Panel I

McPeak, Julie Mix, Commissioner, Tennessee Department of Commerce 
  and Insurance, Nashville, TN...................................     7
    Prepared Statement...........................................     9
Tavenner, Marilyn, President and CEO, America's Health Insurance 
  Plans, Washington, DC..........................................    12
    Prepared Statement...........................................    13
Trautwein, Janet Stokes, CEO, National Association of Health 
  Underwriters, Washington, DC...................................    18
    Prepared Statement...........................................    20
Beshear, Steven L., Governor, Commonwealth of Kentucky, 2007-15; 
  Member, Stites, Harbison, Lexington, KY........................    31
    Prepared Statement...........................................    32

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.
    Shir, Amy, Patient and Consultant, Louisville, KY............    68
    Deutsch, Andrea, Owner, Spot's--The Place for Paws, Narberth, 
      PA.........................................................    68
    Letters:
        Governor Gina M. Raimondo, State of Rhode Island and 
          Providence Plantations.................................    69
        State of Rhode Island, Health Insurance Commission.......    70
    Response by Marilyn Tavenner to questions of:
        Senator Isakson..........................................    71
        Senator Franken..........................................    71
        Senator Bennet...........................................    72
    Response by Steve Beshear to questions of:
        Senator Franken..........................................    73
        Senator Bennet...........................................    75

                                 (iii)  
 
OBAMACARE EMERGENCY: STABILIZING THE INDIVIDUAL HEALTH INSURANCE MARKET

                              ----------                              


                      WEDNESDAY, FEBRUARY 1, 2017

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:03 a.m. in 
room SD-430, Dirksen Senate Office Building, Hon. Lamar 
Alexander, chairman of the committee, presiding.
    Present: Senators Alexander, Burr, Collins, Cassidy, Young, 
Roberts, Murkowski, Scott, Murray, Casey, Franken, Bennet, 
Whitehouse, Baldwin, Murphy, Warren, Kaine, and Hassan.

                 Opening Statement of Senator Alexander

    The Chairman. The Senate committee on Health, Education, 
Labor, and Pensions will please come to order.
    Today, we are holding a hearing on what we can do to 
stabilize the individual health insurance market which, in some 
States, is in an emergency condition.
    Senator Murray and I will each have an opening statement, 
and then we will introduce our witnesses. We thank you very 
much for coming. Afterwards, we will go to a 5-minute round of 
questions.
    I have a prepared statement, but let me try a little 
different approach today.
    For 6 years, Republicans and Democrats have been fighting 
like the Hatfield's and McCoy's over the Affordable Care Act, 
which we call Obamacare. We are very good at this. We can make 
our speeches in our sleep and cast many votes on either side of 
the aisle.
    I received a letter from Senator Kaine and, I think, a 
dozen other Democratic Members of the Senate saying, ``We would 
like to work with you as you Republicans begin to take a look 
at the Affordable Care Act and make changes in it.''
    I responded to him to say I would like to do that.
    Now, I am not a naive person and I know that it is not easy 
to move from the Hatfield's and McCoy's to working together on 
this issue. But if there is one area where we ought to be able 
to do that, it is with the individual market and the problems 
that we have with it because it is a relatively small part of 
our healthcare system.
    Just while I have this up, and I gave it to Republican 
Senators and I am glad to give it to Democrats too, so we will 
have an idea of what we are talking about.
    Medicare is 18 percent and in the discussions that we are 
having, at least I am having and most of the people I talk to, 
is about changing our healthcare system, or repealing, or 
replacing Obamacare. We are not talking about Medicare. So that 
leaves three.
    Go down here to the Medicaid area. Most of the conversation 
we are having about Medicaid is about more flexibility for 
States. That can be discussed separately.
    The employer market, most of that is not in crisis, 
although the small group market, which is this relatively small 
part of that, could stand a lot of work.
    But where the trouble is--and what I would like and what 
this hearing is about--is the individual market, the people who 
buy insurance themselves in the individual market. They are too 
young for Medicare. They are not covered by Medicaid. They do 
not have insurance through their employer, which is where most 
people get their insurance. So they are in the individual 
market. That is about 6 percent of everybody in the country who 
has insurance. So, 4 percent of the 6 percent, or two-thirds of 
the 6 percent, and 4 percent of everybody insured are in the 
Obamacare exchanges.
    That is the focus for today. And as far as I am concerned, 
I am focusing on the individual market especially exchanges 
because I understand that what happens in the exchanges affects 
the rest of the individual market. So that gets us up to about 
18 million people. It is a small, small percentage of everybody 
who has insurance, but these are all real people and they are 
in trouble if we do not, at least in our State of Tennessee, if 
we do not take some steps.
    I would just say to my colleagues that I am certainly 
willing to try to do as we have often done here on big issues 
about which we have had historic agreements, and that is look 
for areas of willingness to work together.
    Again speaking for myself, I think we are going to have to 
take some action pretty quickly. It is going to have to be 
consensus action, which means it is going to have to get more 
than 60 votes. It is going to be the kind of thing that I hope 
was mentioned in the letter that Senator Kaine and others wrote 
to me.
    It can be done just affecting the individual market without 
arguing about the whole rest of the American healthcare system. 
It can be done temporarily. It can be done, in effect, to 
stabilize that market for 2 or 3 years while we discuss 
everything else.
    I think it means that Republicans are going to have to 
approve some things we normally might not support and Democrats 
are going to have to do some things they normally might not do 
during this transition. But that might be a good step toward 
the kind of legislating that we were accustomed to doing in 
this committee.
    The only other things I would say are these. In my home 
State of Tennessee in September 2016--and we are going to hear 
more about this from Julie McPeak, the State Insurance 
Commissioner--we woke up one morning and Blue Cross Blue Shield 
announced that it was pulling out of Nashville, Memphis, and 
Knoxville. That is 131,000 people who had Blue Cross insurance, 
and in the individual market, and they would not be able to buy 
it in 2017. So they do not have that option this year.
    That is an alarm bell in every one of those homes. I mean, 
it is a lot of trouble when you lose your insurance option. And 
in two-thirds of our counties in Tennessee, people who buy 
their insurance through the exchanges only have one option now. 
And that is true in one-third of the counties across the 
country.
    What we are told is that unless we take action fairly 
quickly--and that is what I want to hear from our witnesses 
today--that we may reach a situation in 2018 where many 
Americans have a subsidy through the Affordable Care Act to buy 
insurance in the individual market, but they do not have any 
insurance to buy. It would be like having a bus ticket in a 
town where no buses run. Right now, in two-thirds of our 
counties, we have only one bus running through town and in 
2018, we might have zero. That is the problem to solve.
    It does not make as much difference to me whose fault that 
is. I can make a pretty good speech about that and you could 
make a pretty good speech saying why it is not your fault or it 
is our fault.
    The question the American people want to know, particularly 
if they are of the 11 million people in the exchanges or the 18 
million in the whole individual market is, ``Well, what are you 
going to do about that?''
    Some of the things can be done by the Secretary of Health 
and Human Services. I would like to include in the record a 
list of Health Insurance Reform Regulatory Changes from the 
National Association of Insurance Commissioners which has 
specific recommendations on how to stabilize markets including 
providing more State flexibility and improving the regulatory 
environment.
    [The information referred to was not available at press 
time.]
    Some of it will have to be done by us. We will have to 
agree on it.
    That is a subject I hope we can discuss today. While there 
is a lot to say about Medicaid, there is a lot to say about the 
employer market. There are fine speeches to be made defending 
Obamacare and attacking Obamacare. And Senators have a right to 
make those speeches, and witnesses have a right to say what 
they want to say.
    But for me, the most helpful thing that could happen today 
is for you to answer these questions.
    No. 1, is there really trouble in the individual market in 
our country, and in what States, and in how many States? No. 2, 
specifically, what should we do about it? And No. 3, by when do 
we have to do it?
    One insurance commissioner told me that if we did not act 
by April of this year, there would not be insurance sold in his 
State next year, which is 2018. In other words, people would be 
sitting there in that State with their bus ticket and no bus to 
get on.
    That is what I hope the hearing is about. I hope and say, I 
thank Senator Kaine and others for their letter. It is in the 
spirit of the way Senator Murray and I have worked on a lot of 
issues over the last couple of years. I realize this is a 
contentious issue and I realize this is a contentious time, but 
things change. And when people need help, we are supposed to 
provide it.
    I thank the witnesses for coming and so many Senators for 
being here.
    Senator Murray.

                  Opening Statement of Senator Murray

    Senator Murray. Well, thank you very much, Chairman 
Alexander for holding this hearing. I appreciate your opening 
remarks.
    I like what you said. I think the individual market is a 
challenge. It always has been.
    Before the ACA, no one could get insurance, and if they 
would buy insurance, it did not cover what they thought it 
covered when they had been paying for it for years. It is a 
challenge and the ACA actually provided a way for millions of 
people to purchase insurance. It did lower the rising costs of 
insurance to people and it is an important discussion. I wish 
that was what was happening, but I think that is not what 
Republicans have actually been doing right out of the box.
    We saw in the budget the first week of the session, a move 
to go to reconciliation, repeal Obamacare. That is where this 
Congress is headed, it is what the President is talking about, 
and it is the path we are on. If we take that conversation away 
and Republicans stop going down the path of repealing 
Obamacare, then I think all of us are interested in a 
conversation. But just to repeal Obamacare and then have this 
discussion, leaves a lot of people in jeopardy.
    I just want to open with that and I want to thank all of 
our witnesses who are here. Governor Beshear, I especially 
appreciate you taking time to share your invaluable personal 
experience in your State. I want to thank all of our colleagues 
and I want to thank our colleagues who joined us for the pre-
hearing press conference. I thought it was important to hear 
this morning from real families and doctors about the 
devastating impact that ripping apart our healthcare system 
would have on them and millions across the country.
    Since the election, I have heard from so many families in 
my State who come up to me with tears in their eyes about a 
wide range of issues facing our Nation. And one sentiment I 
have heard over and over again is worry and fear about what is 
going to happen to their healthcare.
    I am going to share just one of my constituents' stories. I 
think it bears repeating because it truly speaks to the angst 
so many families are feeling right now.
    Two years ago, Brice, who is a constituent of mine who 
lives in Seattle, was kayaking in West Virginia and he injured 
his back. Several months later, that pain in his back had not 
gone away. After a visit to the hospital, what doctors first 
suspected was only a stubborn muscle sprain ended up being a 
very rare type of bone cancer called Ewing's sarcoma.
    As we can all imagine, to him, that was pretty terrible 
hearing that news. Thankfully, he said his family had insurance 
because of the Affordable Care Act. And today, Brice is getting 
excellent treatment at Seattle Children's Hospital where 
doctors have been able to ease some of his pain, and he is 
beginning to respond to chemotherapy.
    Brice is almost 18. He is going to need care, very 
expensive care, for the rest of his life. Brice and his family 
are gravely concerned that if Republicans continue down the 
path of dismantling our healthcare system with no plan with 
what to do instead, the pre-existing conditions that we fought 
so hard for in the Affordable Care Act will be undermined as 
well. And if that were to happen, Brice's dad said he does not 
know how they will be able to afford healthcare or get the 
benefits and treatments that Brice is going to need for a long 
time.
    Mr. Chairman, they and the nearly 32 million people who 
stand to lose their healthcare deserve security. They deserve 
certainty and not empty promises.
    It is my hope that we will be able to have an open, honest 
discussion today about what is at stake for millions of 
families and their healthcare. That all of us, Democrats and 
Republicans, prioritize what is best for them, not what is best 
for politics.
    Repealing the affordable healthcare plan with no plan to 
replace it will create chaos throughout our healthcare system. 
That is not just my view. It is not just Senate Democrats' 
view. It is a view shard by the majority of independent policy 
experts, hospitals, insurers, including State leaders from both 
parties across the country.
    Republican Governors from Alabama, Arizona, Idaho, Nevada, 
Ohio and many others agree that an abrupt repeal of the law 
would be devastating. That is why Democrats on this committee 
thought we should hear a Governor's perspective today, the 
former Governor of Kentucky, Steve Beshear, who will speak to 
the damage repeal of the Affordable Care Act will do to his 
State and many others.
    Here is what we already know. Premiums will skyrocket by as 
much as 25 percent in the first year of repeal and 50 percent 
over the next 10 years according to the recent report by the 
CBO. Out-of-pocket prescription drug costs will rise as will 
healthcare costs overall. Patients with pre-existing 
conditions, like Brice who I just talked about, will be denied 
care. Those are facts. No serious experts deny that.
    Yet President Trump, and some of my Republican colleagues 
here, continues to double-down on repeal even after it is clear 
they cannot agree with what to replace that with. And let us 
not forget that Republican policies that are on the table will 
also cut Medicaid and defund Planned Parenthood, not to mention 
ending the guarantee of full coverage under Medicare leaving 
women, and seniors, and families further exposed.
    This just is not my view and I know my Republican 
colleagues held a retreat last week to strategize on repeal; we 
all saw the news coverage. I think it did not go quite as 
planned and it seems like they were left with a lot of 
questions more than answers. And as one member put it, in a 
moment of remarkable candor, he said,

          ``We are telling people that we are not going to pull 
        the rug out from under them, and if we do this too 
        fast, we are, in fact, going to pull the rug out from 
        under them.''

    And I could not agree more.
    In spite of all this and in spite of what the Chairman said 
about working together on a small piece of this, President 
Trump and some Republicans are still rushing ahead to rip apart 
the healthcare system without a plan for the aftermath.
    I want to be very clear. While my colleagues on the other 
side of the aisle do not have a plan, they are now creating 
Trumpcare by sabotage. It is a broken system of chaos and 
uncertainty that will hurt, not help, families and it is 
increasingly a broken promise from the President who said he 
would deliver better healthcare at lower costs and vowed to 
ensure, ``Insurance for everybody.''
    On his first day in office, President Trump signed an 
Executive order which overturned vital consumer protections 
threatening the health and financial security of millions of 
families. Before President Trump's Executive order, families 
could count on their health insurance plan covering a broad 
range of benefits, maternity care, preventive care, 
prescription drugs, mental healthcare. And now, that guarantee 
is gone.
    Last week, President Trump created even more confusion by 
preventing families from finding out about their coverage 
options when he canceled advertising and consumer outreach 
efforts. These outreach activities had already been paid for, 
but President Trump still took those ads off the air at the 
very end of open enrollment when the largest number of people 
are looking for coverage and need help. Open enrollment, by the 
way, ended yesterday. Who knows how many more Americans would 
have found affordable coverage if President Trump had not 
pulled the plug?
    These actions do nothing to clarify the confusion and 
disarray among Republicans about their plans to actually 
replace the Affordable Care Act. Instead, what they do is 
heighten uncertainty for millions of working families whose 
access to healthcare hangs in the balance.
    I hope President Trump, and my Republican colleagues, 
reverse course and stop pursuing the repeal of the affordable 
healthcare system. And if they do not, if they continue rushing 
to take away families' healthcare with no alternative plan, 
they will be fully responsible for the chaos and the 
uncertainty that Trumpcare is already causing and will continue 
to cause.
    I have no doubt that millions of people who are speaking 
out louder than ever against harmful partisan policies will 
hold them accountable and Democrats here in Congress will as 
well. But, of course, it is families like Brice's nationwide 
who will feel the real impact and the hurt.
    I am glad that some of my Republican colleagues here in 
this committee are hearing loud and clear from the overwhelming 
majority of Americans who do not want to have their lives 
upended. Because as I have said many times, if they are truly 
serious about helping women, and families, and seniors get 
quality affordable care, we are ready to work together as we 
always have been on real improvements that need to be made.
    The families we serve are making clear they do not want 
their healthcare or their lives to be at risk, and they want to 
see us work together to get this done right instead. I hope our 
Republican colleagues will stop what they have started, listen, 
and urge them to make the right choice.
    With that, Mr. Chairman, I have left a packet on each 
member's desk so that everyone has a better understanding of 
what repeal will mean, including some patient testimonies from 
States, and data on what repeal will mean for each State. I 
would like that submitted for the record.
    [The information referred to was not available.]
    The Chairman. It will be. Thank you, Senator Murray.
    I am pleased to welcome our four witnesses today. I will 
give them brief introductions so we can have more time for 
their testimony and for the questions the Senators have.
    Julie McPeak is the Tennessee Department of Commerce and 
Insurance leader. She has been there since 2011. Before that, 
she practiced law as counsel to the insurance practice group in 
a law firm, and served as executive director of the Kentucky 
Office of Insurance. She is president-elect of the National 
Association of Insurance Commissioners.
    Marilyn Tavenner is well-known to this committee. Well 
today, she leads America's Health Insurance Plans, a national 
association for the health insurance industry. She served as 
Administrator of the Centers for Medicare and Medicaid Services 
in the Obama administration. Before that, she was Secretary of 
Health and Human Services in the cabinet of Virginia Governor 
Tim Kaine, who is a member of this committee.
    Janet Trautwein is the chief executive officer of the 
National Association of Health Underwriters representing 
100,000 employee benefit professionals involved in the design, 
implementation, and management of health plans all over the 
United States.
    We welcome Governor Steve Beshear, Governor of the 
Commonwealth of Kentucky from 2007 to 2015. He launched the 
Kentucky Health Benefit Exchange to provide access to insurance 
under the Affordable Care Act. He was formerly in the House of 
Representatives and Lieutenant Governor. He currently practices 
law in Lexington.
    Ms. McPeak, let us begin with you. And if you could each 
summarize your remarks in about 5 minutes, we will go to a 5-
minute round of questions for each Senator afterwards.
    Miss McPeak.

    STATEMENT OF JULIE MIX McPEAK, COMMISSIONER, TENNESSEE 
      DEPARTMENT OF COMMERCE AND INSURANCE, NASHVILLE, TN

    Ms. McPeak. Thank you. Good morning, Chairman Alexander, 
Ranking Member Murray, and members of the committee. Thank you 
for inviting me to testify this morning.
    I am Julie McPeak, commissioner of the Tennessee Department 
of Commerce and Insurance. In addition to my responsibilities 
at home, I also serve as president-elect of the National 
Association of Insurance Commissioners. I participate at the 
International Association of Insurance Supervisors, and the 
Federal Advisory Committee on Insurance. I have spent most of 
my career in insurance regulation and I have a strong affinity 
for our country's State-based system of insurance oversight.
    My testimony today will briefly highlight Tennessee's 
history with the Affordable Care Act before discussing some 
practical reforms that Congress and the Administration may 
consider to help stabilize the individual insurance market in 
Tennessee.
    First, I would like to share with you the most important 
message that I will have for you today, insurance markets do 
not respond well to uncertainty. To the extent possible, as you 
consider ACA reforms, it is critical to remain transparent and 
to minimize surprises in our regulatory system.
    Tennessee's insurance market is struggling. Today we have 
three insurance carriers offering policies on our Federally 
Facilitated Marketplace. However, in 73 of 95 counties, 
Tennesseans only have one FFM option.
    Tennesseans have seen rates steadily increase since 2014 
culminating in increases ranging from 44 percent to 62 percent 
for 2017. These rates have been fully justified. According to 
the Department of Health and Human Services, Tennessee had the 
highest risk score in the Nation in 2014 and the second highest 
in 2015. Further in 2014, Tennessee's premium rates were the 
second lowest in the country.
    In addition, Tennessee had a co-op that provided coverage 
from 2014 through the end of 2015 when the Department placed 
the company in supervision.
    In short, Tennessee's ACA individual market experience has 
meant fewer marketplace carriers and higher priced premiums for 
Tennessee consumers.
    Tennessee's experience, which is not unique, suggests a 
need for policy change, but the challenge is implementing 
reforms without disrupting an already distressed marketplace. 
If carriers are uncertain of the regulatory landscape for 2018, 
they may withdraw from the current rating areas, further 
restricting consumer choice. This is not to suggest that 
Congress and the Administration need to delay any repeal, 
replacement, or other modifications to the ACA.
    You should return as much flexibility as possible to the 
States to address our respective marketplace needs and 
stabilize the individual insurance markets.
    A few key areas that could provide immediate assistance to 
our marketplace are rating factors, essential health benefits, 
special enrollment periods, and grace periods.
    As you know, all ACA-compliant plans must offer the same 
package of benefits called EHB. You should consider granting to 
States the flexibility to redefine EHB so that we may consider 
a base set of benefits that would need to be included in a few 
standard plans, while also allowing more flexible designs in 
other available plans. This approach would allow consumers an 
option to select a limited benefit plan that covers basic 
needs, but not all of the ACA required benefits.
    Congress, and the Administration, should also relax 
restrictive age bands that limit premiums based on age to no 
more than a 3 to 1 ratio; a ratio closer to 5 to 1 or 6 to 1 
would provide more rate flexibility in the market. When coupled 
with EHB flexibility, may have the ultimate impact of growing 
the individual insurance pool in Tennessee by attracting 
younger and healthier populations.
    Two other issue areas that you could address quickly are 
special enrollment periods and grace periods. We all agree that 
special enrollment periods are an absolute necessity for 
individuals experiencing a change in life circumstances. 
Unfortunately, special enrollment periods have been so broadly 
interpreted at a Federal level that they are almost akin to a 
permanent open enrollment period, which allows an individual to 
access health insurance benefits only when healthcare is an 
immediate necessity. Obviously, this has a negative impact on 
the overall health of the risk pool.
    Extended grace periods have added administrative costs to 
the market as well. The 90-day grace period potentially allows 
a policyholder to incur claims well past the time that premium 
payments have been discontinued. You should consider shortening 
the grace period to around 30 days to provide certainty to the 
insurance market.
    In conclusion, the ACA introduced new policies, new 
concepts, and at times, new rigidity to our insurance 
marketplace. Rates have gone up. Consumer choice and 
marketplace competition have gone down.
    As this committee continues to work to stabilize individual 
insurance markets, I would again stress two points. First, 
States should be empowered to tailor insurance regulation to 
our unique market and medical and insurance community.
    Second, please continue to be as open and transparent in 
this process as possible. Markets need clarity so we do not see 
carriers exiting markets in bulk when they do not know what to 
expect in terms of regulation over the next several years.
    Thank you for the opportunity to discuss the Tennessee 
experience with the committee. I will be happy to answer any 
questions that you might have.
    [The prepared Statement of Ms. McPeak follows:]
                 Prepared Statement of Julie Mix McPeak
                                summary
                               highlight
    Insurance markets do not respond well to uncertainty. To the extent 
possible as you consider ACA reforms, it will be important to remain 
transparent, as today's hearing suggests, to engage stakeholders, and 
to minimize surprises in our regulatory system.
                          tennessee experience
    Tennessee's individual insurance market is struggling. Today we 
have three insurance carriers offering policies on our Federally 
Facilitated Marketplace (``FFM''). However, in 73 of 95 counties, 
Tennesseans only have one FFM option. Competition in the FFM only 
exists in three rating areas of the State. This is down from 2016 when 
we had two carriers offering policies in all of our counties. 
Tennesseans have seen rates steadily increase since 2014. Approved rate 
increases ranged from seven (7) to 19 percent for 2015; increased up to 
36 percent for 2016, and ranged between 44 and 62 percent for 2017. 
Tennessee's premium rates have gone from the second lowest in the 
country in 2014, to the fifth lowest in 2015, to the 15th lowest in 
2016, and have increased substantially for 2017. Tennessee's ACA 
individual market experience since 2014 has meant fewer marketplace 
carriers, less competition, and higher priced premiums for available 
products. In addition, we have seen existing FFM carriers move toward 
narrower networks, further limiting consumers' access to providers of 
their choosing.
                              aca timeline
    The Congress and/or Administration need to be keenly aware of the 
filing dates that insurance carriers currently expect. Insurance 
carriers are beginning to make decisions on their 2018 footprints. 
Forms and rates must be approved no later than August 21, 2017. 
Insurance companies facing significant uncertainty are likely to pull 
back their business operations. If carriers are not aware of what the 
regulatory landscape may look like for 2018 before the date that they 
need to decide what to offer to consumers in 2018, we may see carriers 
pull back from the current rating areas in which they offer services.
                             market reforms
    The Congress and/or Administration should return as much 
flexibility as possible to the States to address our respective 
marketplace needs. A few key areas that can provide immediate 
assistance to our marketplace include: rating factors, essential health 
benefits (EHB), special enrollment periods (SEPs), and grace periods. 
To help stabilize insurance premiums, we need young and healthy risks 
to enter the insurance marketplace. Providing States the flexibility to 
redefine EHB to bring more innovative products to market and then 
allowing rates to vary more substantially based on member age could go 
a long way toward bringing products to market that will appeal to 
younger and healthier populations. Addressing SEPs and grace periods 
will help provide additional market stability.
                                 ______
                                 
                              introduction
    Good morning Chairman Alexander, Ranking Member Murray, and members 
of the committee. Thank you for inviting me to testify this morning.
    I am Julie Mix McPeak. I am commissioner of the Tennessee 
Department of Commerce and Insurance (TDCI). TDCI is comprised of 
several divisions that regulate professions ranging from the insurance 
companies to hair salons, and in my capacity as commissioner, I also 
serve as the State's Fire Marshal. In addition to my responsibilities 
at home, I also serve as president-elect of the National Association of 
Insurance Commissioners (NAIC), as an executive committee member of the 
International Association of Insurance Supervisors (IAIS), and as a 
member of the Federal Advisory Committee on Insurance (FACI). I have 
spent most of my career in insurance regulation, previously serving as 
the executive director of the Kentucky Office of Insurance, and have a 
strong affinity for the country's State-based system of insurance 
oversight.
    My testimony today will briefly highlight Tennessee's history with 
the Affordable Care Act (ACA) before discussing some practical reforms 
that Congress and/or the Administration can consider to help stabilize 
the individual insurance market in Tennessee. First, I would like to 
share with you the most important message that I will have for you 
today: Insurance markets do not respond well to uncertainty. To the 
extent possible as you consider ACA reforms, it will be very important 
to remain transparent, as today's hearing suggests, to engage 
stakeholders, and to minimize surprises in our regulatory system.
                     tennessee's individual market
    Tennessee's individual insurance market is struggling. Today we 
have three insurance carriers (BlueCross BlueShield of Tennessee, 
Cigna, and Humana) offering policies on our Federally Facilitated 
Marketplace (``FFM''). However, in 73 of 95 counties, particularly the 
more rural areas of the State, Tennesseans only have one FFM option. 
Competition in the FFM only exists in three rating areas of the State. 
This is down from 2016 when we had two carriers offering policies in 
all of our counties.
    Tennesseans have seen rates steadily increase since 2014. Approved 
rate increases ranged from seven (7) to 19 percent for 2015; increased 
up to 36 percent for 2016, and ranged between 44 and 62 percent for 
2017. These rates have been fully justified, and according to the 
Department of Health and Human Services (HHS), Tennessee had the 
highest risk score in the Nation in 2014 and the second highest in 
2015. The HHS risk score essentially measures the health and health 
care utilization of insured populations. Tennessee's premium rates have 
gone from the second-lowest in the country in 2014, to the fifth-lowest 
in 2015, to the 15th lowest in 2016, and have increased substantially 
for 2017.
    In addition, Tennessee had a co-op that provided coverage from 2014 
through the end of 2015. A multitude of factors led the Department to 
place that company under Supervision and I'm proud to say that as a 
result of our efforts, while our co-op has failed, the company should 
be able to repay the Federal Government a portion of the moneys 
allocated for its startup and solvency purposes.
    In short, Tennessee's ACA individual market experience since 2014 
has meant fewer marketplace carriers for Tennessee consumers, less 
competition across the State, and higher priced premiums for available 
products. In addition, we have seen existing FFM carriers move toward 
narrower networks, further limiting consumers' access to providers of 
their choosing.
                              aca timeline
    Tennessee's experience, which is likely not unique, suggests a need 
for policy changes from the Congress and/or Administration. The 
challenge you will face is in implementing reforms without disrupting 
an already distressed marketplace. As I mentioned previously, insurance 
companies facing significant uncertainty are likely to pull back their 
business operations to the extent possible.
    For instance, and again using my home State as an example, if 
carriers are not aware of what the regulatory landscape may look like 
for 2018 before the date that they need to decide what to offer to 
consumers in 2018, we may see carriers pull back from the current 
rating areas in which they offer services. Such an industry reaction 
would result in Tennessee consumers potentially being left with zero 
FFM options in certain areas of the State for 2018.
    The Congress and Administration need to be keenly aware of the 
filing dates that insurance carriers currently expect, absent any 
changes that may come out of the Federal Government. Insurance carriers 
are already beginning to make decisions on their 2018 footprints. Under 
existing Federal guidance, carriers must submit ``policy forms,'' i.e., 
the benefit plans that they would like to offer, for review by the 
State before May 3, 2017. Rates, again under existing Federal guidance, 
are currently due between May 3 and July 17, 2017, as determined by the 
State. Forms and rates must be approved no later than August 21, 2017.
    This is not to suggest that Congress and the Administration need to 
delay any repeal, replacement or other modifications to the ACA. While 
it would be a significant challenge to implement policy changes for the 
already underway 2017 plan year as consumers have selected plans, made 
payments, and started to receive medical services, there are changes 
that I will discuss next that the Congress and Administration should 
consider.
                       individual market reforms
    The Congress and/or Administration should return as much 
flexibility as possible to the States to address our respective 
marketplace needs as you consider revisions to the ACA. As that concept 
is more broadly considered, there are certain areas that Congress and 
the Administration could address in the short- and long-term future 
that would help stabilize Tennessee's individual insurance market. I 
would like to focus on a few key areas that I believe can provide 
immediate assistance to our marketplace: rating factors, essential 
health benefits (EHB), special enrollment periods (SEPs), and grace 
periods.
    As you know, all ACA-compliant plans must offer the same package of 
benefits, called EHB. Insurance carriers largely do not compete anymore 
on innovative benefit packages, but rather they compete on networks, 
price, and name recognition. The Congress and/or Administration should 
consider granting States the flexibility to redefine EHB. Should the 
State be provided a blank slate to define EHB, we may consider a base 
set of benefits that would need to be included in a few standard plans 
while also allowing more flexible designs in other available plans. 
This approach would allow consumers to select from broader benefit 
plans, while also potentially providing an option to select a limited 
benefit plan that will still cover the basics such as hospitalizations, 
physician visits, and mental health care, but may not provide all of 
the benefits that are currently required of all ACA-compliant plans.
    Congress and the Administration should relax restrictive age bands 
that have created a situation where premiums can only differ based on 
age by no more than a 3:1 ratio. Providing more flexibility to 
insurance regulators and carriers in how individuals are rated, even 
while keeping prohibitions against discrimination based on pre-existing 
conditions, may help stabilize insurance markets. Ratios closer to 5:1 
or 6:1 would provide more rate flexibility in the market and when 
coupled with EHB flexibility may have the ultimate impact of growing 
the individual insurance pool in Tennessee. Today 51 percent of 
Tennessee's individual market is 45 years of age or older. To help 
stabilize insurance premiums, we need young and healthy risks to enter 
the insurance marketplace. Providing States the flexibility to redefine 
EHB to bring more innovative products to market and then allowing rates 
to vary more substantially based on member age could go a long way 
toward bringing products to market that will appeal to younger and 
healthier populations.
    Two other issue areas that the Congress and/or Administration could 
address quickly to the benefit of individual insurance markets are SEPs 
and grace periods. We all agree that special enrollment periods are an 
absolute necessity for individuals who experience a change in life 
circumstances. Situations like childbirth, marriage, and a change in 
employment should clearly create a SEP allowing an individual to apply 
for coverage outside of traditional open enrollment periods. 
Unfortunately, reports suggest that SEPs have been so broadly 
interpreted at the Federal level that they are almost akin to a 
permanent open enrollment period. Broadly defined SEPs discourage 
individuals from applying for coverage during open enrollment periods 
and instead allow individuals to access health insurance benefits only 
when health care is an immediate necessity. This obviously has a 
negative impact on the overall health of the individual market pool if 
coverage is purchased only when necessary to cover procedures or 
treatment.
    Extended grace periods have had the unintended consequence of 
adding administrative costs to insurance carriers. The 90-day grace 
period potentially allows gaming of the insurance system by allowing a 
policyholder to stay on a plan well past the time that premium payments 
have been discontinued. Congress and/or the Administration should 
considering shortening that grace period to around 30 days to provide 
certainty to insurance markets.
                               conclusion
    The ACA introduced new policies, new concepts, and at times new 
rigidity to our insurance marketplace. Rates have gone up, consumer 
choice and marketplace competition has gone down. While policies are 
more robust than pre-ACA policies and so-called grandfathered plans, 
policy options and regulation has become more of a one-size-fits-all, 
Washington, DC-approach, rather than an innovative and flexible State-
based solution.
    As this committee continues its work to stabilize individual 
insurance markets, I would again stress two points. First, States 
should be empowered to regulate our markets. Additional flexibility 
from Congress and the Administration will help the States tailor 
insurance regulation to our unique markets and medical and insurance 
communities. Second, please continue to be as open and transparent in 
this process as possible. Markets need clarity and opportunities like 
this hearing today can help provide that clarity so that we do not see 
carriers exiting markets in bulk when they do not have an idea of what 
to expect in terms of regulation over the next several years.
    Thank you again for the opportunity to discuss the Tennessee 
experience with this committee. I look forward to your questions on my 
testimony today and am happy to provide additional thoughts related to 
the regulation of insurance markets and the ACA.

    The Chairman. Thank you, Ms. McPeak.
    Ms. Tavenner.

  STATEMENT OF MARILYN TAVENNER, PRESIDENT AND CEO, AMERICA'S 
             HEALTH INSURANCE PLANS, WASHINGTON, DC

    Ms. Tavenner. Thank you, Mr. Chairman, and I will be brief 
because many things that Julie discussed I will concur.
    Let me start by saying Chairman Alexander, Ranking Member 
Murray, and members of the committee, I am Marilyn Tavenner, 
president and CEO of AHIP which serves as the national 
association whose members provide coverage for healthcare and 
related services to millions of Americans every day. We 
appreciate this opportunity to testify about what is needed to 
stabilize the individual health insurance market.
    It is clear that certain parts of the ACA have not worked 
as well as intended and the individual market does face serious 
challenges. It is also true that the ACA has expanded coverage 
to more than 20 million Americans through expanded Medicaid and 
through the individual exchange marketplace.
    I am here today to offer our recommendations for both the 
short-term solutions, as well as longer term principles for 
lasting improvements.
    First and foremost, immediate policy steps are needed to 
help deliver an effective transition and continuous coverage. 
Strong signals of certainty can help stabilize this market 
avoiding even higher costs and fewer choices. Specifically we 
recommend continuing to provide subsidies such as the Advanced 
Premium Tax Credits and Cost-Sharing Reduction Payments in 
their entirety. The absence of this funding would further 
deteriorate an already unstable market and hurt the millions of 
consumers who depend on these programs for their coverage.
    Second, make full Federal reinsurance payments for 2016. 
This funding is important for plans to effectively cover the 
needs of high-cost patients including those with chronic 
conditions.
    As discussed in my written testimony, while continuing the 
CSRP and reinsurance payments are critical, they are not 
sufficient to ensure stable and workable transition for 
consumers and patients. Additional policies such as 
recalibrating premium subsidies to encourage younger folks to 
participate, Federal risk pool funding, and continuous coverage 
incentives will be necessary to promote a more stable and 
workable transition for consumers and families.
    My testimony also outlines longer term principles for 
lasting improvements that can actually deliver real choice, 
high quality, and access to affordable care in the individual 
market.
    These policies include bringing down the cost of coverage, 
guaranteeing access to affordable coverage for all Americans 
including those with pre-existing conditions, continuous 
coverage incentives, effective risk pooling mechanisms, 
adequate and well-designed tax credits that promote 
affordability, and State flexibilities to promote innovation 
and choices for consumers.
    AHIP, and the health plans we represent, look forward to 
working with this committee, with all Members of Congress on a 
bipartisan basis, and with this Administration as it works to 
improve healthcare for all Americans.
    We can only achieve this by working together in good faith 
and a bipartisan manner to fix critical problems while 
preserving expanded coverage and enhanced affordability of 
coverage for millions of our patients and their families.
    Thank you.
    [The prepared Statement of Ms. Tavenner follows:]
                 Prepared Statement of Marilyn Tavenner
                           executive summary
    Chairman Alexander, Ranking Member Murray and members of the 
committee, I am Marilyn Tavenner, President and CEO of America's Health 
Insurance Plans (AHIP). AHIP is the national association whose members 
provide coverage for health care and related services to millions of 
Americans every day.
    We appreciate this opportunity to testify about what is needed to 
stabilize the individual health insurance market. It's clear that 
certain parts of the Affordable Care Act (ACA) have not worked as well 
as intended and the market faces serious challenges. It is also true 
that the ACA has expanded coverage to 20 million Americans through 
expanded Medicaid and through the individual exchange marketplace.
    I am here today to offer our recommendations for both short-term 
solutions as well as longer-term principles for lasting improvements.

     Immediate policy steps that can help deliver an effective 
transition and continuous coverage. These policies include continuing 
to provide cost-sharing reduction (CSR) payments during the entire 
length of the transition and making full reinsurance payments. 
Recalibrating premium subsidies to encourage younger adults to 
participate, Federal risk pool funding, and continuous coverage 
incentives are also necessary to promote a more stable and workable 
transition for consumers and families.
     Longer term principles for lasting improvements that can 
deliver real choice, high quality, and access to affordable care in the 
individual market. These policies include bringing down the cost of 
coverage, guaranteeing access to coverage for all Americans--including 
those with pre-existing conditions, continuous coverage incentives, 
effective risk pooling mechanisms, adequate and well-designed tax 
credits that promote affordability and State flexibility to promote 
innovation and choices for consumers.

    AHIP and the health plans we represent look forward to working with 
the committee, Members of Congress on a bi-partisan basis, and the 
Administration as it works to improve health care for all Americans. We 
can achieve this by working together in a good faith and bi-partisan 
manner to fix critical problems while preserving the expanded coverage 
and enhanced affordability of coverage for millions of patients and 
families.
                                 ______
                                 
                            i. introduction
    Chairman Alexander, Ranking Member Murray and members of the 
committee, I am Marilyn Tavenner, president and CEO of America's Health 
Insurance Plans (AHIP). AHIP is the national association whose members 
provide coverage for health care and related services to millions of 
Americans every day. The coverage and benefits that our members offer 
improve and protect the health and financial security of consumers, 
families, businesses, communities and the Nation. We are committed to 
market-based solutions and public-private partnerships that improve 
affordability, value, access and well-being for every consumer.
    We appreciate this opportunity to testify about the actions that 
are needed to stabilize the individual health insurance market. It is 
clear that certain parts of the Affordable Care Act (ACA) have not 
worked as well as intended, especially for individuals who purchase 
coverage on their own. This year, many consumers face fewer health plan 
choices and significant increases in average premiums. These increases 
have been driven by underlying growth in medical and prescription drug 
costs as well as the sunset of the transitional reinsurance program. In 
addition, we know how bureaucratic rules, requirements, and red tape 
have complicated the market. Ineffective regulations have raised costs 
and limited choices for consumers leaving hard-working Americans 
struggling to make ends meet. We have witnessed firsthand how higher 
costs are a barrier to access and the sustainability of the delivery 
system--and we are committed to working with you to fix this.
    At the same time, the ACA has succeeded in expanding coverage to 20 
million Americans and the percentage of Americans without health 
insurance has dropped to historical lows--down from 16.0 percent in 
2010 to 8.6 percent in 2016.\1\ These gains have been achieved through 
the expansion of Medicaid as well as through the coverage offered in 
the ACA exchange marketplace.
---------------------------------------------------------------------------
    \1\ Health Insurance Coverage: Early Release of Estimates from the 
National Health Interview Survey, January-March 2016. https://
www.cdc.gov/nchs/data/nhis/earlyrelease/insur201609
.pdf.
---------------------------------------------------------------------------
    Our members have long supported an approach to health care that 
brings as many people as possible into the system. Broad coverage 
improves the availability and affordability of health insurance 
coverage options. While the challenges of providing broad access to 
affordable choices remain significant, we are strong believers in 
private-sector solutions. Health insurance plans have a proven track 
record of providing more affordable, high quality, efficient choices. 
As just one example, America's seniors and disabled persons in the 
Medicare Advantage and Part D programs have benefited tremendously from 
innovations advanced by our members. Our plans deliver better value, 
better services, and better results for beneficiaries and taxpayers 
alike.
    Health insurance plans also provide coverage to 70 percent of all 
Medicaid beneficiaries. These plans promote better care coordination 
for patients with chronic conditions, improve health outcomes, and 
maximize efficient use of public funds.
    Together we have an opportunity to deliver the same level of 
success in the individual market. We have an opportunity to improve the 
individual market for years to come, so that consumers have access to 
quality, affordable coverage that best meets their specific needs. I am 
here today to offer our recommendations for short-term solutions that 
can deliver long-term benefits for consumers: lower costs, more 
choices, and better quality care. An effective transition can deliver a 
strong, stable market that will help ensure public confidence, 
encourage them to participate in the market, and increase the health 
care access and financial security that the American people deserve. I 
will focus on two key priorities:

     The immediate policy steps that can help deliver an 
effective transition and continuous coverage.
     The long-term principles for lasting improvements that can 
deliver real choice, high quality, and access to affordable care in the 
individual market.
       ii. immediate steps for stabilizing the individual market
    As the American people think about the care and coverage they want 
and need, they are looking for strong signals that the individual 
health insurance market will remain viable this year, next year and for 
the duration of any transition period. There are several steps that can 
be taken to ensure that Americans have quality coverage options as 
policymakers and industry collaborate to build an improved, sustainable 
health care system.
    First and foremost, we need to ensure that consumers have quality 
coverage options. This market continues to face challenges, and 
additional market uncertainty will likely exacerbate these challenges. 
But strong signals of certainty can help stabilize the market, avoiding 
even higher costs and fewer choices. Specifically, we recommend:

     Continuing to provide subsidies such as the advanced 
premium tax credits (APTC) and cost-sharing reduction (CSR) payments in 
their entirety. The absence of this funding would further deteriorate 
an already unstable market and hurt the millions of consumers who 
depend on these programs for their coverage.
     Making full Federal reinsurance payments for 2016. This 
funding is important for plans to effectively cover the needs of high-
need patients, including those with chronic conditions.

    While these policies are critically important, they by themselves 
are not sufficient to ensure a stable and workable transition for 
consumers and patients. This is especially the case if the requirement 
to have insurance or pay a tax penalty is eliminated this year without 
workable alternatives to promote continuous coverage and market 
stability. As long as current market rules that prohibit the exclusion 
of pre-existing conditions, require guaranteed issue of insurance 
policies and impose community rating requirements on insurers remain in 
place, there is a corresponding need for incentives for people to 
purchase and keep continuous coverage.
    Our members have strongly supported an approach to health reform 
that brings everyone into the system. Broad coverage can ensure the 
availability of affordable options. Health insurance only works when 
everyone is covered: those who utilize insurance to obtain quality care 
as well as those who are healthy but have insurance to protect them in 
case they get sick. Both types of consumers must be insured for 
coverage to remain affordable. The following policies can work to help 
promote a more stable and workable transition for consumers and 
families.

     Using premium tax credits to encourage younger people to 
get coverage. There is no question that younger adults are under-
represented in the individual market. Recalibrating and reforming the 
way in which the current APTC subsidy is structured will encourage 
younger Americans to get covered. This will strengthen the risk pool, 
expand coverage, and avoid increasing premium costs for everyone. We 
propose modifying the existing tax credit formula to factor in age 
bands, based on a 5:1 ratio, thus adjusting the required individual 
contribution amounts for individuals with incomes between 100 and 400 
percent of the Federal poverty level (FPL).
     Creating incentives for people to keep their coverage 
through the transition. Absent the establishment of alternative 
solutions to promote continuous coverage, the elimination of the tax 
penalties associated with the individual coverage requirement would 
likely create further market instability, raise costs for insurance, 
and result in the loss of coverage for millions of Americans. We 
recommend that continuous coverage requirements be communicated to 
enrollees this year to encourage enrollment during 2018 open enrollment 
and to prevent individuals from dropping their coverage. All eligible 
consumers should be allowed to enroll during 2018 open enrollment 
regardless of current coverage status without continuous coverage 
incentives or penalties. Beginning in the 2018 benefit year, special 
enrollment period (SEP) enrollees must meet continuous coverage 
requirements, defined as 12 months of creditable coverage. For 
individuals without continuous coverage, potential policy options 
include adopting late enrollment penalties and/or waiting periods 
similar to Medicare Part D.
     Establishing transitional risk pools starting in 2017. A 
federally funded, transitional risk pool program would offset some of 
the costs of serving patients who have the most complex health 
conditions and need the most care--to help promote market stability. 
Guidelines for how payments will be determined would be established by 
the Department of Health and Human Services (HHS), and payments would 
be based on available funding. States could have the option of 
administering their own risk-pool program, subject to approval by HHS.
     Providing relief from taxes and fees that hurt consumers. 
Eliminating taxes and fees such as the health insurance tax, will 
reduce premiums and promote affordability. Although Congress has taken 
action to suspend the health insurance tax for 2017, the most recent 
estimates from the Congressional Budget Office (CBO) indicate that this 
tax, if it goes back into effect in 2018, will impose additional costs 
of $156 billion over the next decade (2016-26).\2\ According to an 
analysis by Oliver Wyman, repealing the HIT would have as much as a 3-
percent impact on premiums for 2018--reducing premiums by an average of 
$220 per year.\3\
---------------------------------------------------------------------------
    \2\ https://www.cbo.gov/sites/default/files/114th-congress-2015-
2016/reports/51385-HealthIn-
suranceBaseline.pdf.
    \3\ Oliver Wyman--Estimated Impact of Suspending the Health 
Insurance Tax from 2017-2020. December 16, 2015. https://ahip.org/wp-
content/uploads/2015/12/Oliver-Wyman-report-HIT-December-2015.pdf.
---------------------------------------------------------------------------
     Effectively verifying the eligibility of those signing up 
for coverage during special enrollment periods, and shortening the 3-
month grace period for non-payment of premiums so that it is better 
aligned with State laws and regulations (e.g., 30-day period). The 
market must be fair if it's to be affordable. While most consumers play 
by the rules, many do not--and that raises costs for everyone. Too many 
Americans have incentives to game the system by applying for coverage 
only when they need care. We must eliminate opportunities for fraud if 
we are to make care more affordable for everyone.
     Protecting people who are eligible for public programs 
from being inappropriately steered into the commercial insurance 
market. People should be enrolled in programs that are designed for 
them. Many people enrolled in Medicare or Medicaid receive additional 
protections and non-medical services that are not typically available 
in individual commercial coverage. Inappropriately steering people into 
a commercial market that does not meet their needs--through third-party 
payments of premiums and other mechanisms--is inappropriate and unfair 
to the patient, and creates further imbalance in the risk pool that 
leads to increased costs for everyone. Patients should have the 
coverage that best meets their needs, not the financial interest of 
providers. To that point, the recent district court decision enjoining, 
on procedural grounds, the new CMS rule requiring patient education of 
dialysis patients and notice of intent to make third party payments is 
a setback for patients, consumers, and the stability of the 
marketplace.

    Throughout the discussions on short-term solutions and a stable 
transition, we must provide plans sufficient time to adjust products. 
Under current Federal rules, health plans must file individual and 
small group exchange products for the 2018 marketplace by May 2017. 
Health plans should have sufficient time to modify products and pricing 
to reflect any changes that policymakers may make.
    iii. principles for the development of long-term reforms to the 
                           individual market
    As stated above, the most immediate need is to deliver an effective 
transition that ensures continuous coverage. We can achieve that goal 
by working together to develop and deliver smart solutions. The 
solutions outlined here will allow us to build a strong, stable 
individual market that serves our citizens well. As Congress and the 
Administration debate long-term reforms for strengthening the 
individual market, we have identified several key principles for 
ensuring a stable, competitive market that delivers real choice, high 
quality, and affordable care.

    1. Bringing down the cost of care and coverage. Rising healthcare 
costs have been a financial burden for too many families for too long. 
From out of control drug prices to bureaucratic regulations to outdated 
payment models, we need effective solutions that bring down the cost of 
care for families. More market competition, better coordination, using 
evidence-based medicine, and prioritizing value can deliver the 
affordable coverage and quality care that every American deserves.
    2. Guaranteeing access to coverage for all Americans--including 
those with pre-existing conditions. No individual should be denied or 
priced out of coverage because of their health status. However, with 
this as a principle, modifications to existing insurance reforms are 
needed--e.g., such as greater State flexibility to adopt wider age-
bands to make coverage more affordable to younger adults--while 
retaining core insurance reform elements that guarantee access to 
coverage for those with pre-existing conditions. However, in order to 
ensure these reforms work effectively, they would need to be coupled 
with strong incentives for individuals to maintain continuous coverage.
    3. Promoting public policies that encourage individuals to purchase 
and maintain continuous coverage. Strong, stable markets are the result 
of everyone having coverage--those who utilize insurance to obtain 
quality care and those who are healthy but have insurance to protect 
themselves in case they get sick. We need effective incentives to 
encourage consumers to get and keep insurance so coverage can be 
affordable for everyone.
    4. Implementing more effective risk pooling programs. An improved 
and reformed risk-adjustment program and permanent Federal funding for 
State-based risk pool programs, such as reinsurance, will improve risk 
sharing and deliver more market stability.
    5. Assuring adequate and well-designed tax credits to promote 
access to affordable coverage. Any new coverage options will be 
meaningless if consumers cannot afford them. Those who live paycheck to 
paycheck and struggle to make ends meet should have more generous tax 
credits and be protected from excessive out-of-pocket costs. Assistance 
that is annually indexed with medical inflation will help even further.
    6. Expanding consumer control and choice. Consumers and patients 
need more control over their health care. Nearly 20 million Americans 
have Health Savings Accounts (HSAs) because they deliver affordable 
coverage and more consumer control. We need to expand HSAs so they can 
accumulate savings for the future, enable them to buy affordable 
coverage today, and encourage them to take a more active role in making 
decisions about their care.
    7. Promoting State innovation and State flexibility. Consumers do 
not want one-size-fits-all approaches. That's why States should have 
more flexibility to develop affordable and lower premium individual 
market plans. States should also have additional flexibility around 
coverage requirements; State benchmarks; 1,332 waivers; risk-pool 
mechanisms; and plan designs that promote innovations in care delivery, 
such as value-based insurance designs. We caution, however, that State 
flexibility should not come at the expense of consumers and their 
coverage.

    These principles reflect our members' priorities for long-term 
improvements to the individual market. As specific legislation is 
developed in the coming weeks and months, we will offer more detailed 
recommendations for strengthening the individual health insurance 
market and more specific guidance on legislative proposals.
                             iv. conclusion
    AHIP and the health plans we represent look forward to working with 
the committee, Members of Congress on a bi-partisan basis, and the 
Administration as it works to improve health care for all Americans. We 
can achieve this by working together in a good faith and bi-partisan 
manner to fix critical problems while preserving the expanded coverage 
and enhanced affordability of coverage for millions of patients and 
families. Thank you again for the opportunity to work with you on these 
important issues.
    appendix: considerations to support implementing a better, more 
                            effective market
    We are committed to making healthcare work for every American. As 
policymakers develop and debate the long-term solutions to improve the 
individual market, the following considerations are important factors 
to guide new solutions:

     Allow time to develop new products. Health plans need at 
least 18 months to create new products, gain approval from State 
regulators, and introduce them in the marketplace.
     Question whether new rules are needed. New rules will 
require time for draft rulemaking notices, comment periods, final 
rulemaking and timing for implementation.
     Understand that States may need to repeal current statutes 
tied to current Federal law or enact any necessary changes.
     Allow time for consumers to become informed and educated 
on changes and options. This includes changes to the purchasing process 
and any new requirements related to getting and staying covered.
     Make changes effective at the start of a new benefit year. 
Mid-year changes to rules and regulations may lead to more confusion in 
the market, creating unnecessary disruption for consumers and 
businesses alike.
     Engage the States as a key stakeholder. Every consumer is 
different--and every State is different. States should have a voice in 
deciding what is best for their people, and letting the people decide 
what is best for themselves. By granting States more flexibility to 
serve their citizens, reforms can encourage innovations that deliver 
better quality and lower costs.

    The Chairman. Thank you, Ms. Tavenner.
    Ms. Trautwein, welcome.

STATEMENT OF JANET STOKES TRAUTWEIN, CEO, NATIONAL ASSOCIATION 
             OF HEALTH UNDERWRITERS, WASHINGTON, DC

    Ms. Trautwein. Good morning, Chairman Alexander, Ranking 
Member Murray, members of the committee.
    My name is Janet Trautwein. I am the CEO of the National 
Association of Health Underwriters. NAHU is the leading 
professional association for health insurance brokers, agents, 
and other professionals. We represent more than 100,000 benefit 
specialists nationally. I do thank you for inviting me here 
today to talk about immediate steps to stabilize the health 
insurance market.
    Passage of the ACA brought health insurance with no health 
questions asked, no pre-existing conditions clauses, and tax 
credits to pay for the coverage. It also allowed adult children 
to stay on a parent's health insurance policy until age 26.
    Over the years since it was enacted, especially in the 
individual market, we have also seen fewer coverage and 
provider choices, and higher and higher premiums and cost 
sharing. This trajectory cannot be sustained. The individual 
market has become very unstable and immediate steps need to be 
taken to stabilize it.
    I have heard recent reports that premiums have gone up 
because carriers made errors in estimating what their costs 
would be, and that rates should now be stable. I think a bigger 
question is why those costs were higher in the first place than 
they were predicted to, and whether there is a flaw in the 
system that we have that resulted in these higher costs?
    The problem is that we have created a system that operates 
under a set of rules that can be broken. We see people who come 
in during open enrollment and drop out a few months later after 
they get the services they need. They maintain coverage only 
during their period of illness.
    Special enrollments are not requiring up front 
documentation of a qualifying event and many of them are 
subjective in nature. Our members even report stories of call 
center staff coaching enrollees on what their reason should be 
for their special enrollment period.
    Affordable coverage requires a stable risk pool made up of 
healthy and less healthy individuals on a year-round basis.
    To stabilize the market, we need to address what is really 
wrong and we need to not make matters worse. I do not think any 
of us wants to go back to the times of health questions and 
pre-existing conditions, but in order to operate in a 
guaranteed issue environment, we have to be sure we do what is 
needed to plan for high risks and ensure that healthy people 
enroll and stay enrolled for coverage.
    First, the reinsurance program and cost sharing subsidies 
scheduled to run through 2017 should be allowed to continue. 
These are market stabilizers and removal of either of them 
would increase market instability and hurt consumers who would 
likely be faced with either fewer or no plan choices in 2018.
    Second, regardless of any other legislative efforts 
undertaken by Congress, some regulatory action could offer 
virtually immediate benefits. The most important of these are 
significant changes to the rules surrounding special enrollment 
periods and changes to the ACA tax credit grace periods.
    Changes to the types of plans that must or may be offered 
would also help, such as not requiring standardized plan 
offerings and allowing flexibility for grandmothered and 
grandfathered plans.
    Redefining the formula for the medical loss ratio could 
provide important relief for consumers and compensation relief 
for brokers who help them get covered. Easing the reporting 
burden for employers would ensure that employers could continue 
to offer coverage to employees, which also helps the individual 
market.
    These are just a few issues that could be easily addressed 
by the new Administration and would increase stability in the 
health insurance markets. Of course, many of these needed 
actions cannot be done on a regulatory basis and would require 
bipartisan cooperation for enactment.
    First, we could allow premium tax credits to be used 
outside of the marketplace. This would ensure that those who 
are eligible for a tax credit can actually use it to purchase 
coverage given the current scarcity of coverage options.
    Since coverage outside of the marketplace is also subject 
to ACA regulations, it includes the same covered services and 
is of equal quality. Getting and keeping people covered is the 
best tool that we have to fight adverse selection.
    Second, we could allow any person to purchase the 
catastrophic category of coverage regardless of their age or 
income status and allow premium tax credits to be used for this 
coverage. This provides an additional option for getting and 
keeping people insured.
    Third, the current structure of open enrollments and 
special enrollments must be addressed. We recommend making the 
open enrollment less frequent than the current annual 
enrollment period and tightening special enrollment 
opportunities significantly to remove subjective eligibility.
    Once the initial enrollment opportunity expires, we would 
recommend that any person enrolling with more than a 60-day 
break in coverage be subject to late enrollment penalties. A 
late enrollment penalty has been very successful in preventing 
adverse selection of Medicare Part B. In fact, the 
recommendations that we make are far less punitive than what we 
actually see in Part B. It allows us to preserve guaranteed 
issue without applying pre-existing conditions, but still 
discourages the person to wait until they are ill to obtain 
coverage. It also encourages a person not to drop coverage, so 
that penalties will begin anew. It would really keep people 
insured.
    In conclusion, the issues that we have talked about, and 
that we elaborate on much further in our written testimony, are 
suggestions for immediate action to stabilize the private 
health insurance market.
    Other recommendations are included in our written comments. 
For example, we recommend a new type of high risk pool that 
would ensure risk rather than issue coverage so that no one 
covered by the pool would actually pay a higher premium as a 
result of being covered by that pool.
    We also, as our other witnesses have commented on, would 
like more flexible rating rules and a greater State flexibility 
in essential benefits packages.
    I would be happy to answer any additional questions as time 
permits and thank you for this opportunity to be here today.
    [The prepared Statement of Ms. Trautwein follows:]
              Prepared Statement of Janet Stokes Trautwein
                           executive summary
    The National Association of Health Underwriters (NAHU) is the 
leading professional trade association for health insurance agents, 
brokers and consultants, representing more than 100,000 benefit 
specialists nationally. NAHU members experience the realities of the 
current State of the health insurance market every day. While many 
people have gained coverage as a result of the ACA, our members are 
finding it increasingly difficult to help their clients find affordable 
high-quality health insurance coverage, particularly in the individual 
health insurance market.
    The problems the individual market is experiencing are largely due 
to adverse selection, which occurs when people either wait until they 
are sick to obtain coverage or drop coverage as soon as they have been 
treated for their illness. This causes an imbalance in the insurance 
pool, with not enough healthy people in the pool to offset those in 
poorer health.
    As lawmakers move forward with changes to the ACA, it will be 
important to take immediate steps to stabilize the health insurance 
market since some actions they might take could create problems in an 
already troubled market. If repeal of the ACA via budget reconciliation 
is pursued, the effective date of repeal should be delayed for premium 
tax credits to allow alternative measures to be put into effect first. 
Immediate regulatory action should be taken to address problematic 
open- and special-enrollment issues.
    The most significant changes will need to be addressed by Congress 
on a bipartisan basis. It is possible to retain provisions of the ACA 
like guaranteed issue of coverage, no pre-existing conditions, coverage 
to age 26 and other important protections while making other 
significant changes that will bring down the cost of coverage and 
enhance coverage options. Consideration will need to be given to how we 
enroll people for coverage and how we encourage them to remain covered. 
We will need to look at creative solutions to address high-risk 
individuals in a way that does not discriminate against them but 
instead acknowledges the increased risk and mitigates it so that it 
does not increase costs for others who are insured. A most significant 
concern should remain making sure most people are covered somewhere, 
either through their own policy or through their employer, and that 
younger people understand and embrace the importance of continuous 
health insurance coverage. Continuous coverage can be encouraged and 
achieved with the right incentives.
    The following pages detail our recommendations in these areas. We 
welcome the opportunity to work with members of this committee and 
others interested in enhancing market stability, health insurance 
choices and affordability.
                                 ______
                                 
    Good morning. My name is Janet Trautwein and I am the CEO of the 
National Association of Health Underwriters. NAHU is the leading 
professional trade association for health insurance agents, brokers and 
consultants, representing more than 100,000 benefit specialists 
nationally. Thank you for inviting me here today to talk about 
immediate steps to improve the stability of health insurance markets 
and increasing the affordability and availability of coverage.
    NAHU members work on a daily basis to help individuals, families 
and employers of all sizes purchase health insurance coverage. They 
help their clients use their coverage effectively and make sure they 
get the most out of the policies they have purchased. Since the passage 
of the Affordable Care Act, our members have spent enormous amounts of 
time educating their clients about the law's provisions and helping 
their clients comply with its regulations.
    Some provisions of the Affordable Care Act have been noteworthy and 
helpful to people seeking health insurance coverage. They no longer 
have to answer health questions to qualify for coverage, they are no 
longer penalized if they have a pre-existing condition, and dependent 
children up to age 26 may now remain covered under a parent's health 
insurance plan. Premium tax credits are available for the purchase of 
private coverage for those without a valid offer of employer-sponsored 
coverage to help with the cost of coverage for people from 100 percent 
to 400 percent of the Federal poverty level.
    On the negative side, these benefits have come with a cost. 
Although everyone can obtain coverage regardless of health status, 
coverage and provider choices are fewer and premiums and cost-sharing 
are higher, particularly in the individual market. Even though tax 
credits have helped people afford coverage, the overall cost has 
increased so much that, for many, their share of the cost is still more 
than they can afford. This is the current state of the market and does 
not take into consideration the effect of any new changes that may be 
made relative to the ACA--the individual health insurance market is 
already unstable and immediate steps need to be taken to stabilize it.
    The problems the individual market is experiencing are the result 
of coverage being offered on a no-questions-asked basis without 
adequate mechanisms to ensure that the pool of insured individuals is 
made up of both healthy and unhealthy individuals on a continual basis. 
The structure and the process related to the current system encourage 
individuals to wait until they are sick to obtain coverage. In fact, 
much of the problem in the market today stems from the fact that people 
are signing up for coverage during open- or special-enrollment periods, 
obtaining the care they believe they need and then dropping coverage. 
This means that the overall pool of covered individuals is sicker than 
average. We call this phenomenon ``adverse selection.''
    To prevent adverse selection, the Affordable Care Act included an 
individual responsibility provision requiring people to continually be 
covered by health insurance. In addition to preventing adverse 
selection, the individual responsibility requirement was intended to 
ensure that people were continuously covered and able to obtain 
preventive and other care they needed on a timely basis. Unfortunately, 
while well-intended, the requirement did not provide an adequate 
incentive to maintain coverage continuously and has not been effective 
in preventing the adverse selection we see today.
                           market correction
    There are steps that can be taken to stabilize markets. Some should 
be taken immediately, while others could come into effect over the next 
few years. It is very important to address things in the proper order 
to ensure that one modification or improvement builds on the one before 
it. So the things that need to be done are important, but it is 
important not to randomly pick and choose what is done, but to 
methodically address stability in the correct order.
    Before we outline these steps, it is important to address the item 
of immediate pending changes that could occur in connection with 
repealing some parts of the ACA via budget reconciliation. It is a 
given that we do not want to make changes that will cause the health 
insurance market to deteriorate even further. While we can begin to 
work on strategies to correct market problems now, some corrections 
will take time to come into effect for both practical and political 
reasons. Some key items to consider relative to reconciliation are:

    1. Allow those already receiving premium tax credits and those who 
might become eligible for them during the next 3 years to continue to 
receive them until January 2020. This keeps people in coverage and 
works against adverse selection.
    2. Retain the small business tax credit for a similar period of 
time to allow those who have selected coverage based on presumed 
receipt of a tax credit to receive it.
    3. Repeal the medical loss ratio requirement--it creates the wrong 
incentives relative to cost-effective care and can increase overall 
premium levels.
    4. Repeal the Excise/Cadillac Tax to provide premium relief to 
businesses and incentives to continue offering coverage to employees.
    5. Repeal the Health Insurance Tax to provide premium relief for 
all fully insured health plans.
    6. We strongly advise that the repeal of the reinsurance program 
scheduled to run through 2017 not be repealed even though it was a part 
of the prior reconciliation effort to repeal. Coverage pricing for 2017 
has already factored in reinsurance. Removal would increase market 
instability and hurt consumers, who would likely be faced with fewer or 
no plan choices in 2018. Some carriers might even be forced to leave 
the market during 2017.
    7. For the same reason, we recommend no action to remove cost-
sharing subsidies prior to the effective date of repeal of the current 
premium tax credits. Many who are receiving these credits are young 
families who serve to stabilize the overall market. They are likely to 
drop coverage if the cost of using their coverage is no longer 
affordable.

    Whether or not parts of the ACA are repealed via reconciliation, 
action must be taken to enhance health insurance market stability. 
Since not all desired elements of a reformed marketplace can be 
achieved via reconciliation, if reconciliation successfully repeals 
some provisions, taking immediate action in a number of areas becomes 
even more imperative. Those items that can be corrected on a regulatory 
basis offer virtually immediate benefit for market stabilization.
 immediate regulatory actions to increase stability of the individual 
                       and small-employer markets
    The ACA has had an enormous impact on the private health insurance 
marketplace, including the availability and affordability of health 
insurance options for individual consumers and on the ability of 
employers to offer affordable and comprehensive health insurance 
coverage to their employees. In addition to the breadth of the ACA 
statute itself, the resulting regulations and guidance, totaling more 
than 40,000 pages to date, have had a profound effect on our economy 
and all aspects of our national health coverage system.
    NAHU has identified a number of these regulations that could 
immediately improve the stability of the health insurance market. We 
address these immediate action items here and have attached an appendix 
of others that may be pending or eligible for congressional review that 
could provide important relief for individuals and businesses 
purchasing health insurance. We present these recommendations for 
administrative and congressional action in the very near future, which 
we believe will significantly reduce costs and increase access for 
business and individual consumers of private health insurance coverage.
    Some of the areas where NAHU believes that the new Administration 
could positively impact via thoughtful and targeted regulatory change 
include but are not limited to:

    1. Special enrollment periods should be limited only to those 
clearly defined in the ACA and should require submission of documented 
proof by the 15th of the month before coverage will be effective.
    2. The extended 90-day grace period for individuals who are 
receiving premium tax credits should be reduced to the same 30-day 
grace period for other covered individuals.
    3. HIPAA Certificates of Credible coverage, which for many years 
documented periods of coverage and showed when coverage began and 
ended, were discontinued in conjunction with the ACA. Immediate 
restoration of those certificates would facilitate proof of dates of 
coverage for multiple purposes, including documentation of continuity 
of coverage and loss of coverage for special enrollment purposes.
    4. Allow continuation of ``grandmothered'' policies beyond the 
scheduled expiration date of 2017.
    5. If the medical loss ratio is not repealed via reconciliation and 
until it can be repealed legislatively, there should be regulatory 
action to redefine the formula for MLR to specifically exclude broker 
commissions in the same way taxes are excluded from the formula.
    6. Allow a more robust form of composite rating in fully insured 
plans to allow ease of administration for small employers that provide 
coverage for employees.
    7. Remove the requirement for standardized benefit plans to be 
offered in Marketplaces.
    8. Simplify the structure and burden of IRC 6055 and 6056 
employer reporting requirements.
    9. Remove limitations on keeping grandfathered plans to allow 
greater changes in employee contributions toward coverage, deductibles 
and other benefit changes based on an annual allowable change vs. 
lifetime change.
                  legislative action in regular order
    NAHU recognizes that many actions that are needed to stabilize the 
individual market cannot be done on a regulatory basis, nor are they 
likely to be eligible for inclusion in a reconciliation repeal effort. 
For this reason, we have developed a set of recommended actions to 
increase market stability.
    The following recommendations are made in the order they appear to 
importantly address ``first things first.'' Randomly selecting from 
these items when the correct stabilizing actions have not been taken 
will not provide the desired market outcome.
    Our recommendations, in order, are:

    1. While ACA tax credits are still in effect, allow premium tax 
credits to be used outside of the Marketplace if there are fewer than 
two choices offered in a State. Alternatively, this could apply in 
certain counties within a State. This would ensure that those who are 
eligible for a tax credit have a place to use the credit. It does not 
require the creation of new infrastructure: The Marketplace would still 
be used for eligibility determination and tax credits would be sent to 
insurance carriers as they are today. Since coverage outside of the 
Marketplace is currently still subject to ACA regulations, coverage 
outside of the Marketplace would be of equal quality to that being 
offered inside the Marketplace. The purpose of this provision is to 
ensure continuous coverage and prevent adverse selection.
    2. Allow any person to purchase the catastrophic category of 
coverage regardless of age or income status. Since market stabilization 
has not yet been achieved and premium levels are high, many people are 
priced out of coverage. This provision would allow purchase of some 
level of affordable coverage for all. We further recommend that the 
current schedule of ACA tax credits be permitted to apply to this type 
of coverage. Right now, only those who are exempt from the individual 
mandate and those under 30 are allowed to purchase catastrophic 
coverage, and tax credits may not be used for this category of 
coverage. The purpose of this provision is to create incentives and 
affordable access for at least a baseline of coverage. Currently, many 
people are unable to afford their share of the premium for Bronze-level 
coverage even with a tax credit. This provides an additional option for 
bringing people into the insurance pool rather than remaining 
uninsured.
    3. The current structure of open enrollments and special 
enrollments must be addressed. We recommend changing the current annual 
open enrollment to a one-time or less-frequent-than-annual open-
enrollment period. We further recommend that special-enrollment 
opportunities be tightened significantly to remove subjective 
eligibility and be allowed only for lifestyle changes such as loss of 
coverage (documented), marriage, divorce, death of a spouse or birth or 
adoption of a child, and that a person be permitted a maximum 60-day 
break in coverage. Once the initial enrollment period opportunity 
expired, we recommend that any person enrolling with more than a 60-day 
break in coverage be subject to late enrollment penalties for 5 years 
with a mandatory 6-month waiting period for those who do not meet a 
continuous-coverage requirement. This type of provision will be a 
strong incentive to maintain coverage and has worked very well in 
Medicare Part B. It allows the preservation of guaranteed issue without 
application of pre-existing-conditions limitations, but discourages 
people from waiting until they are ill to obtain coverage. It also 
encourages a person not to drop coverage so that the penalties would 
begin anew. The 5-year period is less than the lifetime penalty imposed 
by Part B but enough of an incentive that it encourages continued 
coverage.
    4. Begin action on allowing and providing funding for States on 
hybrid high-risk pools (hybrid version to insure risk and not be 
coverage-issuing pools) to be in effect by January 1, 2019. These 
special high-risk pools would be available as a State option where 
carriers could cede risk relative to individuals who had not maintained 
continuous coverage, for a reasonable fee. If a carrier cedes risk for 
an individual, any late-enrollment penalties are paid to the pool, 
minus the pool fee for ceding the risk.
    A number of State high-risk pools are still in existence and could 
be converted to this model. The advantage of this model is that the 
insured individual still receives coverage through a traditional 
insurance plan and is not turned down for coverage due to a health 
condition. The insurer is able to either cede the risk to the pool and 
forego late-enrollment penalties or retain the risk and receive late-
enrollment penalties. The other market stabilizer is the mandatory 
waiting period (similar to Part B).
    This avoids the undesirable elements of the high-risk pools of the 
past; individuals in the pool would have the same coverage as anyone 
else could have. Premiums would not be based on health status. At the 
same time, it allows the risk of unhealthy individuals to be offset by 
the pool. This means that the cost of the high-risk individuals would 
not be borne by everyone in the regular insured pool, and overall 
premiums would go down.
    5. If ACA tax credits are repealed via reconciliation or some other 
mechanism, they will need to be replaced with another type of tax 
credit. NAHU feels that the greatest market stability would be obtained 
by making these credits income-adjusted, which would provide for a 
larger credit for those who most need it so that they can afford to 
remain continuously insured. This income adjustment does not need to 
replicate what is in place today, but assistance is particularly needed 
for those below 300 percent of FPL.
    If the credit is not income-adjusted, it should, at a minimum, be 
refundable and advanceable and age-rated with at least five rating 
categories. Weighting should encourage younger individuals to enroll.
    The purpose of this provision is to provide assistance to those 
without an offer of employer-sponsored coverage to enhance their 
ability to afford coverage and increase the number of people 
continuously covered--thereby increasing overall market stability.
    6. Allow States to regulate their markets by allowing them to 
modify age-rating rules for their individual and small-employer 
markets. Create a fallback level for rating rules of 5:1 if a State 
does not actively elect another formula or does not elect to retain 3:1 
rating. Retain prohibition of rating based on health status by issuers 
in the individual and small-employer markets. The purpose of this 
provision is to bring more younger individuals into the insurance pool 
and enhance market stability.
    7. Allow States flexibility in plan design relative to coverage for 
an essential benefits package but retain coverage for dependents to age 
26, prohibition on lifetime limits, mental health parity and 
prohibition on pre-existing conditions. States would elect one plan 
offered in the State in the small-employer market annually to indicate 
which covered items and services would be included in the essential 
benefits package for that State. This would not dictate plan design but 
would indicate what must be covered by a plan. This provision is a 
consumer protection to ensure that adequate coverage is available for 
all. Using benefits in the small-employer market ensures an adequate 
level of coverage regardless of the content or even the existence of a 
federally prescribed package of benefits.
    The following items could also enhance market stability but only 
after initial stabilization occurred in the areas above:

    1. Allow States that wish to increase competition to permit 
coverage to be offered in the individual market from carriers domiciled 
in other States. Coverage offered must reflect the essential benefits 
package in the domiciled State or the State where coverage is being 
offered.
    2. Allow States that wish to increase competition to permit 
coverage to be offered through bona fide association health plans. 
Coverage offered must reflect the essential benefits package in the 
domiciled State or the State where coverage is being offered.
    3. Increase flexibility for HSAs, for example, by allowing 
contributions equal to the out-of-pocket maximum and a limited number 
of office visits to be covered before the deductible each year. This 
would encourage more people to be covered by giving them the advantage 
of a HSA combined with an underlying health plan that would have more 
practical features important to the average individual and family.
                               conclusion
    The items discussed here are suggestions for immediate action to 
stabilize the private health insurance market. There are other actions 
that need to be addressed, particularly relating to employer-sponsored 
coverage and maintaining the integrity of those programs. However, NAHU 
sees these items as important immediate steps to ensuring the 
affordability and availability of private health insurance coverage for 
all Americans.
    We appreciate the opportunity to provide these comments and would 
be pleased to respond to any additional questions or concerns of the 
committee.
                                 ______
                                 
                               Appendix A
  Regulations Impacting Employers and Health Insurance Consumers That 
   Have Been Proposed by the Obama Administration but Have Not Been 
                               Finalized
    proposed revision of 5500 annual information returns and reports
    The Obama administration proposed an enormous overhaul and 
expansion of the 5500 annual information returns and reports most 
employer-sponsored group benefit and retirement plans must submit 
annually to the Departments of Labor and Treasury. Not only would the 
rule require entities that currently have to comply with reporting 
requirements to drastically expand the amount of information they 
provide annually to the Federal Government, it would also expand 
reporting obligations to over 2 million new small businesses. The 
proposed reporting expansion will be extremely expensive and 
complicated for employers of all sizes to implement. Furthermore, it is 
unclear what the Departments of Labor and Treasury will even do with 
the new data they plan to collect. Comments were due on this proposed 
rule on December 5, 2016, and it has yet to be finalized. NAHU 
recommends that the Trump administration rescind this proposed rule.
                       premium tax credit nprm vi
    On July 8, 2016, the Department of Treasury issued proposed 
regulations that address the treatment of cash incentives provided to 
employees who waive coverage under an employer's health plan. The 
proposed rule sets out very complex requirements for employers to 
follow, and places liability and requirements on employers to police 
the veracity of employee attestation. If finalized as proposed, 
employers will likely cease providing any type of compensation to 
employees who do not need coverage through the employer group plan. 
NAHU recommends that the Trump administration rescind this proposed 
rule.
information reporting of catastrophic health coverage and other issues 
                           under section 6055
    On July 29, 2016, the IRS issued a proposed rule to clarify a 
number of technical issues related to information reporting under IRC 
6055. This proposed rule does provide employers with some guidance to 
avoid liability for reporting errors, but the compliance date is for 
the 2016 plan year, which is much too soon. NAHU urges the Trump 
administration to make the effective date of any TIN-solicitation 
requirements, processes and timelines the 2017 plan year, reported on 
in 2018.
 expatriate health plans, expatriate health plan issuers and qualified 
expatriates; excepted benefits; lifetime and annual limits; short-term, 
                       limited-duration insurance
    On June 10, 2016, the Departments of Health and Human Services, 
Treasury and Labor issued a proposed rule to provide implementation 
guidance on the Expatriate Health Coverage Clarification Act (EHCCA), 
which was signed into law on December 16, 2014. The rule also imposed 
significant limitations on short-term, limited-duration insurance 
policies.
    Relative to expatriate health plans, NAHU members who work with 
expatriates to find coverage both on the group and individual level 
believe that some provisions of the proposed rule, as drafted, would 
have a burdensome and negative effect on many expatriates, particularly 
those doing missionary work overseas. Furthermore, we have concerns 
that the language in the proposed rule will impair the ability of U.S. 
insurance companies to compete with foreign competitors. NAHU urges the 
Trump administration to review the comments of all stakeholders with 
regard to the EHCCA provisions of the proposed rule and make the 
various suggested amendments that will ensure that American insurers 
will be on a level playing field with foreign competitors--and that 
American expatriates doing missionary work will not be penalized.
    With regard to the proposed additional standards for short-term, 
limited-duration health insurance policies, requiring that the coverage 
must be less than 3 months in duration and may not be renewed, will 
result in hundreds of thousands of people being shut out of needed 
coverage options for part of each year. Furthermore, the new proposed 
cap on the duration of such policies and the restriction on policy 
renewals raise enormous enforceability, claims-processing and fraud 
concerns. Also, we believe the rule, as proposed, would limit coverage 
choices for consumers who currently buy short-term coverage to meet a 
gap in their group coverage options and never intend to seek 
individual-market coverage. NAHU agents report that this kind of 
consumer represents over half of the short-term coverage marketplace 
today. NAHU feels that the Obama administration exceeded the bounds of 
its regulatory authority in this area. The primary responsibility to 
regulate excepted benefits rests with the States, and therefore the 
requirements in the proposed rules are wholly inappropriate and 
unnecessary. As for the proposed design restrictions for these 
policies, particularly with regard to fixed indemnity policies, the 
proposed rule will significantly alter common benefit-design options 
already available to employers and employees in the marketplace and 
negatively impact employee choice. NAHU urges the Trump administration 
to rescind the excepted-benefit provisions of the proposed rule.
    Health Reform Rules That Have Not Yet Been Issued/Are Not Being 
                  Enforced by the Obama Administration
  affordable care act 2716 non-discrimination provisions applicable 
                     to insured group health plans
    The ACA required that existing IRS benefit plan non-discrimination 
requirements and related annual testing requirements that self-funded 
employer plans must abide by be extended to all employer-sponsored 
health benefit plans of all sizes. However, these existing 
requirements, which were originally designed for large-employer pension 
plans, cannot easily be expanded in a way that would make any sense for 
smaller-employer and fully insured group health benefit plans. NAHU 
analysis done in 2010 in anticipation of this requirement being imposed 
on small-group benefit plans showed that up to 80 percent of small-
group benefit plans of less than 50 employees would fail the current 
non-discrimination testing imposed on large self-funded plans simply 
because too many of their employees are covered under other minimum 
essential coverage, such as a spouse's plan. As such, the IRS issued 
Notice 2011-1 in January 2011 noting that the Treasury Department and 
the IRS, as well as the Departments of Labor and Health and Human 
Services (collectively, the Departments) determined that compliance 
with 2716 should not be required until after regulations or other 
administrative guidance of general applicability has been issued under 
2716. To date, no regulations have been issued to enforce compliance 
with this ACA requirement. NAHU strongly urges the Trump administration 
to continue the Obama administration's policy of not issuing 
regulations to require expanded compliance with 2716 and to publicly 
announce its intention to not enforce compliance beyond the 
requirements currently in force on self-funded employer group plans.
                    w-2 reporting for smaller plans
    While the ACA statute requires virtually all employers that offer 
health insurance coverage to employees to report information about 
their benefits to employees via the Form W-2, in 2011 the IRS issued 
Notice 2011-28, which made the reporting optional for smaller employers 
that file fewer than 250 Forms W-2 for the prior calendar year until 
further notice. The IRS has not issued any further guidance mandating 
reporting for smaller employers so, for the 2016 tax year W-2 reporting 
cycle, which is due by January 31, 2017, only employers that issue 250 
or more forms W-2 have to comply. NAHU strongly urges the Trump 
administration to continue the Obama administration's policy of not 
issuing regulations to require expanded compliance with W-2 reporting 
for smaller employers.
        Recently Finalized Regulations That Could Be Subject to 
                          Congressional Review
          non-discrimination in health programs and activities
    On May 18, 2016, the Obama administration finalized a regulation 
implementing the prohibition of discrimination under 1557 of the ACA. 
This rule imposes significant costs and mandates on health plan design 
that must be implemented for the 2017 plan year, which in many cases 
starts for employer plans on January 1, 2017. Even though not all 
employers should be affected by the rule, since most employer groups 
will get their coverage through a health insurance carrier or work with 
a TPA that is covered by the new rule, the construction of the health 
insurance policies most employer groups will be able to buy will be 
affected, which can be confusing to employers. NAHU recommends that 
this final rule be revised so that only entities directly under the 
control of HHS must comply with these new requirements.
                              erisa fines
    On June 30, 2016, the Department of Labor issued an interim final 
rule that significantly increases various penalties under the Employee 
Retirement Income Security Act of 1974 (BRISA). NAHU recognizes that 
the amount of the civil penalties that were adjusted in many cases had 
never been adjusted previously, and we believe that the formula used to 
increase the penalties was fairly applied in the interim final rule. 
However, we question the need for an interim final regulation that 
raised fines almost immediately rather than the use of the traditional 
regulatory process. Further, we question why health benefit plan fines 
needed to be raised at this time. Given that the fines established 
originally to help ensure compliance with BRISA and subsequent health 
plan requirements have always been significant and are still 
intimidating to employers in some cases over four decades later, we do 
not believe that the increase is needed at this time. NAHU recommends 
that the Trump administration issue a final regulation setting the fine 
rates at their pre-August 2016 levels.
                       eeoc wellness program rule
    On May 17, 2016, the Equal Employment Opportunity Commission 
published final rules on wellness programs under the Americans with 
Disabilities Act and Genetic Information Nondiscrimination Act. These 
rules are intended to provide clarity about how employers can operate 
wellness programs and not run afoul of either the ADA or GINA. These 
rules were proposed and finalized after the EEOC initiated three 
lawsuits against high-profile employers for allegedly committing ADA 
violations in the Administration of their wellness programs, which have 
so far all been decided in favor of the employers.
    The finalized rules raise a number of concerns for employer-
sponsored wellness plans. First, the wellness-program standards imposed 
by these new rules are different, and in some cases more extensive, 
than the pre-existing HIPAA and ACA wellness-program rules. With regard 
to the value of the wellness incentives, the EEOC standard actually 
conflicts with, and reduces, the discount standard specifically allowed 
by the ACA and discourages the use of wellness programs by employers. 
NAHU recommends that Congress and Trump administration suspend 
implementation of the new EEOC wellness program rules.
        Recently Finalized Regulations with Questionable Status
                           dol fiduciary rule
    The Obama administration finalized a version of the fiduciary rule 
on April 6, 2016, so it is likely to be outside of the scope of 
congressional review. However, we know there is significant interest in 
making changes to the rule as soon as possible and want to highlight a 
rarely noted but extremely problematic provision of the rule that 
negatively impacts health plans. In the final rule, the definition of 
``plan fiduciary'' was expanded to cover not only service providers who 
assist employers and employees with individual retirement account (IRA) 
options, but also those who assist with Health Saving Accounts (HSAs) 
and Archer Medical Savings Accounts (MSAs), including providing advice 
on a one-time basis. NAHU is concerned that, as this provision of the 
rule is implemented, both employers and licensed agents and brokers 
will be inclined to eschew the HSA option for employees in favor of 
other benefit designs due to the new complexity and liability that will 
be associated with HSAs. NAHU recommends that in any revision of plan 
fiduciary requirements, to preserve the group HSA marketplace and 
protect employee access to the HSA option and its many benefits, the 
Trump administration exclude HSAs and MSAs from the scope.
             notice of benefit and payment parameters 2018
    The Obama administration released the proposed 2018 Notice of 
Benefit and Payment Parameters on August 31, 2016. This proposed rule 
contains a wide range of provisions impacting the individual and group 
health insurance markets and the health insurance marketplaces. The 
White House Office of Management and Budget is currently reviewing the 
rule and every indication is that the Obama administration plans to 
finalize it before the end of the term. As such, this regulation would 
certainly fall under the bounds of congressional review. If so, NAHU 
urges Congress and the Trump administration to review the provisions of 
the new rule thoroughly and seek input from stakeholders right away 
about what changes could be made using the rule as a vehicle to improve 
health insurance market competition, lessen the cost and access burdens 
on employers and individual health insurance market consumers, and 
improve the functionality of health-reform programs that may continue 
on at least a short-term basis.
      Immediate Regulatory Action to Improve Marketplace Operation
    NAHU has worked extensively to try to improve conditions in the 
Federal Marketplace, including participating as a vendor for broker 
training. While some improvements have occurred, it has been extremely 
frustrating for our members to try to assist their clients. Although we 
understand there may be little impetus for improving the Marketplace at 
this juncture, we list below some outstanding items that are very 
problematic to our members and their clients. Some of these serve to 
destabilize the individual health insurance market so we include them 
here for your review.
            nahu requests to cms that have not been resolved
     A dedicated portal for brokers to submit individual 
exchange applications and manage their clients' individual exchange 
coverage choices throughout the plan year and from year to year. This 
has already been achieved through State-run marketplaces.
     A customer-service channel dedicated to brokers for 
client-specific individual exchange issues outside of the traditional 
call center.

          A broker call center number was made available this 
        year, but only assists with password resets and questions 
        regarding SEPs. This has already been achieved through State-
        run marketplaces.

     Amendments to the marketplace coverage application and 
transaction records to track and record the identifying numbers for all 
navigator/non-navigator assisters, call-center support personnel and 
certified agents who assist an enrollee. This will provide better 
consumer protection and inspire greater cooperation among the various 
types of individuals providing consumers with application and coverage 
assistance.
     Enhanced priority to technology efforts that will allow 
both agents and individual consumers access to direct-enrollment 
portals through health insurance issuers and web-based brokers.
     Access to participating carrier plan designs at least 2 
weeks in advance of open enrollment so agents and brokers may 
adequately prepare to assist their clients on the first day of open 
enrollment.
                        application improvements
     Once the application has been completed, an ``application 
review'' screen should appear showing the application as it will be 
submitted so that the applicant can review the application in its 
entirety for accuracy one last time before submission.
     In its current State, in order to edit the application, 
the applicant must go through the entire application in order to make 
any changes. The ability to open the application for specific changes 
(address, income, birth of child) without revisiting each question 
would be very beneficial.
     Uploading requested documents through the application 
process often results in errors in uploaded documents that are not 
retained in the healthcare.gov system. A confirmation page or e-mail 
receipt to the applicant signifying that a document was successfully 
uploaded would largely alleviate this.
     An application identifying number (ID) is generated once 
an application has been successfully submitted and provided on-screen 
to the beneficiary. We would like to request that this application ID, 
or another identifier provided to the beneficiary, be used to mark all 
FFM communications regarding a specific beneficiary or applicant. 
Often, calls are made to the call center, no reference number is given 
and consumers are told there is no way for the call center to trace 
past communication with healthcare.gov. Using the application ID 
assigned by healthcare.gov or another unique identifier to effectively 
link the consumer to all of their interactions with the FFM would 
provide a level of accountability and a smooth and easy conduit to 
connect conversations over the course of multiple touches.
     Throughout a coverage year, one spouse may obtain 
employer-sponsored coverage. Often, this coverage is deemed 
``affordable,'' causing a married couple enrolled in a subsidized plan 
on the exchange to lose their subsidy. However, NAHU members have come 
across instances in which the couple calls to cancel the plan for the 
spouse who has obtained employer-sponsored coverage, but they are never 
asked why the spouse is canceling their plan, whether the employer-
sponsored coverage is affordable or whether a change in income should 
be reported. This results in the remaining spouse, and possibly other 
family members, continuing to receive subsidized coverage, only to be 
faced with a large tax bill once their income and employer-sponsored 
coverage of one spouse is reconciled at the end of the tax year. When a 
couple calls to cancel the plan of a spouse, this should trigger 
questions in the script of the call center to inquire about employment-
sponsored coverage of the spouse, and a change in income in order to 
prevent couples such as these to receive inaccurate subsidies that they 
will then have to pay back through their taxes the following year.
                              agent access
     Agents and brokers are only able to access their accounts 
by going in to each separate client's account. A single certified agent 
account would be extremely beneficial to allow agents to access a list 
of all of their clients' accounts, and the ability for agents to review 
the applications and receive communication on any status or actions 
required on the account would ensure that their clients' applications 
are complete and accurate. In addition, the system should also allow 
agents to log in to the CMS Enterprise Portal to enroll a new consumer, 
renew an existing consumer's application and re-enrollment, and make 
updates to a consumer's application throughout the plan year.
     There have been several instances in which agents have 
called healthcare.gov to act on their client's behalf only to be told 
that they are no longer authorized to do so even though the client has 
authorized the agent to act on their behalf for the allotted 365 days. 
There should be no change to the ``Agent'' or ``Authorized 
Representatives'' field unless the consumer requests such a change, and 
the agent of record should be on display if accessed by a call-center 
representative.
     Currently, all correspondence regarding an applicant is 
sent to the applicant via the HIM Message Center. We would like to 
request that agents and brokers be included on all correspondence to 
the applicants. Often, the agents are not alerted to a problem until 
after an insurance claim has been denied or coverage has been 
discontinued. If agents were included in the client communication from 
the initial message, these issues could be resolved before a denial of 
coverage is issued.
                       consumer access to agents
     Earlier this year, NAHU wrote to HHS Secretary Burwell to 
address the troubling and increasing prevalence of insurers reducing or 
eliminating broker commissions during the plan year. While CMS has been 
very clear that it does not require or regulate broker compensation for 
marketplace products, CMS does stipulate that if an issuer provides 
broker compensation, then the issuer must provide the same level of 
compensation for all substantially similar QHP products whether they 
are sold via the exchange Marketplace or in the off-exchange 
Marketplace.
     NAHU also believes that CMS has the responsibility and 
authority under its rate-review and QHP-certification processes to 
ensure that issuers maintain the services that they promise via filed 
and approved rates throughout the plan year. Much like CMS stipulates 
that issuers may not change and reduce their initially specified 
service areas mid-plan year, we believe it is appropriate for CMS to 
stipulate that the services promised as part of approved rates, 
including access to the purchasing services and plan year, and renewal 
of consumer support offered by a licensed health insurance agent or 
broker, not be eliminated partway through a given plan year. Otherwise, 
consumer services that are promised as part of the approved rates of 
the policy may be reduced, and the consumer would see no corresponding 
premium reduction.
     Ultimately, consumers, especially those most at risk, are 
left with fewer choices and without experienced and educated insurance 
professionals. At a time when the market is changing and becoming more 
complex, this is unacceptable.

    Note: We believe this adverse selection that has resulted in 
commission cuts, narrow provider networks, increasing out-of-pocket 
expense and premium increases can be corrected with many of the 
recommendations we are making in this document.
                               Attachment
    budgetary treatment of proposals to regulate medical loss ratios
    CBO has been asked to review a proposal that would require health 
insurers to provide rebates to enrollees to the extent that their 
medical loss ratios are less than 90 percent. (A medical loss ratio, or 
MLR, is the proportion of premium dollars that an insurer spends on 
health care; it is commonly calculated as the amount of claims incurred 
plus changes in reserves as a fraction of premiums earned.) In 
particular, CBO has been asked to assess whether adding such a 
requirement to the provisions of the Patient Protection and Affordable 
Care Act (PPACA) put forward by Senator Reid (as an amendment to H.R. 
3590) would change its judgment as to how various types of health 
insurance transactions that would occur under that legislation should 
be reflected in the Federal budget.
    In May, CBO released an issue brief entitled The Budgetary 
Treatment of Proposals to Change the Nation 's Health Insurance System. 
That publication identified the primary elements of proposals that CBO 
thought were relevant to whether purchases of private health insurance 
should be treated as part of the Federal budget. CBO concluded (on page 
4) that,

          ``At its root, the key consideration is whether the proposal 
        would be making health insurance an essentially governmental 
        program, tightly controlled by the Federal Government with 
        little choice available to those who offer and buy health 
        insurance--or whether the system would provide significant 
        flexibility in terms of the types, prices, and number of 
        private-sector sellers of insurance available to people.''

    (Note: CBO estimates the budgetary impact of legislation as it is 
being considered by the Congress; if legislation is enacted into law, 
the Administration's Office of Management and Budget ultimately 
determines how its effects will be reflected in the Federal budget.)
    The PPACA would make numerous changes to the market for health 
insurance, including requiring all individuals to purchase health 
insurance, subsidizing coverage for some individuals, and establishing 
standards for benefit packages. Taken together, those changes would 
significantly increase the Federal Government's role in that market. 
Nevertheless, CBO concluded that there would remain sufficient 
flexibility for providers of insurance and sufficient choice for 
purchasers of insurance that the insurance market as a whole should be 
considered part of the private sector. Therefore, except for certain 
transactions that explicitly involve the government, CBO would treat 
the cash-flows associated with the health insurance system (for 
example, premium and benefit payments) as nongovernmental.
    Certain policies governing MLRs, particularly those requiring 
health plans whose MLR falls below a minimum level to rebate the 
difference to enrollees, can be a powerful regulatory tool. Insurers 
operating at MLRs below such a minimum would have a limited number of 
possible responses. They could change the way they provide health 
insurance, perhaps by reducing their profits or cutting back on efforts 
to restrain benefit costs through care management. They could choose to 
pay the rebates, but if they raised premiums to cover the added costs 
they would simply have to rebate that increment to premiums later. 
Alternatively, they could exit the market entirely. Such responses 
would reduce the types, range of prices, and number of private-sector 
sellers of health insurance--the very flexibilities described in CBO's 
issue brief.
    In CBO's judgment, an important consideration in whether a specific 
MLR policy would cause such market effects is the fraction of health 
insurance issuers for whom the policy would be binding. A policy that 
affected a majority of issuers would be likely to substantially reduce 
flexibility in terms of the types, prices, and number of private 
sellers of health insurance. Taken together with the significant 
increase in the Federal Government's role in the insurance market under 
the PPACA, such a substantial loss in flexibility would lead CBO to 
conclude that the affected segments of the health insurance market 
should be considered part of the Federal budget. (CBO made similar 
judgments in its issue brief in assessing the level of required 
coverage that would, in combination with a mandate to purchase 
coverage, make the purchase of insurance essentially governmental.)
    Setting a precise minimum MLR that would trigger such a 
determination under the PPACA is difficult, because MLRs fall along a 
continuum. However, CBO has identified MLRs in the principal segments 
of the insurance market above which a significant minority of insurers 
would be affected; if a minimum MLR were set at or below those levels, 
CBO would not consider purchases of private health insurance to be part 
of the Federal budget. Compared with MLRs anticipated under current 
law, MLRs under the PPACA would tend to be similar in the large-group 
market, slightly higher in the small-group market, and noticeably 
higher in the individual (nongroup) market--for reasons that are 
discussed in CBO's November 30 analysis of the effect of Senator Reid's 
proposal on insurance premiums. Taking those differences into account, 
CBO has determined that setting minimum MLRs under the PPACA at 80 
percent or lower for the individual and small-group markets or at 85 
percent or lower for the large-group market would not cause CBO to 
consider transactions in those markets as part of the Federal budget.
    A proposal to require health insurers to provide rebates to their 
enrollees to the extent that their medical loss ratios are less than 90 
percent would effectively force insurers to achieve a high medical loss 
ratio. Combining this requirement with the other provisions of the 
PPACA would greatly restrict flexibility related to the sale and 
purchase of health insurance. In CBO's view, this further expansion of 
the Federal Government's role in the health insurance market would make 
such insurance an essentially governmental program, so that all 
payments related to health insurance policies should be recorded as 
cash-flows in the Federal budget.

    The Chairman. Thank you, Ms. Trautwein.
    Governor Beshear, welcome.

   STATEMENT OF STEVEN L. BESHEAR, GOVERNOR, COMMONWEALTH OF 
           KENTUCKY, 2007-15; MEMBER, STITES & HARBI-
                       SON, LEXINGTON, KY

    Mr. Beshear. Thank you very much, Mr. Chairman, Ranking 
Member Murray, and members of this committee.
    I am here today to share a perspective of an 8-year 
Governor whose job it was to improve the lives of the families 
in his State and to strengthen its economy.
    You know, Kentucky is a long way from the partisan debate 
over the ACA here in Washington. And I would submit to you that 
that distance gives my words some credibility. Why? Because to 
me, the ACA was not, and is not, a partisan issue. Rather, it 
was a powerful tool that I used to attack one of Kentucky's 
biggest and most stubborn problems, poor health.
    Five years ago, Kentuckians were among the least healthy 
people in this Nation. We were sicker than most. We died too 
early. We went bankrupt paying to treat diseases and chronic 
conditions.
    Furthermore, there was a direct line between poor health 
and almost every challenge that Kentucky faced including 
poverty, unemployment, lags in education attainment, substance 
abuse, and crime. Our problem, in a nutshell, was lack of 
access to care.
    Before the ACA, almost one out six Kentuckians had no 
health coverage. After hiring two outside experts, who told me 
that Kentucky could afford to do so, I both expanded Medicaid 
and created a State-operated health benefit exchange called 
Kynect. And for the first time in history, we made affordable 
health coverage available to every single person in the 
commonwealth.
    In just over a year, we enrolled over a half a million 
Kentuckians in health coverage, and the positive impact on both 
their lives, and the State's economy, has been phenomenal.
    Kentucky led the Nation in reducing the number of uninsured 
people, in one poll moving from 20.4 percent to 7.5 percent.
    Furthermore, Kentuckians began to access care in record 
numbers. I am talking especially about preventive care and 
substance abuse treatment, both of which change lives and head 
off expensive and serious problems later.
    It typically takes years for policy changes to be reflected 
in surveys of health outcomes. But in Kentucky, we are already 
seeing signs of better health. In addition, a study of 
performance data from Kentucky's first year of expanded 
Medicaid showed dramatic positive financial benefits in terms 
of jobs created, a boost to our State General Fund, and the 
bottom lines of our rural hospitals.
    If I had time, I could overwhelm you with research, with 
numbers, with studies describing this impact because I have got 
a mountain--a mountain--of nonpartisan, objective evidence.
    I could overwhelm you with hundreds of stories of Kentucky 
families for whom the ACA has meant better health, a saved 
life, or financial security.
    I cannot leave my home or my office without running into 
somebody who tells me how they now have hope and they now have 
better health. They are farmers. They are entrepreneurs. They 
are construction workers. They are nurse's aids, cleaning 
staff, teaching assistants, and new graduates working at a high 
tech startup. I could go on and on.
    These are real people, not ``Republicans and Democrats.'' 
They are Kentuckians. They are Americans. Kentucky's experience 
is just a microcosm of the country where 20 million previously 
uninsured people now have coverage. This is not a partisan 
issue. This is a people issue. And it is time to put people 
over politics.
    The ACA is not perfect and we all know that, and there are 
things you can do to improve it. But you need to do it in a 
deliberate and a thoughtful manner. Because one thing you must 
not do is go backward.
    In 2010 with the adoption of the ACA, this country 
committed to its people, they committed to make affordable 
health insurance a reality for every American. This is a time 
for measured, thoughtful steps that improve our healthcare 
system and continue the ACA's guarantee of affordable health 
coverage for all Americans because Americans deserve that 
guarantee.
    You must not rush to repeal or put in place a plan that 
reduces either the number of people who are covered or the 
benefits they can access because this tool is working.
    Newfound access to affordable care is saving lives. It is 
strengthening our workforce, it is improving health, and it is 
helping our children get off to a better start in life.
    But I promise you this, if you rush to repeal, especially 
if you do it without a comprehensive plan that strengthens the 
core elements of the ACA, you will throw the market into chaos. 
You will hurt American families, and some of those folks are 
going to die. And those folks are not aliens from some distant 
planet. Those folks are our neighbors, our family, and our 
friends.
    Our experience in Kentucky proves that the ACA works. We 
just need you to make it work better.
    Thank you, Mr. Chairman.
    [The prepared Statement of Mr. Beshear follows:]
                Prepared Statement of Steven L. Beshear
                           executive summary
    Chairman Alexander, Ranking Member Murray and members of the 
committee, thank you for the opportunity to speak today about the 
importance of preserving and protecting the health progress that the 
Affordable Care Act has made possible, both in my home State of 
Kentucky and nationally. I would like to share with you a Governor's 
perspective on the critical benefits the Affordable Care Act brought to 
my State and many others, including significant gains in health, 
economic activity, and overall well-being.
    For me, the ACA was never a partisan issue. Rather, it was an 
invaluable tool to address my State's longstanding poor health. And it 
worked. In a transformative way, it helped me improve the future of our 
State and the lives of our families. Today, having seen the objective 
evidence that proves that the ACA benefited not only Kentuckians, but 
also tens of millions of other Americans, it is vitally important that 
we build on that success rather than simply repeal the ACA to make a 
political statement and jeopardize the gains the country has begun to 
realize.
    No one has ever claimed that the Affordable Care Act is a perfect 
plan. But the ACA has been undeniably successful in its core aims of 
increasing the number of individuals covered by insurance and in 
improving the quality of the coverage provided. Still, there is room 
for improvement. Congress should increase subsidies to improve the 
affordability of insurance for middle-income families, consider 
broadening the services that are covered with no cost-sharing to 
beneficiaries, take steps to address prescription drug prices, and 
support continued implementation and expansion of value-based payment 
initiatives.
    The path forward is not to make it more difficult for people to 
afford insurance, nor to offer skimpier benefit plans that fail to 
cover people when they most need help, nor to retreat to the days when 
insurers could refuse to cover pre-existing conditions or cancel 
policies when individuals became ill. Rather, any replacement plan must 
be judged on how well it achieves the objectives of a universal 
coverage program like the ACA: will everyone have a realistic path to 
coverage, and will the insurance cover people both for preventive care 
and when they get sick? As a former Governor, I urge all Governors to 
reject any proposal that will leave their States with less Federal 
funding, reduced coverage, and less robust benefit package--and this 
includes a rush to repeal the ACA without a viable plan in place to 
help people get the care they need.
                                 ______
                                 
                            i. introduction
    Chairman Alexander, Ranking Member Murray and members of the 
committee, thank you for the opportunity to speak today about the 
importance of preserving and protecting the health progress that the 
Affordable Care Act has made possible, both in my home State of 
Kentucky and nationally. I would like to share with you a Governor's 
perspective on the critical benefits the Affordable Care Act brought to 
my State and many others, including significant gains in health, 
economic activity, and overall well-being.
    As Governor of Kentucky, I embraced the Affordable Care Act for one 
simple reason: Kentucky's collective health had long been terrible, and 
what we'd been doing for generations wasn't working. In almost every 
measure of health, Kentucky ranked near the bottom or at the bottom, 
and had done so for a long time. The suffering was deep, and it took a 
toll on my State. Kentuckians were sicker than most, we died too early, 
and our families were going bankrupt paying to treat diseases and 
chronic conditions.
    It is undeniable that there was and remains a direct line between 
poor health and almost every challenge Kentucky faces, including 
poverty, unemployment, lags in education attainment, substance abuse 
and crime. And Kentucky's poor health had devastating consequences for 
the State as a whole, including decreased worker productivity, 
depressed school attendance, a poor public image, difficulty in 
recruiting businesses, enormous healthcare costs, and a lower quality 
of life for Kentuckians. And while Kentucky was very slowly improving 
on some health metrics, such as smoking rates and enrollment of 
eligible children in health insurance, I knew that incremental progress 
was no longer sufficient. In the 50 years since the Medicaid program's 
inception, Kentucky had spent over $100 billion in public funding on 
health care for the most vulnerable, but remained one of the sickest 
States in the Nation, with one of the Nation's highest uninsured rates.
    The ACA gave us an opportunity to change that using a State-based, 
market-driven approach, and I seized the chance. For me, the ACA was 
never a partisan issue. Rather, it was an invaluable tool to address my 
State's longstanding poor health. And it worked. In a transformative 
way, it helped me improve the future of our State and the lives of our 
families. Today, having seen the objective evidence that proves that 
the ACA benefited not only Kentuckians, but also tens of millions of 
other Americans, it is vitally important that we build on that success 
rather than simply repeal the ACA to make a political statement and 
jeopardize the gains the country has begun to realize.
    The path forward is not to make it more difficult for people to 
afford insurance, nor to offer skimpier benefit plans that fail to 
cover people when they most need help, nor to retreat to the days when 
insurers could refuse to cover pre-existing conditions or cancel 
policies when individuals became ill. Rather, any replacement plan must 
be judged on how well it achieves the objectives of a universal 
coverage program like the ACA: will everyone have a realistic path to 
coverage, and will the insurance cover people both for preventive care 
and when they get sick? As a former Governor, I urge all Governors to 
reject any proposal that will leave their States with less Federal 
funding, reduced coverage, and less robust benefit packages--and this 
includes repealing the ACA without a viable plan in place to help 
people get the care they need.
               ii. kentucky's affordable care act success
    Kentucky's success in implementing the Affordable Care Act was 
shaped by many things, and many people, but two primary decisions 
strongly influenced the positive results in the Commonwealth: the 
expansion of Medicaid and the creation of a State-run health benefit 
exchange.
    As Governor, my decision to expand Medicaid rested not only on the 
morality of providing much-needed health care to the most vulnerable 
Kentuckians, but also on the economic sustainability of the program. 
Like Governors around the country, I was concerned about the 
affordability of expansion. So before I committed to the Medicaid 
expansion, I engaged Pricewaterhouse Coopers and the University of 
Louisville's Urban Studies Institute to conduct an economic analysis of 
Medicaid expansion. The results were compelling. The study concluded 
that expanding Medicaid would inject $15.6 billion into Kentucky's 
economy over 8 years, create nearly 17,000 jobs, shield Kentucky 
hospitals from the impact of scheduled reductions in funding for 
indigent care, and create an overall positive budget impact of $802 
million over 8 years. With that evidence, it became clear that Kentucky 
couldn't afford not to expand Medicaid.
    The decision to create a State-run health benefit exchange was even 
more straightforward. Virtually every stakeholder in Kentucky--from 
healthcare providers to business organizations to advocates for the 
poor--urged me to create, manage and operate a State exchange. It would 
give us control, flexibility and accountability, and we could customize 
the experience to meet Kentuckians where they were, rather than 
imposing a ``one-size-fits-all'' model through the Federal exchange. 
And we did that by calling our exchange ``kynect'' and engaging in an 
extensive marketing and outreach campaign designed and led by 
Kentuckians. The choice to create our own exchange paid off. In the 
early days of the ACA, when the Federal exchange struggled, Kentucky 
had a virtually seamless enrollment experience that continued through 
subsequent enrollment years. And by creating a Kentucky ``look and 
feel'' to our exchange, Kentuckians were more easily able to overcome 
their personal political preferences and embrace the lifesaving 
potential of the ACA. Not only that, our commitment to making kynect 
and the ACA work allowed us to form strong partnerships with our 
insurance companies to create a competitive market, and during my time 
as Governor we saw continued increases in the choice of plans offered 
to consumers.
    The results of Kentucky's intentional decision to seize the 
opportunity presented by the ACA speak for themselves. By creating 
kynect and implementing the Medicaid expansion, more than 500,000 low-
income Kentuckians became insured, including more than 400,000 through 
the Medicaid program, and Kentucky experienced the sharpest decline in 
the Nation of residents with no health insurance. As of February 2016, 
Gallup polling data showed that Kentucky experienced the largest drop 
in its uninsured rate of any State in the country since the ACA took 
effect in 2014, from 20.4 percent to 7.5 percent, lower than the 
national rate of uninsured. This nation-leading progress was confirmed 
in late 2016 by U.S. Census data, which found Kentucky's uninsured rate 
to be 6 percent, an all-time low for Kentucky and among the lowest 
rates of uninsured in the country.
    Moreover, according to independent research commissioned by the 
Foundation for a Healthy Kentucky, since the implementation of Medicaid 
expansion Kentucky has seen an increase in preventive care and 
substance abuse treatment utilization by Medicaid enrollees and a drop 
of 78.5 percent in uncompensated care (inpatient and outpatient charity 
and self-pay from rural and urban hospitals, 2013-15). The increase in 
substance abuse treatment is critically important in Kentucky, which 
has suffered more than most States from the opioid epidemic. And 
although improved health outcomes typically lag behind health policy 
changes (often years behind), a recent study found that low-income 
adults in Kentucky and Arkansas received more primary and preventive 
care, made fewer emergency room visits, and reported higher quality 
care and improved health compared with low-income adults in Texas, 
which did not expand Medicaid.\1\ In short, as a result of the ACA, all 
evidence indicates that Kentuckians are seeing improved health and 
beginning to reverse decades of poor health statistics. And this 
evidence is consistent with the countless stories that Kentuckians, 
including farmers, teachers, students, entrepreneurs, and others have 
shared with me about how the ACA has positively changed their lives.
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    \1\ Sommers BD, Blendon RJ, Orav EJ, Epstein AM. Changes in 
Utilization and Health Among Low-Income Adults After Medicaid Expansion 
or Expanded Private Insurance. JAMA Intern Med. 2016;176 (10):1501-09.
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    Beyond improvements in health, research shows that the ACA has 
conferred a tremendous economic benefit on Kentucky and States across 
the country. Numerous studies show the expansion of Medicaid is 
financially sustainable, and is in fact beneficial both for the State 
budget and the Kentucky economy as a whole. For example, after the 
first full year of Medicaid expansion, I retained Deloitte Consulting 
and the University of Louisville Urban Studies Institute to update 
prior projections on the economic impact of Medicaid expansion using 
the actual performance data from the first year of implementation. That 
study revealed that the economic benefits of Medicaid expansion were 
even more than had originally been anticipated, concluding that 
Medicaid expansion had already generated 12,000 new jobs and $1.3 
billion in new revenues for providers (growing to almost $3 billion in 
the first 18 months of expansion). In addition, the study found that 
Medicaid expansion was projected to have a $300 million positive impact 
on the State's 2016-18 biennial budget. And by 2021, Kentucky would see 
the creation of 40,000 new jobs, as well as a nearly $900 million 
positive State budget impact and a $30 billion overall economic impact. 
These projections included the State Medicaid funding match required 
beginning in 2017. So with the jobs created and revenue generated, 
expanded Medicaid is sustainable and is paying for itself for the 
foreseeable future.
    The economic benefits of expansion are not unique to Kentucky--as 
the Robert Wood Johnson Foundation recently confirmed, considerable 
economic benefits of Medicaid expansion exist in every State that has 
expanded. In April 2016, RWJF found that the 30 States, plus 
Washington, DC, that expanded Medicaid in 2014 reported general fund 
savings and new revenue, along with both higher rates of health sector 
job growth and slower growth in State Medicaid spending relative to 
non-expansion States. In addition, RWJF found that rural hospitals in 
expansion States are significantly more financially stable than those 
in States that have not expanded. In short, there is simply no data to 
support partisan claims that Medicaid expansion is unsustainable. On 
the contrary, all the data point to the conclusion that Medicaid 
expansion is a great deal for Kentucky and every other State. In fact, 
Medicaid expansion has transcended politics in a number of States, with 
Republicans like Gov. John Kasich, Gov. Rick Snyder, former Gov. Jan 
Brewer, Gov. Brian Sandoval, and even now-Vice President Mike Pence 
adopting the Medicaid expansion in their States. In short, the ACA has 
helped States create healthier workforces, improve their economic 
competitiveness, stabilize rural hospitals, and improve the health of 
their populations.
 iii. the path forward: build on the success of the affordable care act
    No one has ever claimed that the Affordable Care Act is a perfect 
plan. But the ACA has been undeniably successful in its core aims of 
increasing the number of individuals covered by insurance and in 
improving the quality of the coverage provided. Today, more than 20 
million previously uninsured individuals have gained health insurance. 
But the benefits of the ACA affect every American, not just those 20 
million. Under the ACA, individuals cannot be discriminated against 
based on a pre-existing condition, nor can insurers impose restrictions 
such as annual and lifetime limits on coverage, which cutoff benefits 
when they are most needed.
    Women are no longer charged more for health insurance as a result 
of their gender, and Americans have been freed from so-called ``job 
lock,'' allowing them to start new businesses without fear of losing 
their health insurance.
    Still, there is room for improvement. Congress should increase 
subsidies to improve the affordability of insurance for middle-income 
families, consider broadening the services that are covered with no 
cost-sharing to beneficiaries, and take steps to address prescription 
drug prices. And last week, more than 100 healthcare organizations 
signed a letter urging the Trump administration to continue the work 
that has begun on value-based payment initiatives. These are all 
sensible proposals that would, if implemented, help to stabilize the 
market, improve the affordability of insurance, reduce healthcare 
costs, and improve the quality of care.
    In stark contrast to that are most of the so-called ``replacement'' 
proposals that have circulated in recent weeks and years. Governors 
should be exceedingly wary of block grants or other capitated funding 
mechanisms for the Medicaid program. As a Governor, I certainly would 
have enjoyed having more flexibility to administer Kentucky's Medicaid 
program. But flexibility becomes considerably less useful when 
accompanied by significant funding cuts--without adequate funding, 
Governors will have to use their enhanced ``flexibility'' to make 
impossible choices of which individuals to cut from the program, or 
which benefits to eliminate. In a State like Kentucky, which suffers 
from poor health on virtually every front, a Medicaid block grant would 
be a disaster, leading to fewer people having coverage, a reduced 
benefits package, and a reversal of the progress we have begun to see.
    Likewise, in the Marketplace, any proposal that results in fewer 
people being covered, or in benefits being reduced, should be rejected. 
Replacing the subsidies with tax deductions or tax credits unrelated to 
financial need will be an enormous hardship for middle-income families, 
most of whom will lack the ability to prepay for health insurance and 
wait for reimbursement in their tax refunds the following year. 
Relatedly, the use of Health Savings Accounts will be meaningless for 
most American families, who lack the discretionary income to fund the 
accounts.
    Similarly, proposals that would lock individuals out of the market 
for lengthy periods of time for failure to maintain continuous coverage 
are unnecessarily punitive and misunderstand the financial realities 
faced by most Americans. And the idea that high-risk pools are a viable 
mechanism to insure the sickest and most vulnerable Americans is 
unsupported by the evidence, for the simple reason that high-risk pools 
operate in a way that is fundamentally contrary to the purpose of an 
insurance market. High-risk pools are enormously expensive to fund and 
cover very few people for the dollars invested. For example, in 
Kentucky, the high-risk pool that existed prior to the ACA was 
subsidized through a combination of tobacco settlement money and an 
assessment on all insurance plans sold within the State.
    Even so, the program covered only about 4,000 individuals at a time 
and only 18,000 total over its 13-year life span, premiums were too 
expensive for all but upper income families, and the coverage was not 
as robust as that offered by the ACA. Finally, the sale of insurance 
across State lines will eviscerate the ability of States to regulate 
insurers, creating a race to the bottom and destabilizing insurance 
markets across the country.
    In short, the path forward is not a ``replacement'' plan that 
covers fewer people and provides less robust benefits. Rather, Congress 
should build on the progress to date by continuing and expanding 
measures that already have bipartisan support, such as value-based 
payment initiatives, and seeking solutions that improve the 
affordability of coverage while maintaining the robust consumer 
protections of the ACA. The starting place for discussion must be how 
to make Americans better off, not worse.
                             iv. conclusion
    It is now apparent that it will be difficult at best to move 
forward on the heated campaign rhetoric promising to ``repeal and 
replace'' the Affordable Care Act. Remember, polls show that most 
Americans want the ACA to be fixed rather than repealed. And it will 
not be possible to keep the most popular parts of the ACA, like the ban 
on discrimination based on pre-existing conditions and allowing 
children to remain on their parents' plans until age 26, without 
retaining its other core provisions. So rather than push forward with a 
rushed repeal, which will almost certainly destabilize the insurance 
markets and may well cause millions to lose coverage, we must pause to 
consider the consequences of a rush to action. The campaign is over, 
and it's time to govern.
    There is a choice to be made. The ACA has saved lives, led millions 
to gain coverage, and benefited every American. Repeal without a broad, 
comprehensive replacement will cause millions to lose their insurance, 
and many will die. Americans value pragmatic, practical solutions that 
improve their lives. As Governor, I put politics aside and made 
decisions based solely on what was best for Kentuckians--and the 
evidence shows that the ACA worked in Kentucky. If Congress can adopt 
the same approach in reforming the Affordable Care Act, Americans will 
thank them.

    The Chairman. Thank you, Governor and thanks to all the 
witnesses for your specific testimony and for coming such a 
distance.
    We will now move to a 5-minute round of questions.
    Senator Murray characterized the Republican position on the 
Affordable Care Act. Let me characterize it the way I think 
about it.
    Our goal is to repair the damage caused by Obamacare where 
we find damage. We want to do that by moving decisions. Our 
goal in that sense is to give Americans more choice of 
insurance at a lower cost. Our method of doing that would be 
gradually to move decisions out of Washington and back in the 
hands of consumers and of States. That is what we intend to do.
    I think of the work we have in the way the chart is behind 
me. You see Medicare at the top. We are not talking about 
Medicare. Put it aside.
    We are talking about employer insurance where most people 
get their insurance; that is not in crisis right now. We are 
talking about Medicaid; that is a discussion to have with 
Governors.
    Today, we are talking about the individual market which is 
in trouble. It is 4 percent of the people who are insured and 
buy on the exchanges, and 6 percent total buy on the individual 
market. The 4 percent affects the 6 percent. So the question 
is, is it in trouble? What should we do and how soon should we 
do it?
    My first question of you, Ms. McPeak, you are the 
president-elect of the State Insurance Commissioners. Is it 
possible to work just on the individual market?
    If we were to come to some agreement here about the 
individual market for the next 2 or 3 years, Republicans doing 
some things we would not normally do, Democrats doing some 
things they would not normally do, and stabilize it as you have 
suggested. Could we do that and leave for a separate discussion 
what we do about Medicaid and what we do about the employer 
market?
    Ms. McPeak. Absolutely. I think that you can address the 
individual market separately from the other categories of care, 
and that is where the real need is, and the timing is critical.
    As mentioned by one of my colleagues, right now plans are 
calculating whether they want to participate for 2018 because 
under current----
    The Chairman. Well, let me get to that and let me ask you 
and Ms. Tavenner that as well.
    If you accept the fact that the individual market is in 
trouble, when do we have to act so there will be insurance 
available in the States in 2018? And in how many States is 
there trouble?
    Ms. McPeak. Well, for individual State filings, our policy 
forms are due by companies in May for 2018. Rates by mid-July 
for approval by August by the individual States with rate 
review authority under current HHS guidelines.
    The Chairman. But when do we have to act?
    Ms. McPeak. I think that you need to provide some 
indication to plans as quickly as possible. March would be, I 
think, extremely helpful.
    The Chairman. Ms. Tavenner, what would you say?
    Ms. Tavenner. I would say the same thing. Right now, plans 
are trying to price for 2018. The uncertainty around cost-
sharing subsidies and the tax credits would cause them to 
hesitate to price because we need to understand what the 
funding support is going to be because that affects premiums.
    The Chairman. Ms. Trautwein.
    Ms. Trautwein. I would say the same thing. I think the 
latest would be the end of March because with carriers having 
these filling requirements that is after they have already made 
their decision. The decisions are made much earlier than the 
actual filing deadline.
    The Chairman. It is getting clear what this would mean.
    How many States, if we do not act, is it likely or possible 
that there would be no insurance to buy? In two-thirds of the 
counties in Tennessee there is only one insurer, how many 
counties might there be no insurer? You might have a bus ticket 
without a bus running through town. Ms. McPeak.
    Ms. McPeak. I can only speak to Tennessee's experience, but 
we have significant concern that we may have some uncovered 
areas in 2018 and that number might be significant.
    The Chairman. Ms. Tavenner.
    Ms. Tavenner. I think without the cost-sharing subsidy and 
tax credit confidence, we would lose counties and markets 
across the country.
    The Chairman. OK, Let me stick with that in my remaining 
minute. You suggested two things that Republicans might not 
want to do, which is to continue cost-sharing for 2 or 3 years 
or reinsurance for 2 or 3 years in order to stabilize the 
market.
    How essential is cost-sharing and reinsurance at least 
temporarily in order to avert a serious emergency in the 
individual market for between 11 million and 20 million 
Americans?
    Ms. Tavenner. I think they are critical. They are required 
and I think what happens----
    The Chairman. In other words, you mean insurance companies 
would pull out of those States if they did not have either of 
those things?
    Mr. Tavenner. I think we would lose more insurance 
companies. We have already lost significant in 2017 and I think 
we would lose more in 2018. And those who would stay in would 
have to price over those hurdles, which means we would face 
probably somewhere in the 20 percent or greater premium 
increase on top of medical cost and everything else. So it is 
important.
    The Chairman. Thank you, Ms. Tavenner. My time is up.
    Senator Murray.
    Senator Murray. Thank you, again, Mr. Chairman.
    I think we all agree that improvements could be made and do 
it in a bipartisan way. Those are good discussions. But we 
cannot repair the roof while the President and Republicans are 
burning the house down, and that, I think, is creating a lot of 
the chaos and concern that most people have.
    As I said, the very first action out of the box has been 
the budget reconciliation to allow Republicans to repeal 
apparently fairly soon the healthcare, leaving a lot of crisis 
and chaos out there. And, of course as I said, the President is 
issuing Executive orders, as we all know, that are also 
creating chaos and confusion.
    As I said, President Trump signing Executive orders on his 
very first day in office that is going to have a devastating 
impact on America's health and economic security. Experts have 
suggested that it will create even more instability and risk in 
our healthcare system, causing costs to go up for all of our 
families, and we really do not yet know the full impact.
    Without a plan, and as Ms. Tavenner has said, some of the 
main parts of healthcare ACA need to remain intact. If that is 
just repealed, then we tinker on the individual market, we are 
going to create considerable chaos and uncertainty.
    Ms. Tavenner is it not true that insurance carriers need 
certainty in order to price and develop health plans that work 
for consumers?
    Ms. Tavenner. Absolutely. Insurers price on an 18-month 
interval. They are pricing now for 2018 and it takes time. They 
look at their previous year's results. They look at their 
reserves. They need certainty.
    Senator Murray. If Congress were to just vote to repeal, 
and the President continues to issue Executive orders that put 
this in chaos and uncertainty, and then work around trying to 
develop a plan for some amount of time, what happens?
    Ms. Tavenner. I think to the extent that whether we talk 
about repair and replace and reform, we need stability and 
predictability for a longer period of time.
    I think we can work in a bipartisan way to transition to 
improvements. We just need to understand what that timeline 
looks like, and how long we are operating in this environment, 
and when we would predict a move.
    Senator Murray. And I would add, what the consequences of 
those improvements are having worked on the ACA many years ago, 
tinkering here can cause big things happening on the other side 
if you do not actually really consider what you are doing. 
Rushing down the road to have some kind of plan of replacement 
in several months, could create all kinds of uncertainty in the 
future. I am pretty sure that is what insurance companies do 
not want.
    Governor Beshear, are you worried about the impact the 
President's Executive orders will have on the market and 
families and, more specifically, States?
    Mr. Beshear. Very much so, Senator. Let me just say a word 
about this market chaos. Obviously, the market is different in 
different places in the country. In Kentucky, it is fairly 
stable; in other States, it is stable; and in some States, it 
is not.
    I would agree with everybody up here. The reason for that 
is uncertainty. Put yourself in the place of a CEO of a 
healthcare company. They get this huge sea change in 2010 and 
they have got to figure out how to handle it, and they do. They 
get their arms around it. And then, over the next few years, 
they are faced with defunding of the quarter payments, which 
was supposed to help them transition over the first few years 
as the more sick people get into the plan.
    Sixty votes to repeal, but with no mention of what we are 
going to be replaced with, a reconciliation vote to repeal, but 
nothing to replace it. Of course, they are uncertain. And, of 
course, they are pulling back because of that. I would submit 
to you that tinkering around with this right now is not the 
answer and is not going to create the certainty they need.
    What they need is a strong statement from this Congress 
that says,

          ``Look. We are committed to every American to give 
        coverage to them. We are going to do that. We are going 
        to take the ACA, we are going to make some changes, but 
        we are going to go slow, and we are going to do this 
        the right way. And you are going to know what the 
        replacement or the repair is going to be overall. Not 
        just for 2 years, but forever until we have to do 
        something else.''

    So that it will bring stability to the marketplace. That is 
the answer to this.
    Senator Murray. What I feel like is there is a lot of 
instability because of the reconciliation rush to repeal 
because the President is issuing Executive orders that are 
unclear in their consequences. And to me that is creating a 
chaos.
    Certainly the fear of what I hear people come up to me 
every time I even step off a plane in my home State, or go to 
the grocery store, or answer my phone is,

          ``Well, OK. So you are going to tinker. We hear there 
        is tinkering, but what happens to me? I have a son with 
        diabetes who is going to be 21. Am I going to lose my 
        ability to cover them?''

    The uncertainty of that to individuals is horrific, but I 
am certain it is to the insurance market as well really 
horrific.
    I appreciate all of you being here. I have more questions. 
Thank you.
    The Chairman. Thank you, Senator Murray.
    Senator Collins.

                      Statement of Senator Collins

    Senator Collins. Thank you, Mr. Chairman.
    What has been lost in this debate is regardless of who was 
elected President, we were going to have to do major repairs on 
the Affordable Care Act. Let me just give some examples of some 
of the issues.
    First of all, we still have nearly 30 million Americans who 
are still uninsured. I looked at someone in Aroostook County, 
ME, my home area, who makes $12,000 a year. That is just over 
the poverty rate. So that person is in a bind.
    When we look at how much that individual under the ACA 
exchange in Maine is responsible for out-of-pocket, it is 
$2,592. That is nearly 20 percent or about 20 percent of the 
income of that individual. No wonder this 44-year-old 
individual that is using the Silver Plan benchmark is going to 
opt to pay the penalty. It is a lot cheaper to pay the penalty 
and he is still uninsured.
    We have a problem where we are seeing nationwide average 
premium increases of 25 percent. In Arizona, it is 116 percent. 
In Maine, it is 22 percent. Insurers are fleeing the 
marketplace. That means that there are far fewer choices for 
consumers; 18 out of the 23 co-ops have failed, and the other 5 
are struggling.
    I think we have to acknowledge up front that we have a real 
problem with the individual market. It is a problem that exists 
with the ACA that was not created by the new President or 
Republicans. And we need to work together across the aisle to 
develop solutions to address this problem.
    Ms. McPeak, I know you are the incoming president of the 
National Association of Insurance Commissioners, NAIC. Is my 
analysis correct from your perspective, looking across the 
country?
    Ms. McPeak. I think your description is absolutely accurate 
for what we are experiencing across the Nation.
    Senator Collins. I hope we can get away from trying to make 
this a partisan debate.
    That is what Senator Cassidy and I have done in introducing 
our bill to return more power to the States, to use a 
combination of federally funded Health Savings Accounts for 
low-income people to enroll individuals into a basic insurance 
plan that would include substance abuse, the mental health 
coverage, for example, that would have a high deductible plan 
associated with it. You could also use your HSA for first 
dollar costs. And that attempts to broaden the number of people 
that we are insuring.
    We want to see everyone have access to affordable health 
insurance. That is our goal.
    Ms. Tavenner, do you see any potential in that kind of 
approach where we would give more choices to the States? They 
could continue with the Affordable Care Act, if that is working 
well for them. Or they could go to an approach where they would 
auto-
enroll their uninsured population into a plan with Health 
Savings Accounts, a high deductible insurance plan, and keep 
the consumer protections that are in the Affordable Care Act.
    Ms. Tavenner. Senator Collins, first of all, we are in the 
process of reviewing the bill that you and Senator Cassidy 
submitted and we appreciate the work.
    I would say that we definitely believe that the individual 
market has a long history of instability. Part of that is 
because people turn over so quickly in this market. We 
certainly would support an HSA-type approach.
    We currently have over 20 million Americans who depend on 
HSA's, and I know there is a lot of work going on in a 
bipartisan way to try to make improvements in HSA policy.
    These are all things we need to do. Right now, we need to 
understand what is going to happen for 2018. So we need some 
signals about stability, 2 to 3 years of stability, and then 
work together in a bipartisan way to say, ``How do we make a 
long term principle work?''
    Certainly the issue of the high co-paying deductible is one 
where if you get more insurers back in the market and you have 
more flexibility at the State level, competition increases, 
premiums get better, and consumers have choices.
    Senator Collins. Thank you very much.
    A related issue, which I do not have time to get into, are 
the cliffs that are in the ACA. So if you make a dollar more 
than 250 percent of the poverty rate, then you lose all 
assistance with co-pays and deductibles. A dollar more than 400 
percent, you lose your assistance with premiums. And that is 
another real problem with the law that is creating wage loss, 
where people cannot accept promotions. They cannot work more 
hours because they are going to lose those subsidies.
    The Chairman. Thank you, Senator Collins.
    Senator Murphy.

                      Statement of Senator Murphy

    Senator Murphy. Thank you, Mr. Chairman.
    I appreciate your response to Senator Kaine's letter that I 
was a signatory to. I would love to be able to take the 
politics out of this issue, but we are at a hearing entitled, 
``Obamacare Emergency,'' which does not necessarily suggest 
that we are taking the politics out of this issue. In part, 
because I think we need to look at the full scope of the 
individual market in this country.
    I can paint you a pretty clear picture that suggests that 
the individual market was absolutely in emergency status before 
the Affordable Care Act. What the Affordable Care Act did was 
take that emergency patient, bring them into the emergency 
room, and stabilize them. It does not mean that that patient is 
fully well today, but I think it is important to get a baseline 
here and to understand where that market was, where individuals 
were before the Affordable Care Act, and compare it to where 
they are now.
    I just want to try to get that baseline here and I am just 
going to ask you all some questions. I do not expect you to 
know the answers to all these. If you do not know the answer, 
just tell me, but I think we can maybe get a baseline here, and 
I can help you with the numbers.
    Ms. McPeak, let us just start with you. Today, nobody can 
be denied healthcare because of a pre-existing condition or 
because of medical acuity. Do you know offhand in Tennessee or 
nationally what the denial rate was in the individual market 
prior to the Affordable Care Act? I do not mean these to be 
got-you questions, but that is fine.
    Ms. McPeak. I can certainly only speak to our Tennessee 
experience. I do not know the denial rate, but I can certainly 
look into that for you.
    I will tell you, though, we had 18 insurers writing in our 
market before 2014, and we have 6 now. So we had much more 
affordable options for consumers.
    Senator Murphy. Here is what I know. I think the denial 
rate nationally was 20 percent, 1 out of every 5 were denied 
healthcare because of a pre-existing condition. I think the 
number in Tennessee was much higher. I think it was closer to 
30 percent and above 30 percent in other States like Kentucky, 
for instance, prior to it.
    Ms. Tavenner, do you know what the uninsured rate was 
nationally before the Affordable Care Act for individuals 
compared to what it is today?
    Ms. Tavenner. If I remember correctly, probably in the 15 
to 16 percent range. I think the most recent estimates are 
about 8.6 percent.
    Senator Murphy. Yes, that is why there are some estimates 
for adults in particular that have the number of uninsured 
above 20 percent. I think for a total population, your numbers 
are right. In Connecticut, that number was 8 percent; today it 
is 4 percent.
    We talk about the lack of competition in these markets. Ms. 
Trautwein, do you know how many of these markets today are 
uncompetitive? Meaning they only have one choice or no choices 
versus how many markets are competitive? Do you have a sense of 
that?
    Ms. Trautwein. Well, I think we define what is competitive 
differently than we did in the past. Now we say competitive is 
you have four carriers there, four or five carriers. In the 
past, as Ms. McPeak said, you might have had 14 or 15.
    I think we do have--based on what my members are saying, 
there are a large number where I only have one or two carriers 
across the country, not just county by county, but in some 
States there is only one carrier or two carriers in the entire 
State.
    It is definitely less than it was, fewer choices for 
consumers, and the prices and cost sharing are a lot higher.
    Senator Murphy. Here are the numbers, 8 out of 10 
Americans--8 out of 10 Americans--have access to an exchange 
that have more than one carrier, that have competition.
    Let us just, for a baseline, compare that to the employer-
based system where estimates are that up to 70 percent of 
Americans do not have any choice when they are in an employer 
system. Eighty percent of Americans in these exchange markets 
have competition, a much lower number have competition in their 
employer-based systems. And by the way, before the exchanges 
existed, affordable healthcare was unavailable to millions of 
Americans.
    Last, Governor Beshear, how about approval rates? Do you 
have a sense of how many people that are on exchanges are 
satisfied with the coverage they get? Because, in the end, that 
is kind of what it is all about. Do people like the coverage 
they have or do they not like the coverage that they have?
    Do you know what the satisfaction rates are?
    Mr. Beshear. Senator, what I can tell you is I cannot go 
out of my house or my office every day without somebody 
grabbing me and thanking me for having affordable healthcare, 
most of the time for the first time in their lives. They are 
excited about it.
    As I said, in the 18 months, we went from 20.4 percent 
uninsured to about 7.5 percent. In addition, we went from 
uncompensated care of about 25 percent down to less than 5 
percent. Our providers love this because they are finally 
getting paid for what they do.
    Senator Murphy. The number nationally is 77 percent.
    My last quick comment, Mr. Chairman, is I think it is 
really interesting that none of the people testifying today 
suggested repealing the Affordable Care Act and starting from 
scratch. I think they had really good suggestions about how to 
make this Act work better.
    But that is not what we are doing. That is fundamentally 
not what the President is proposing. I think if we did have a 
conversation about good ideas to make this work better, we 
could get to a place where Republicans and Democrats would 
support it. But this hearing kind of exists in an alternative 
universe to the reconciliation process and the Executive orders 
of this President, which are not recommending some of the 
commonsense changes that this panel has.
    I thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murphy.
    Senator Cassidy.

                      Statement of Senator Cassidy

    Senator Cassidy. Thank you.
    By the way, I will echo what Senator Collins said about the 
un-affordability of the Affordable Care Act, and I appreciate 
what Senator Murphy said.
    On the other hand, having worked in a public hospital for 
the uninsured, when I look at somebody who makes $47,000 a year 
and having a deductible of $7,500. I can just tell you, my 
practice with the patients I had, why do you not make it $7 
million. Because if you are making $45,000 and unless you are a 
very frugal person, you probably do not have $7,500 to put up 
front before you start getting benefits. That is why we prefund 
the Health Savings Account in the Patient Freedom Act, Governor 
Beshear.
    That said, President Trump has said that he wants everyone 
covered and take care of those with pre-existing conditions 
without mandates at a lower cost. Now, one of the debates is, 
do we repeal, get rid of all of the Obamacare pay-for's up 
front? The $48 billion that pharma said, ``We will put in 
because universal coverage benefits our business plan,'' we are 
going to give that to pharma.
    It may end up that we want to fund the proposals that we 
begin to tax employer-sponsored insurance. That will give us 
roughly 20 percent of the revenue that we would get from the 
pay-for's. We already have that pharma, insurance and hospitals 
put forward by and large.
    Could you run a Medicaid expansion program with 20 percent 
of the revenue that you currently have?
    Mr. Beshear. No.
    Senator Cassidy. One of the arguments that you could do so 
is that the legislation that gives States more flexibility in 
benefit design, et cetera. Would that make up for the 80 
percent drop?
    Mr. Beshear. That would be what I would call a Trojan 
horse. The flexibility sounds great, but when you give me about 
50 percent less money or whatever, all you are doing is saying, 
``Governor, you are the one that has got to cut people off the 
rolls. You are the ones that have to reduce.''
    Senator Cassidy. I spoke to a Republican Governor. He was a 
tad more vulgar than you.
    Mr. Beshear. Yes.
    Senator Cassidy. Just to say that.
    Ms. McPeak, again, one of the proposals is that we stop the 
pay-for's and we have a transition period of high-risk pools, 
but basically, no expansion and no subsidies for those on the 
exchanges that kind of withers away. On the other hand, we give 
healthcare plans back the flexibility on benefit design. We 
hope that rising economy puts more people on employer-sponsored 
insurance. But still, we are talking about somebody who makes 
$18,000 not having assistance.
    What would happen, do you think, to uninsured rates should 
that occur?
    Ms. McPeak. Well, the situation that you describe is 
exactly what we are experiencing in Tennessee. We have coverage 
that is available, but it is not affordable. And even if it is 
affordable, it is not something that they can use because of 
the high deductibles and cost sharing requirements.
    So again, being able to provide more choices, more basic 
benefits to allow consumers to have a policy that they could 
actually afford and therefore use, would be a huge benefit to 
the State.
    Senator Cassidy. Ms. Tavenner, we in our plan prefund 
Health Savings Accounts. So we know one of the knocks on HSA's 
is that lower income people cannot fund them. But we prefund it 
and you could do some other stuff, make it not subject to the 
deductible, that sort of technical stuff that would make it 
useful and more used.
    Ms. McPeak speaks about how these high deductibles are 
thwarting people's ability to receive care. Can you speak about 
the potential of prefunding the Health Savings Account, giving 
someone first dollar coverage, the potential that has for 
making primary care and other services truly accessible to 
someone who is otherwise low income?
    Ms. Tavenner. Thank you, Senator Cassidy.
    I think that this is an area where we need to do 
something--if you will--State creativity, waivers, and 
innovation. We are uncertain exactly how this works.
    I know we are not here to talk about Medicaid today, but in 
the Indiana model of Medicaid expansion, they prefunded HSA 
accounts to low-income people. We have a demo underway that we 
can run from and I think that is what we should do. We should 
be open-minded.
    Senator Cassidy. I think we have seen in Indiana that the 
Indiana plan has actually worked. That prefunding of those 
HSA's has both improved outcomes and decreased the number of 
E.R. visits. In a sense, the demo is quite promising.
    Ms. Tavenner. I think we need more of those experiences and 
evaluate those.
    Senator Cassidy. Governor Beshear and Ms. McPeak, let me 
ask you this. In our bill, we have a spirit of federalism, a 
good conservative value that maybe even our Democrats would 
agree to in which we give States the option.
    What are the options, frankly, as stated in the ACA? ``We 
think it is a bad decision, but Massachusetts, we love you. We 
will let you do it.''
    On the other hand, if a State chooses to go in a different 
way, giving you and Ms. McPeak the options to put in a system; 
we put in safeguards. You cannot use the money for a racetrack. 
It has to be used for healthcare. The patient has the power, 
not a State bureaucracy. I do not trust either one of you any 
more than I trust anybody up here. I trust the patient if she 
has the power. It lines up for her.
    What do you think of a federalist approach allowing States 
to choose that which works best for their State recognizing 
that California is different from Alaska different from Maine 
different from Louisiana?
    Mr. Beshear. I think what you end up with is backing off of 
a commitment this country has made to make sure that everybody 
has affordable healthcare.
    Senator Cassidy. Even if you end up with the same amount of 
funding or approximately the same?
    Mr. Beshear. Oh, yes. Because you have got some Governors 
who do not believe in this, you may have some Governors who 
think we need to be back in the 18th century and everybody 
fends for themselves.
    Senator Cassidy. I will concede that one of our options is 
that the Governors would say, ``We do not want the Federal 
money.'' So you are saying that some Governor may say, ``Keep 
your billions. We do not want it.''
    Mr. Beshear. Yes. I think you will have Governors going all 
different ways and you will end up with no coverage for a lot 
of people.
    Senator Cassidy. Ms. McPeak.
    Ms. McPeak. I cannot overstate how much we would appreciate 
it if the State of Tennessee has the ability to craft a system 
that works for the consumers in our State. The counties that 
have only one option on the exchange are the rural areas of our 
State, and those individuals have very unique challenges that 
we think we can better address at the State than at the Federal 
level with a one-size-fits-all solution.
    Senator Cassidy. Thank you both.
    The Chairman. Thank you, Senator Cassidy.
    Senator Warren.

                      Statement of Senator Warren

    Senator Warren. Thank you, Mr. Chairman.
    President Trump and the Republicans have said they are 
going to repeal the Affordable Care Act within weeks, but so 
far, President Trump has not produced any plan for helping 
millions of Americans who will lose their coverage the day the 
repeal goes into effect.
    The President also has no plan for the rules that will 
affect everyone else with insurance like questions about pre-
existing conditions, and lifetime caps, and that sort of thing.
    A lot of people in Massachusetts are stuck in limbo and 
they are really worried about what happens next. Will they lose 
coverage for mom's cancer treatment? Will they still be covered 
for their child's asthma medication? Will a nearby hospital or 
community health center be able to survive and still offer 
services?
    On his first day in office, President Trump signed an 
Executive order telling Federal agencies and, I want to quote 
here, ``To waive deferred grant exemptions from, or delay 
implementation of, parts of the Affordable Care Act.''
    Ms. Tavenner, your organization represents health insurance 
companies. Has the President or his Administration specified 
what waivers the Federal Government will issue to carry out 
this Executive order?
    Ms. Tavenner. Senator Warren, he has not.
    Senator Warren. He has not. Has the President or his 
Administration said what exemptions will be granted?
    Ms. Tavenner. He has not.
    Senator Warren. Has the President or his Administration 
listed what parts of the Affordable Care Act would be deferred 
under his Executive order?
    Ms. Tavenner. We do not have any details on the Executive 
order.
    Senator Warren. So he has not?
    Ms. Tavenner. Right.
    Senator Warren. s. Tavenner, if so much of what this order 
means is unknown, do your members face significant challenges 
in pricing health insurance through the exchanges or through 
private markets?
    Ms. Tavenner. I think this is part of what I have tried to 
stress in this hearing. We need predictability and we need 
predictability for long periods of time in order to price and 
price effectively.
    Senator Warren. OK.
    Ms. Tavenner. Consumers win in that environment.
    Senator Warren. Last week the President did take one action 
that everyone could understand. He shut down millions of 
dollars already budgeted to help people sign up for healthcare.
    Ms. Tavenner, if fewer people signed up for coverage last 
week in the open enrollment period, does that help or hurt the 
stability of the individual market?
    Ms. Tavenner. Senator Warren, we released a statement the 
day that announcement was made encouraging we needed full and 
robust enrollment periods.
    Senator Warren. Any attempt to undermine the enrollment?
    Ms. Tavenner. Well, if you assume that the risk pool is a 
young and healthy risk pool, and young people act like my 
children, they wait until the last minute to sign up for 
everything. OK? So we want to keep the enrollment open and 
robust.
    Senator Warren. OK. I take that as it hurts the stability 
of the individual market and is particularly acute because of 
the timing on it.
    Governor Beshear, you know more probably than anyone what 
is actually at stake in these debates because you set up an 
individual mandate in your State, and you expanded coverage for 
millions of people in Kentucky.
    What does it mean to the families in Kentucky to be able to 
get affordable care through the ACA?
    Mr. Beshear. Senator, as I mentioned, we were one of the 
least healthiest States in the country. And there was no way we 
were ever going to really change that. We could peck around the 
edges, but we did not have the resources to do that.
    Then along came the ACA and it gave us the most powerful 
tool in our lifetimes to finally get everybody in our State 
healthy, and that is what the bottom line is. I do not care 
what you call it. I do not care what party did it. It is 
getting all of our people healthy because with healthy people 
not only is their quality of life better, but our workforce 
will be more productive. And we will create a lot more jobs 
because of it.
    Senator Warren. Thank you, Governor.
    The official topic for today's hearing is ``Obamacare 
Emergency,'' and I have to say, I could not agree more. 
President Trump is creating chaos, and sabotage, and his own 
special baked up emergency here.
    Insurance companies cannot figure out what is going on. 
Families cannot figure it out. The only part that is clear is 
that he is trying to undermine the Affordable Care Act by 
getting fewer people to sign up.
    This is an emergency. And I sincerely hope that the 
politicians who are creating this emergency will come to their 
senses before millions of Americans are hurt.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Warren.
    Senator Scott.

                       Statement of Senator Scott

    Senator Scott. Thank you, Mr. Chairman.
    I thought that I had a little more time, but I am glad that 
you called on me.
    I have sat here and listened to my good friends who are 
seriously concerned about the healthcare of Americans on the 
left. I would imagine that those of us on the right are 
seriously concerned as well. I have heard a baked up emergency 
on the matter of the ACA from Senator Warren. And the Ranking 
Member talked about without Obamacare the rates would go up by 
25 percent.
    Ms. McPeak, can you help me understand the definition, the 
phrase, ``stability of the individual market,'' what that means 
and how you destabilize that market? I am going to give you a 
couple of options and you help me understand whether these 
things destabilize the market.
    The current definition of essential health benefits, does 
that destabilize the market?
    Ms. McPeak. It has, yes, because consumers do not have a 
tremendous amount of options under that provision.
    Senator Scott. The current definition, is that the product 
of an Executive order by Trump or was that already there before 
Trump became President?
    Ms. McPeak. The definition of essential health benefits is 
in the original law of the Affordable Care Act.
    Senator Scott. That would be under the previous 
Administration?
    Ms. McPeak. That is correct.
    Senator Scott. The use of special enrollments to--from my 
words, not yours--gain the system. Does that destabilize the 
market?
    Ms. McPeak. There is no question that that destabilizes the 
market.
    Senator Scott. Did that happen before or after the 
election?
    Ms. McPeak. The actual definition of special enrollment 
periods is contained in the law, and then some Federal 
interpretations by the prior Administration have allowed the 
system that I described.
    Senator Scott. The extended grace period, having sold 
insurance, giving folks 90 days to figure it out as opposed to 
30 days is consistent with the reality that existed beforehand. 
Does that destabilize the market?
    Ms. McPeak. Absolutely, it destabilizes the market.
    Senator Scott. Was that before or after the election?
    Ms. McPeak. That was in the original law of the Affordable 
Care Act.
    Senator Scott. The medical loss ratio that restricts and 
constricts what health insurance companies can do in the 
marketplace. Does that destabilize the marketplace?
    Ms. McPeak. It does destabilize the marketplace in terms of 
not being able to recoup any significant losses sustained by 
the insurers.
    Senator Scott. Was that before or after the election?
    Ms. McPeak. That was in the original law of the Affordable 
Care Act.
    Senator Scott. OK. Now according to my insurance 
commissioner, the rates in South Carolina have experienced, 
since 2014, a rate increase of around 45 percent if you take 
out the subsidies that the taxpayers are paying.
    With Obamacare, the situation as we know it is crumbling. 
Crumbling to the point where the No. 1 hospital in South 
Carolina is a hospital called the Medical University of South 
Carolina. It is a top rate hospital in the country in five 
adult categories and in six pediatric categories.
    Unfortunately for those folks on the exchange, so to speak, 
they have gone from a dozen carriers down to a single carrier 
and almost lost the opportunity to go to the Medical University 
of South Carolina because the one carrier that was left in the 
market did not have that, MUSC the hospital, as a part of their 
package. Thank God for last minute negotiation. My 
understanding is that that negotiation also happened before the 
election.
    The results of the current quagmire, call it Obamacare, is 
that yes, you may have a card that suggests you have access, 
but it does not guarantee you coverage. And the State of the 
individual market is getting worse and worse by the day. Not 
because of a new administration, but because of the basic 
foundation of Obamacare, which was somehow, someway in some 
world that does not exist in this universe, there is a way to 
get 7 million young people to buy a policy that costs more than 
the actual penalty for not buying the policy.
    Does that stabilize the market or does that destabilize the 
market?
    Ms. McPeak. That destabilizes the market. That encourages 
individuals that only need to access healthcare to actually pay 
that additional premium amount over the penalty.
    Senator Scott. My last question, because my time is running 
out. This was such a quick time with you, we will have to do 
this again.
    Looking for ways to actually create access to healthcare, 
and as our Governor from Kentucky has suggested in his State, 
it got down to about 7 percent of those folks in the State 
perhaps uninsured. I just checked the numbers; around 695,000 
of the 4.2 million people in Kentucky today do not have health 
insurance.
    If we were looking for ways to drive down the uninsured 
market in the individual market specifically, how do we do 
that?
    Ms. McPeak. I think we have to offer products that are 
affordable to the people that are currently uninsured, and that 
might be a very basic set of benefits, not something as rich as 
the defined essential health benefits that exist today.
    Senator Scott. Is it then safe to say that the essential 
health benefits, be as prescriptive as they are, eliminates 
competition and makes it more expensive for the average person 
in the average market in the average State to find affordable 
coverage?
    Ms. McPeak. Yes, because it completely restricts the 
ability of insurers to compete on the benefits that they offer. 
It limits the areas that an insurer can compete with other 
insurers on, and therefore it limits the participation in the 
market.
    Senator Scott. The house may be on fire, but it was on fire 
before we got here.
    Thank you.
    The Chairman. Thank you, Senator Scott.
    Senator Franken.

                      Statement of Senator Franken

    Senator Franken. Thank you, Mr. Chairman.
    Many of my colleagues on the other side of the aisle charge 
that the Affordable Care Act--and I think the Senator from 
South Carolina is basically saying--is failing, collapsing, 
that the market is in a death spiral.
    Senator Scott. Yes.
    Senator Franken. And, in fact, we are here today for a 
hearing entitled ``Obamacare Emergency.'' For them, the only 
solution is immediate and swift repeal. Let us be clear. This 
is just wrong.
    News reports indicate that enrollment is surging. The law's 
popularity has jumped and in the most recent poll, more 
Americans approve of the ACA than disapprove. Ratings, even S&P 
Global Ratings reported that markets were stabilizing barring 
an additional uncertainty.
    Since the ACA passed, 20 million Americans gained health 
insurance coverage, young adults can stay on their parents' 
plan, lifetime and annual caps were eliminated, people received 
free preventive services, and health insurers can no longer 
deny coverage or charge people more because they have a pre-
existing condition.
    We bent the cost curve. We improved healthcare quality. We 
improved value and we extended the life of the Medicare trust 
fund by 11 years. These changes affect not just those people on 
the individual market, they affect everyone. Everyone on those 
markets have these benefits.
    Yes, premiums have gone up, but so too have the tax 
credits, which means the majority of families enrolling in 
individual coverage still have access to high quality 
affordable health insurance.
    Let us talk for a minute about why these premiums went up 
so quickly over the past 2 years and why some insurers have 
left the exchanges. But who should Americans blame for this? 
Well, I would say Republicans.
    You see, the Affordable Care Act was designed to keep 
insurance companies in the game. The law included several 
programs including the Risk Corridor Program to stabilize the 
individual market and make sure that even though insurance 
companies could not refuse coverage to sick people, they would 
not lose money on them either.
    In the 2015 budget bill, and last minute in a bill that had 
to be passed, Republicans unexpectedly inserted a provision 
that crippled the Risk Corridor Program. Suddenly, without 
warning, insurance companies that had to insure sick people 
were no longer protected from losses if they got a higher risk 
pool. That drove Blue Cross Blue Shield in Minnesota out just 
as the Chairman described in Tennessee.
    Ms. Tavenner, as someone who represents health insurance 
companies, did this change cause any insurance companies to 
lose money? Did any plans enter the market after incurring 
these losses?
    Ms. Tavenner. Senator Franken, when the Risk Corridor 
funding issue became known, there were plans that were 
dependent on that money and had significant losses. Some did 
exit the market. Certainly the story of the co-ops has been 
pretty public, but there were also health insurance plans that 
could not survive without that support.
    Senator Franken. Right. As a result of this change, health 
insurers receive slightly more than 12 percent of the funding 
they were due to cover market losses. And as I said, Minnesota 
Blue Cross Blue Shield plan left the individual market and I 
suspect that is why the markets the Chairman enumerated, they 
lost Blue Cross Blue Shield.
    Would you, Ms. Tavenner, say that these losses caused 
insurance companies to increase or decrease their premiums in 
2016?
    Ms. Tavenner. Without----
    Senator Franken. And then this other, the competition 
dropping out as a result?
    Ms. Tavenner. Right. The Risk Corridor Program was 
temporary funding for 2014, 2015, and 2016. It certainly 
started to affect 2016 once the information was known. 2017 and 
beyond, they have priced assuming there is no Risk Corridor 
funding, and it is hard to go back and re-price for past 
losses. How it did affect premiums is in your access to risk 
capital or reserves required at the State level, so it added 
upward pressure on premiums.
    Senator Franken. I know I am out of time, but let me just 
wrap up. Republicans jammed through a provision that undercut 
the Risk Corridor Program, led to huge financial losses for 
insurers and market exits, which drove up premiums. This is not 
in a death spiral. In Minnesota, 3 percent more enrolled this 
year. S&P is saying the price on this was a 1-year spike.
    My colleagues on the other side took away this Risk 
Corridor and as a result, we saw insurance companies like Blue 
Cross Blue Shield drop out of the market in Tennessee and in 
Minnesota driving up prices because all I keep hearing about is 
the counties that have just one choice. Well, they had more 
choices if it were not for the Republican party of the United 
States of America. I got a smile from Senator Collins.
    Senator Collins. It was not a smile of agreement, just so 
we are clear on that.
    [Laughter.]
    The Chairman. Senator Young.
    Senator Franken. It was a sardonic smile.
    The Chairman. Senator Young.

                       Statement of Senator Young

    Senator Young. Well, the title of this hearing ``Obamacare 
Emergency,'' I do believe we have an emergency on our hands, 
whether we happen to be a Republican or Democrat. I was not 
here when we had, blessedly, the debate about and the vote on 
the Affordable Care Act, but I want to be part of the solution. 
One would hope this could be a bipartisan solution where 
perhaps we retain some of the features of current healthcare 
law that are working for Americans and look to replace it.
    However we characterize that, however you wish to 
characterize that among one's Democrat base or Republican base 
is every member's prerogative. But I know it is the hope of the 
Chairman and many others, many other members present here, that 
we can solicit the best ideas, come up with a good work 
product.
    The reality is the ACA, as it existed just days ago, will 
no longer exist. And I now reveal my opinion and bias; I think 
that is a good thing.
    I want to hone in on one particular area and it pertains to 
unaffordable coverage, something that is impacting people 
across this country.
    According to a new survey from Bankrate.com, 6 out of 10 
Americans do not have enough savings to pay for a $500 or 
$1,000 emergency. Now the ACA exacerbates this problem, to my 
mind, by capping how much individuals can save tax free for 
their healthcare costs.
    Ms. Tavenner, you spoke favorably, at least generally, 
about Health Savings Accounts and some of the incentives they 
create and disincentives will be part of the solution here. 
They are part of the Cassidy-Collins Plan, which I am still 
studying, but the prefunded HSA, I think, is an intelligent 
part of the overall solution here.
    Most popular plans in the marketplace in my home State of 
Indiana now require Hoosier families to pay, on average, 
between $6,400 and $11,600 in out-of-pocket deductibles before 
their coverage kicks in.
    Ms. Trautwein, a couple of quick questions for you. What is 
the first thing that we, as a congress, should do to help 
address this dynamic of unaffordable coverage; the first thing?
    Ms. Trautwein. Well, we are very much in favor of Health 
Savings Accounts and things like that. But I have to tell you, 
I do not think that is the first thing that you do.
    Senator Young. OK.
    Ms. Trautwein. The first thing you do is you have to figure 
out why is that cost sharing so high? Why? There is a reason 
for that. And it was actually an attempt to make coverage more 
affordable, so that people could buy anything, so if they could 
afford the basic level of premiums.
    So why are those premiums so high? It is because of the 
adverse selection we have in the individual market. Before we 
do anything with HSA's, which are a marvelous idea, we have got 
to look at why those premiums have risen like that. Why people 
do not continuously stay covered. Why they come in and out, and 
why the special enrollments are working like that.
    We really have to figure out this whole enrollment process, 
no matter what else we do. And we have to understand that the 
individual market at any time always required some additional 
backing because it does not operate like other markets. There 
is no employer contribution. People pay for it themselves. And 
so the structure and the function of the tax credits are really 
important.
    We need to straighten out a few things first before we move 
into other aspects like that. That would be really helpful for 
people with that cost sharing because it might as well be a 
million dollars to them if it is a deductible that is that high 
for some people.
    Senator Young. Ms. Tavenner, your thoughts on this. Do you 
agree with that assessment or perhaps you would start somewhere 
else?
    Ms. Tavenner. No, I absolutely agree. I agree that HSA's 
are important. I agree that changing co-pays and deductibles 
are important.
    But first, we have some basic rescue work that has to go 
on, and that has to do with, how do we stabilize special 
enrollment periods? How do we handle grace periods? We get some 
kind of finality to keep people in as long as possible. We need 
to talk about if we want lower premiums, we need to continue 
the cost-sharing subsidies. We need to continue the tax 
subsidies or tax credits.
    There are other issues. There are health insurance taxes, 
medical cost trends, I can go on and on.
    I think that is our whole point today. I think the four of 
us would agree. We need predictability. We need long-term 
predictability, not what is going to happen for 6 months.
    Senator Young. I believe that every member of this 
committee aims to provide that predictability. There is 
disagreement about whether or not some measure of short-term 
disruption needed to occur in order to change what everyone 
agrees was a suboptimal system.
    I would hope we could work together to provide more 
predictability. I hear a lot of commonalities between the 
testimony regardless of my suspicions about political 
affiliation, and the merits and demerits of the previous 
approach. I really hope that we continue to work on this effort 
and with a bipartisan spirit in mind.
    With that, I yield back.
    The Chairman. Thank you, Senator Young.
    Senator Kaine.

                       Statement of Senator Kaine

    Senator Kaine. Thank you, Mr. Chair and thank you to the 
witnesses.
    It is rare that I actually go to a hearing and I then take 
all the testimony back to my office because there are so many 
good ideas in it that I want to digest them further. I 
appreciate that.
    Mr. Chair, I appreciate your words at the opening about the 
letter that 13 of us on the Democratic side sent to you, 
Senator Hatch, and Leader McConnell at the start of the 
session. I think I can speak for everyone on the Democratic 
side, none of us believe any law is perfect. Certainly not the 
ACA, and we would love to work on improvements, and many of us 
have ideas or have introduced legislation to make improvements 
to the ACA or to our health system generally.
    I actually think hearings like this, and we can use more of 
them, will be more likely to make improvements if we spend more 
time listening to stakeholders than listening to each other, 
listening to stakeholders, patients, providers kind of gets out 
of the Democratic versus Republican tug of war. Hearings like 
this are very helpful.
    The letter that you sent last night in response to ours was 
a positive one, encouraging us to work together. And just a 
quote from your letter, ``To stabilize the individual insurance 
market.'' There are other issues other than the individual 
insurance market, but I like the word stabilize.
    I think stabilize is a very good word and I think we should 
work to stabilize our healthcare system, but I think 
stabilization is completely contrary toward repeal with no 
replacement and rushing. I do not think you can stabilize and 
rush. I do not think you can stabilize and repeal with no known 
next chapter.
    Congressman Price was here before us a week or so ago in 
his confirmation hearing and he said, ``We need to bring the 
temperature down.'' I agree with that too. We need to bring the 
temperature down and listen to each other, but that is also 
contrary to rushing. And I think it is also contrary to 
repealing with no known next chapter.
    For the panel, the title of this hearing today is 
``Obamacare Emergency.'' Would it be an emergency to fully 
repeal the Affordable Care Act with no replacement? I would 
like to have any of you answer that question.
    Mr. Beshear. It would not be an emergency. It would be a 
disaster.
    Senator Kaine. Does anybody disagree that it would be an 
emergency if we repeal the Affordable Care Act with no 
replacement?
    The estimates are that 30 million people would lose their 
health insurance, that millions more would lose other 
protections. A full repeal would increase the deficit by $350 
billion over 10 years and it would inject uncertainty into the 
largest sector of the American economy; healthcare is one-sixth 
of the American economy.
    I hope we can all agree, stakeholders I hope we can all 
agree that a repeal without a replacement would be an emergency 
or worse. Does anybody want to challenge me on that? OK. Let me 
ask you another one.
    If we agree that a repeal with no replacement would be an 
emergency or worse, then what we are talking about is 
replacement, repair, reform, fix, improve. Again, I am like 
Senator Young. I do not care about the word. I just want to get 
this right for people.
    Whatever we call what we are doing, replace or repair, do 
you agree with me that doing it in a way that is careful, 
considerate, and open is better than doing it in a way that is 
secret, rushed, and careless? Is that generally agreeable?
    Does anybody think that secret, rushed, and careless is a 
better way to approach this challenge than open, considerate, 
and careful?
    In fact, some of the testimony, I would read the testimony 
of Ms. McPeak,

          ``Please continue to be as open and transparent in 
        this process as possible. Markets need clarity and 
        opportunities like this hearing so they can help 
        provide that clarity so that we do not see carriers 
        exiting markets in bulk when they do not have an idea 
        about what to expect in terms of regulation over the 
        next several years.''

    Ms. Tavenner, your testimony,

          ``First and foremost, we need to ensure that 
        consumers have quality coverage options as this market 
        continues to face challenges and additional market 
        uncertainty will likely exacerbate these challenges. 
        But strong signals of certainty can help stabilize the 
        market.''

    Careful, considerate, and open--open and transparent is the 
way we ought to be doing this. The last thing I will ask you 
is, Were we in an emergency before the Affordable Care Act was 
passed? Forty-five million people did not have insurance. 
Premiums were going up in a dramatic way, hundreds of thousands 
going bankrupt every year because of medical bills.
    Do any of you challenge where we were pre-ACA would meet 
the definition, a fair definition, of emergency?
    I do not have any other questions, Mr. Chair. Thanks.
    The Chairman. Thank you, Senator Kaine.
    Senator Murkowski.

                     Statement of Senator Murkowski

    Senator Murkowski. Thank you, Mr. Chairman.
    Mr. Chairman, I want to thank you for conducting, not only 
this hearing this morning, but the informational sessions that 
we have had where we have gained information from various 
States' insurance commissioners. Because I believe you are 
proceeding in a manner that is very open, very careful, and 
really very considerate just as Senator Kaine has asked be 
done. I appreciate that a great deal.
    I appreciate the fact that you are trying to focus us as 
policymakers on the area that is really troubled right now, and 
this is the individual market, and to look specifically to how 
we can provide for the stabilization.
    Senator Murphy asked or raised the issue of we need to know 
the baseline. Well, I can tell you in my State, in Alaska, 
before the ACA was passed, the information that we got just 
this morning from our State's Insurance Commissioner--who is 
here with us this morning at the hearing, as well as our 
Commissioner of Commerce and Economic Development--before the 
ACA we had four carriers in the State. That is not a lot, but 
we had four. Now we are down to one and the real concern is 
whether we will even have one next year in 2018.
    Before the ACA, the average cost for an individual for 
their plan was $251 a month and now with implementation of the 
ACA, and the fact that we do not have competition and that we 
are a high cost State, it is $800 a month for an individual.
    If you are a family of four, Alaskans are suffering and the 
decisions that they are making, they have to make a decision as 
to whether they pay the mortgage or whether they cover their 
families. This is a situation that is not sustainable. So the 
focus is on what we can do to provide some level of stability.
    I appreciate the very concrete suggestions that have been 
laid down here this morning, whether it is the grace periods, 
the special enrollment, talking about essential health benefits 
flexibility. There has been some discussion about the age 
bands, but drilling down into some of these things that could 
make a difference for families like mine in Alaska.
    We are talking in our State about the need for an Alaska 
Plan, something that is very Alaska-specific. Ms. McPeak, you 
kind of talked about the flexibility to have a Tennessee Plan. 
Whether it is the Cassidy-Collins and the direction that they 
are taking to be able to recognize that flexibility is clearly 
what we need given the situations that we have in each of our 
States.
    In Alaska right now, we are doing some innovation that is 
helping to stabilize. We have worked on some major reforms 
through the State in the creation of a reinsurance program for 
high-cost, high-risk individuals. It has helped. It still 
leaves us with high costs, but it has helped keep the premiums 
from skyrocketing and we have moved forward with a Section 1332 
Innovation Waiver.
    Mr. Chairman, if I may, I would like to submit for the 
record the letter from our State's Director of Insurance to you 
outlining the situation in Alaska, and some of the innovations 
that we have seen, if I may.
    [The information referred to was not available at press 
time.]
    The Chairman. Yes, it will be included.
    Senator Murkowski. A question to you, Ms. McPeak, and this 
will relate to the State Innovation Waiver, the 1332.
    We have worked through the process. It has been difficult. 
It has been costly. It was about $200,000 just to submit it. 
Can you speak as a member of the NAIC to what you have heard 
from various States that might be pursuing these types of 
waivers, what the challenges are?
    We look at this as one way to gain flexibility and it has 
not been raised in this discussion yet this morning. How we can 
either improve or evolve this process so that it allows the 
States the flexibility that they would need.
    Ms. McPeak. Thank you, Senator.
    The information that I receive from my colleagues across 
the Nation in terms of insurance commissioners is that the 
Innovation Waivers might be helpful, but the time and the 
expense associated with completing the application and 
shepherding it through the process is only one that is 
undertaken when there are really no other options available in 
the State as Alaska has experienced.
    Senator Murkowski. Which is our situation.
    Ms. McPeak. Absolutely. I think other States might be 
interested in pursuing an Innovation Waiver if the process 
could be simplified or streamlined in any regard.
    Senator Murkowski. Would you be in a position to help us 
divine what we could do to make it more efficient, to make it a 
more simplified process? We are pioneering with the Alaska 1332 
Waiver, but we recognize that we have to make this more user 
friendly.
    Ms. McPeak. Our members are absolutely willing to work with 
you to provide some recommendations on streamlining that 
process and improving the system.
    Senator Murkowski. Thank you.
    And Mr. Chairman, it came up in discussion this morning 
that these State Commissioners, again, are an amazing resource 
and can help us identify those areas that we might be able to 
move more readily to provide this stabilization in the short 
term through the administrative rather than the more lengthy 
legislative process that we engage in here.
    I would certainly encourage recommendations from our 
States' commissioners as to how, from an administrative 
perspective, we can be the rescue team that we need to be more 
readily.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murkowski.
    Senator Baldwin.

                      Statement of Senator Baldwin

    Senator Baldwin. Thank you, Mr. Chairman.
    I want to thank our witnesses for being here to share your 
expertise. But I have to share with you that it is troubling to 
me that at our first hearing on President Trump's and the 
Republican plan to take away coverage for millions of Americans 
that our committee is not going to hear from somebody who would 
be directly and immediately impacted by repeal of the 
Affordable Care Act.
    The stakes are really too high for so many of the people 
that I represent in Wisconsin and elsewhere who will see 
coverage and protections disappear. Let me just share one with 
the committee and the panel.
    I recently heard from Sydney in Sheboygan, WI. She recently 
started her own small business. She calculated that without the 
Affordable Care Act premium tax credits and other cost-sharing 
mechanisms that her premiums would triple and her deductible 
would more than double.
    She writes, ``I and many other small business owners rely 
on the Affordable Care Act.'' She wrote, ``By supporting the 
ACA, you also support America's many small business owners.''
    The ACA also provides people like Sydney cost sharing 
subsidies that help reduce their deductibles and out-of-pocket 
costs. These have specifically been targeted by Republicans who 
want to immediately stop this assistance that would impact more 
than 120,000 people in the State of Wisconsin all while they 
are trying to rush to really take apart our healthcare system 
with no plan in place to replace it.
    I recently sent a letter calling on President Trump to 
avoid further damage from his health plan by protecting access 
to the cost-sharing subsidy assistance.
    Ms. Tavenner, I am hoping you can explain what is at stake 
for roughly over 6 million Americans who receive the cost-
sharing assistance under the ACA if the Trump administration 
were to halt those payments?
    Ms. Tavenner. Thank you, Senator Baldwin.
    The most recent estimate is about 65 percent of those 
individuals on the exchange who receive tax credits also 
receive the cost-sharing subsidies. So they are vital. These 
are low-income people--as you know, less than 250 percent of 
the poverty level. We have said that it is, when we talk about 
immediate stability, that is critical. Without that, then 
obviously individuals----
    First of all, insurers may not stay in the market because 
they understand these people have to have this assistance.
    Second, they would have to move premiums to price above 
that, which there was a recent study by Covered California that 
said it is about a 15 percent premium increase. So you take the 
affordability issue and you make it worse.
    If I do not leave with any message today, I hope I leave 
the message of, this is something that we need to resolve in 
the next 30 days. It is very important to the stability of the 
individual market.
    Senator Baldwin. Thank you.
    I want to quickly, in my minute left, touch on another 
topic I have heard some discussion of, the essential benefit 
package.
    Governor Beshear, I know that Kentucky, like my home State 
of Wisconsin and many other States that we represent, has been 
hit hard by the opioid and heroin epidemic. We have made some 
bipartisan progress on this issue in the Congress in recent 
months. But President Trump and Republicans are working to undo 
this progress and perhaps worsen the epidemic in our 
communities by repealing the Affordable Care Act.
    What would happen to States like your State of Kentucky, my 
State of Wisconsin, struggling with this opioid abuse and 
substance abuse disorders if Republicans really do take away 
the guaranteed coverage of essential health benefits like 
substance abuse treatment?
    Mr. Beshear. Senator, do you want to talk about a real 
emergency? Opioid abuse in this country is one of the biggest 
issues that we have got to face and we have got to face it 
quickly. It is all over Kentucky. It is all over everyplace.
    We went hard at first, prescription drug abuse while I was 
Governor because that was sort of the drug of the moment--
prescription drugs. We ran the pill mills out of the State. We 
did a lot of things that got that under control, but it is kind 
of like the game of whack-a-mole. You know, you knock that down 
and some other drug pops up. And now it is heroin. It is 
Fentanyl.
    We tried to do some legislation on that, but you cannot 
incarcerate yourself out of an opioid emergency. You have to 
treat your way out of it. We have got to provide more treatment 
so that our people can get back on their feet, get back into 
society, become productive members of society again.
    The essential benefit of substance abuse treatment in the 
Affordable Care Act has been monumental in helping to do that. 
You take that away and we have got an emergency now. You can 
almost write off half the country if we do not start treating 
our people and getting them back into society.
    The Chairman. Thank you, Senator Baldwin.
    Senator Hassan.

                      Statement of Senator Hassan

    Senator Hassan. Thank you, Mr. Chair and Ranking Member, 
and thank you to all of our panelists for being here today.
    Governor Beshear, I am sure that you have seen firsthand, 
just as I did as Governor of New Hampshire, all the benefits 
that the ACA led to in your State. I reviewed your testimony 
and I understand that that is what you talked about in it.
    From one Governor to another, I can tell you how much the 
ACA has helped my State of New Hampshire. Approximately 55,000 
Granite Staters have coverage under the State's bipartisan 
Medicaid expansion and 49,000 have private coverage through the 
exchange.
    I truly worry that Trumpcare and efforts to sabotage the 
ACA, I worry about how those changes will strip access to care 
for tens of thousands of Granite Staters and how it will 
increase costs.
    I also worry about how efforts to repeal the law will 
impact States' bottom lines including efforts to repeal 
Medicaid expansion and the efforts to turn the Medicaid program 
into some sort of a block grant program. That would leave 
people uninsured. It would slash Federal funding and shift 
costs to States putting pressure on what, in most States, are 
already very strained budgets.
    I am not the only Governor who has expressed this concern. 
Press reports show that Republican Governors share my concerns. 
According to Politico, at least 5 of the 16 Republican 
Governors of States that took Federal money to expand Medicaid 
are advocating to keep it or they are warning Republican 
leaders of the disastrous consequences if the law is repealed 
without a replacement that keeps millions of people covered.
    Governor, your State expanded Medicaid. As I understand it, 
an estimated 151,000 Kentuckians have health insurance today 
because Kentucky expanded Medicaid. In all, your State has more 
than 1 million people on the Medicaid program.
    What would it mean for a State budget like Kentucky's if 
some of us here in Washington get their way and the Republicans 
repeal Medicaid expansion and turn Medicaid into a block grant?
    Mr. Beshear. Well, first of all, turn it into a block grant 
and you can pretty much write off a whole lot of people in your 
State in terms of getting coverage because it is a Trojan 
horse.
    It sounds great, ``Oh, flexibility.'' As you know, having 
been a former Governor, your eyes light up when you hear the 
word flexibility. But then when you open that horse up and see,

          ``Oh, I am getting half the money to do the program 
        that was going to be done and it is going to be up to 
        me to cut people off and to cut benefits.''

    It looks like Congress is pulling the Pontius Pilate 
routine and washing their hands of all of our folks and then 
blaming it on me. That is a nonstarter and that would be a 
disaster.
    Our State, obviously, has benefited tremendously by 
expanding Medicaid and by the Affordable Care Act. But not only 
in quality of life and quality of health, economically it has 
been a boon to us. This is not Steve Beshear talking. This is 
PricewaterhouseCoopers.
    Senator Hassan. Right.
    Mr. Beshear. This is Deloitte Consulting who did studies 
and PricewaterhouseCoopers before I expanded Medicaid. I asked 
them, I said, ``You have got to tell me what this is going to 
do to me or for me, because I have a budget to manage.''
    Senator Hassan. Right.
    Mr. Beshear. They came back in, in 6 months and said, 
``Governor, you cannot afford not to do this because it is 
going to be so good for your State.''
    Senator Hassan. Right.
    Mr. Beshear. Deloitte came in a year later and looked at 
actual data. We had already created 12,000 new jobs. You are 
going to create 40,000 overall. It is going to have a $900 
million positive impact on the State budget over 8 years.
    It is a no-brainer. It is a no-brainer both from the health 
of your people and from the budget that you have got to 
operate.
    Senator Hassan. Well, thank you. And thank you, again, for 
being here and for your work for the people of Kentucky.
    Ms. Tavenner, I also had a question. It is clear that those 
who want to do away with the ACA have not been able to come up 
with a plan to replace it as of now. They have laid out a 
roadmap, though, of how to repeal it.
    In 2015, Republicans passed the Budget Reconciliation bill 
that repealed major parts of the ACA. It was vetoed by 
President Obama. Had it been signed into law, it would have had 
devastating impacts. It would have made the risk pools sicker. 
It would have stripped away premium subsidies, which help 
people afford their monthly premiums. In New Hampshire, more 
than 31,000 people get these subsidies, averaging $261 a month.
    If Republicans were to pass a bill similar to the one they 
passed in 2015 this year, will not premiums on the individual 
market skyrocket?
    Ms. Tavenner. First of all, I think that what we would want 
to see is that we would work with, you could call it, repeal-
replace. These two need to travel together.
    Senator Hassan. Right.
    Ms. Tavenner. We need to understand as the changes are made 
what is the length of time for the changes? And there are some 
improvements that could be made.
    Earlier when we were talking about Executive orders and 
things such as special enrollment periods could be handled 
today, grace periods could be handled today, and have immediate 
benefit in terms of some relief of premium uncertainty and 
keeping people in the market and not using it as just-in-time.
    The devil is going to be in the details. The message that 
we are sending today is we want to work with you to have a 
logical way to move to make improvements in the individual 
market and that has been challenged. It is undergoing some 
unique challenges today. There are low-income people who cannot 
pay co-pays and deductibles. So there are improvements to be 
made all around. That is what we want to see.
    Senator Hassan. Well, and certainly, I think there is not 
anybody up here who does not agree that there are flaws that we 
need to work on in the ACA. But what we are trying to point out 
is that just a straight out repeal destabilizes the market.
    I just know that before the ACA came along, when I entered 
the State Senate in New Hampshire, we were seeing insurance 
premiums skyrocket and we were seeing insurers leave our State. 
Since we have passed the ACA and passed bipartisan Medicaid 
expansion, because we did it in a market-based way, we have 
attracted new insurers into our markets and more people are 
covered.
    I appreciate your willingness to work. My biggest concern 
is that the current plan from the majority seems to be just to 
repeal without a replace plan.
    Thank you.
    The Chairman. Thank you, Senator Hassan.
    Senator Casey.

                       Statement of Senator Casey

    Senator Casey. Mr. Chairman, thank you.
    I want to thank you and the Ranking Member for having this 
hearing. By the way, I would agree with the last statement, and 
several others, that Senator Hassan made.
    This idea of repealing the ACA, better known as the longer 
and more accurate title of the bill, the Patient Protection and 
Affordable Care Act. I will talk about that patient protection 
part in a moment, but this idea of doing this and everything is 
just going to be tranquil and without impact for peoples' lives 
is a big lie if someone is professing that. I am not sure 
anyone is.
    It leads to, at least in my judgment, chaos, uncertainty, 
and real adverse consequences for a lot of people. And really 
risk, in some cases risk to human life, but even if it does not 
rise to the level of the kind of chaos that will lead to 
someone losing their life, there are going to be a lot of 
Americans who will be in jeopardy.
    We are grateful that you are here to give us testimony, and 
expertise, and insight that we may not have otherwise.
    I wanted to start with a chart that the Chairman put up 
earlier in the hearing today, and he had on display before, and 
I appreciate the fact that he did because it reminded us of 
some of the big numbers here.
    One of the health insurance coverage categories that he had 
on the board that was up a little while ago was 178 million 
Americans get employer-sponsored coverage, but according to 
that chart, about 61 percent of the American people.
    That is who that patient protection part comes in. If those 
178 million Americans did not have the kind of protection that 
they have now, in fact, they had almost no protections.
    An insurance company could say to you,

          ``I know you are paying your premiums. I know you 
        have had insurance for years. I know you care about 
        your kids. But we can tell you that your kids do not 
        get coverage because we are the insurance companies and 
        we have the power to do that.''

    That ended with this legislation.
    The patient protection part, forget the exchanges. Forget 
all the things that we have to work on to improve this. The 
fact of the matter is this legislation brought protections to 
178 million Americans who never had it before. Some think it 
was 150 million. So, I will go with the higher number.
    Here is one of the main issues, pre-existing conditions. If 
we are going to maintain that protection, and a heck of a lot 
longer list of protections, you have got to be able to pay for 
it. You cannot just say it is a goal and say, ``That is good. 
We want to keep what is good.'' And then talk in ways that 
undermine that completely.
    Governor Beshear, I was going to ask you first, as someone 
who has governed a rural State and a large part of your State 
is similar to Pennsylvania. We have in our State a huge 
population, about 3.5 million people live in rural areas. Allow 
them to get the protection of Medicaid or get healthcare 
through Medicaid. We know that kids get the disproportionate 
share of that in parts of the country like that.
    I wanted to ask you about pre-existing conditions. What 
does this repeal effort--and the other effort to pass what has 
been known as the Ryan Budget block granting Medicaid--what 
does that mean to the part of your State that is both rural and 
focused on rural children? What does it mean?
    Mr. Beshear. If you block grant Medicaid, in essence, you 
are going to send me less money than it takes to run the 
program. And I am going to have to turn around and say, ``OK. 
We are going to have to reduce the people in the program and we 
are going to have to reduce the benefits in the program.'' 
People are going to lose their care. Lots of people are going 
to lose their care.
    These are people that, in one sense, need the care more 
than anybody else, and so many of them do not know how to 
access healthcare until they are covered by this care. You are 
going to hurt a lot of families. Some people will die because 
they do not have the coverage that they need.
    Talking about pre-existing conditions, let me just give you 
a little, quick story. I went down right after we expanded 
Medicare, right after we fully implemented the ACA in Kentucky, 
and I was going to be on one of those television shows, and 
they had to do this satellite thing.
    I am in Louisville and I go to this small television studio 
run by this independent television producer guy and he says, 
``Here is where you sit,'' and all of that. And he said, ``What 
are you going to talk about?'' I said, ``Well, the Affordable 
Care Act. There are some folks here in our political scene in 
Kentucky that are not too thrilled with what I have done.''

    And he said,

          ``Well, let me tell you something. I am thrilled 
        because I have had a heart condition for the last 8 
        years and I could not get insurance. But I went down 
        and signed up this morning.''

    That is what is going on out here.
    Some folks talk about all these people involved in this 
like they are, I said, ``aliens from some distant planet.'' 
These are people that we sit in the bleachers with on Friday 
night. We go to the grocery with on Saturday. We sit in the 
pews on Sunday with them. They are you and me. They are family 
and they are friends.
    We ought to be putting them first and forgetting all this 
political mess that goes on up here, and deal with them as 
Kentuckians and Americans.
    Senator Casey. Governor, thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Casey.
    Senator Whitehouse.

                    Statement of Senator Whitehouse

    Senator Whitehouse. Thank you very much, Chairman.
    Just from a Rhode Island perspective, I would like to 
congratulate Governor Beshear on his success with the 
Affordable Care Act and point out that Rhode Island has been a 
success with the Affordable Care Act.
    Our Governor has written to the House Majority Leader to 
say,

          ``By fully leveraging the flexibility and resources 
        available to us under the ACA, Rhode Island has 
        developed a more competitive environment for health 
        insurance and positioned itself to make the healthcare 
        system more efficient and affordable. We have been 
        successful controlling Medicaid costs without reducing 
        benefits or eligibility. Unlike some States which have 
        seen dramatic premium growth on the exchange, we have 
        actually seen exchange premiums decrease in 2 out of 
        the last 3 years. In fact, some consumers are seeing a 
        decrease of as much as 5 percent as they compare plans 
        and enroll for 2017. Our aggressive rate review process 
        strengthened by ACA funding has saved consumers nearly 
        $220 million since 2012 in a State of 1 million 
        people.''

    Mr. Chairman, our Health Insurance Commissioner wrote to 
you and said,

          ``The ACA has worked in Rhode Island. We have a 
        remarkable story to tell. Rhode Island has enjoyed 
        market stability and has avoided dramatic increases in 
        premiums seen in other States. Over the last 3 years, 
        premium increases in the individual and small group 
        markets have been relatively modest for Plan Year 2017. 
        Average premium changes in the individual market will 
        range from a 5.9 percent decrease to a 5.9 percent 
        increase based on issuers. In the small group market, 
        average premium changes in 2017 will range from a 
        decrease of 3.1 percent to an increase of 3.6 percent 
        based on issuer.''

    She concludes,

          ``The answer is not to make health insurance coverage 
        less comprehensive by weakening the essential health 
        benefits covered or to throw people off the insurance 
        rolls altogether. But to transform the healthcare 
        delivery system and reconfigure payment methodologies 
        to encourage more efficient, higher quality 
        healthcare.''

    I have probably bored this committee to death with my 
persistent pursuit of delivery system reform efforts.
    My point here is that we are seeing it work in Rhode 
Island. We are seeing costs come down among primary care 
provider groups that have become ACO's under the Affordable 
Care Act. If you strip out from them the Accountable Care 
Organization status, which is part of the Affordable Care Act, 
you leave them stranded after the investment that they have 
made. You are taking the people who are delivering care to 
folks and you are just throwing sticks in the spokes. It makes 
no sense. It hurts them and our providers are really concerned 
about what people are looking at.
    Repeal without replace that focuses on the delivery system 
reforms as well as the patient protections that Senator Casey 
referred to is really, really, really important.
    Let me make a second point, which is that I was our State's 
insurance commissioner at one point and as our director of 
business regulation. One of the tasks that I had to do was to 
run as receiver the bogus shutdown insurance companies that had 
come in when a previous Governor decided that it would be 
really smart to blowout insurance protections at the State 
level, and let any slick operator come in and sign up in Rhode 
Island. They failed and I had to clean up the mess. And the 
mess was not pretty.
    A lot of the stuff was taking advantage of the problem of 
serious injuries occasioned in schools and playground and so 
forth. I was talking on the telephone to people in other 
States--a lot of the stuff got sold across State lines--who had 
a son who was counting on this for insurance, and it was gone. 
The son is crippled for life and they have no place to go. They 
could get, maybe, onto Medicaid once they burned down all of 
their family resources to get to that point. If they went off 
the insurance that was covering the child in the family, if 
they moved, then they would get lost. They would never be able 
to insure again, so they were job trapped in their jobs. The 
fallback was to go to the State hospitals and be charity cases 
in State hospitals.
    One was from Texas and he said, ``I do not know what you 
guys are like in Rhode Island, but our State hospitals in Texas 
are no picnic for the kids who are there.''
    There is a sea of misery lurking behind the process of 
letting insurers just come in at random. My experience has been 
if you are going to run a health insurance outfit, first of 
all, you need to have a good provider network. You cannot come 
in and just throw insurance around with no provider network. I 
see Ms. McPeak nodding her head. It is crazy. It does not work.
    You have to have an adequate provider network. You have to 
arrange a payment structure which is a really important thing 
in terms of getting the best care at the best price out of that 
provider network.
    You have got to have the requisite I.T. connections so that 
people are sharing data in the way that they should and that 
your health I.T. requirements are robust.
    You have to have quality standards so people know when they 
are meeting your benchmarks for treating diabetes properly, 
treating congestive heart failure properly, and things like 
that.
    If you are going to be a company that does not do any of 
that, frankly, you have no business coming into my State. I do 
not want you in my State if you are a fly by-night operator who 
will not put that basic investment into an adequate provider 
network.
    If you are going to come in and buildup that provider 
network, guess what? It is not a big deal to go to the 
insurance commissioner and file for it.
    This whole argument about how you are going to open this 
all up to competition is completely phony. It is completely 
phony because the real challenge of moving into a State is in 
setting up a proper provider network. If you are not going to 
do that, you are not doing fair business in the State. You are 
coming in to freeload and to cheat people. There is no other 
way around it.
    One of the things that we want to do about this is to, and 
Senator Franken and Senator Brown and I have proposed it, is to 
add a public option. State by State, it actuarially has to be 
sound so you are not laying off onto other places. And add 
discipline to the market under the Ben Franklin Rule that the 
best way to show that a stick is crooked is to put a straight 
stick right down next to it.
    This can be the straight stick. It can be Medicare. It can 
be things that people count on and trust, and it will protect 
this markets against market manipulation by private insurance 
particularly when it gets to be very small levels of 
competition and market manipulation becomes a really feasible 
technique.
    I have run out on my time on those three points, but I 
appreciate the Chairman allowing me to make them.
    The Chairman. Well, you always have good incisive comments. 
We are fortunate to have former State insurance commissioners 
on our panel. Senator Collins was one as well.
    Senator Murray, do you have any concluding remarks?
    Senator Murray. Mr. Chairman, I just want to say, I really 
appreciate what my Democratic colleagues have brought forward 
and the consequences, the real consequences of either tinkering 
or moving on without really thinking about what we are doing. 
What we are seeing is the reality that Republicans, despite 
your words, are rushing to repeal without replace under a 
budget reconciliation process that is rolling downhill at this 
point in my understanding.
    Even as disconcerting a President who is actually creating 
Trumpcare by sabotage by putting out rules and regulations that 
have real impacts on the uncertainty that many of our witnesses 
have talked about and its impact on the system today.
    I hope that our colleagues on the other side who come with 
real intention to help make things better stop the rush to 
repeal. And start really thinking about some of the 
consequences and encourage the President to do the same.
    With that, Mr. Chairman, I do want to submit for the record 
some testimony of two small business owners from Kentucky and 
Pennsylvania, and a physician who participated with us in a 
press conference this morning about the real impacts of where 
they see this going right now.
    Thank you.
    [The information referred to may be found in Additional 
Material.]
    The Chairman. Thank you, Senator Murray.
    Senator Whitehouse. I forgot to ask unanimous consent to 
put the letter from our Health Insurance Commissioner and the 
letter from our Governor into the record, if those could be 
added to the record.
    [The information referred to may be found in Additional 
Material.]
    The Chairman. They certainly will be.
    Senator Whitehouse. Thank you.
    The Chairman. Let me thank the witnesses. This has been 
very helpful. We would like to have your further suggestions.
    I said at the beginning that I hope--maybe I would have 
been better entitling the ``Obamacare Emergency,'' I could 
have--because that seems to have roused my Democratic 
colleagues--what I really meant was ``The Individual Market: 
Next Steps.''
    Senator Franken. Oh, much better.
    The Chairman. Is that better?
    [Laughter.]
    That brings it down just a bit.
    What I was trying to do in the environment in which we have 
is to get us in the position, we are perfectly capable of 
doing, of addressing a real problem and doing it together. The 
witnesses were a big help in that today, everyone, all four, 
all of you.
    Governor, thank you for your perspective, from my respect, 
of what a Governor brings to the table. And to the others, to 
have you come with a lot of background, Ms. Trautwein, in the 
provider area and those who are in the midst of writing 
healthcare plans all the time. Ms. Tavenner in the Obama 
administration and Governor Kaine's administration, and Ms. 
McPeak, you have done a terrific job in Tennessee.
    I think our real issue still is next steps. I do not think 
the Senators did as well as the witnesses today in moving 
toward moving together. But even if we move 10 percent in that 
direction that is a good step forward.
    From my point of view, just so we do not characterize the 
Republican position wrongly. President Trump has said, and I 
think very helpfully, that repeal and replacement of Obamacare 
should be done simultaneously. To me that means you have to 
know what you are going to replace it with before you have an 
effective repeal. I do not see how you do it any other way. 
That is what most of the discussion is today.
    I have tried to just say that we can deal with Medicaid in 
a discussion with the Governors and we want to make 
improvements in it. We can deal with the employer market to the 
extent we need to. But the real issue for the moment is in the 
individual market, which we are told we can address separately 
and needs addressing.
    I think of it as a collapsing bridge. In our State, Ms. 
McPeak said, it is like our market in the individual market. 
Now it is just the 4 to 6 percent that we are talking about is 
very near collapse. What do you do about a collapsing bridge? 
You do not go to the edge of the bridge and argue about whose 
fault it was that it is in disrepair.
    You send in a rescue team and you go to work to repair it 
so nobody else is hurt by it. You start to build a new bridge 
and only when that new bridge is complete and people can drive 
safely across it, you close the old bridge.
    In my view, the way you deal with the individual market is 
to address it carefully. Of course, we need to know what 
happened in the past, but we are more interested in the future 
and identify what needs to be done to give people real 
affordable choices of insurance and build that new bridge. When 
it is completed, we can close the old bridge. But in the 
meantime, we repair it.
    No one is talking about repealing anything until there is a 
concrete, practical alternative to offer Americans in its 
place. We can do that with the individual market while having 
separate discussions about Medicaid with the Governors and 
separate discussions about the employer market, the extent to 
which it needs to be changed. And again, we are not even 
talking about dealing with Medicare. So that is what I am 
talking about and that is what I hope we can do.
    The problem we have is that in the individual market in 
some States, really many States because one-third of the 
counties in the country this year, people only have one choice 
to buy their insurance, is leaving people in a condition of 
having a bus ticket with no bus running through town.
    What we are being told is if we do not act by March or 
April that in many States, even if you have a subsidy through 
the Affordable Care Act, there will not be an insurance company 
there to sell you insurance. We should not let that happen.
    Maybe the title of the next roundtable or hearing will be, 
``Individual Market: Next Steps,'' and maybe we can, as 
Senators, do as well as the witnesses have done today in 
helping us think about those steps. If you have any followup 
comments you would like to make, we would all welcome them.
    The hearing record will remain open for 10 days. Members 
may submit additional information for the record within that 
time if they would like.
    Thank you for being here. The committee will stand 
adjourned.
    [Additional Material follows.]

                          ADDITIONAL MATERIAL

 Prepared Statement of Amy Shir, Patient and Consultant, Louisville, KY
    Hello. My name is Amy Shir, I'm from Louisville, KY, and I'm a 
consultant who goes across the country delivering solutions to fight 
poverty. Specifically, I work in financial empowerment, and I've seen 
the devastation that medical bankruptcies cause for families.
    I am a mother of two teenagers in public schools and I'm self-
employed, as is my husband.
    I was diagnosed with Crohn's Disease when I was 22 years old. I 
take medicines that would cost thousands of dollars each month if I 
didn't have health insurance.
    This disease is also considered a pre-existing condition, which may 
prevent me from accessing health care in the future unless concerned 
citizens make their voices heard and stop repeal of the Affordable Care 
Act.
    When the long-overdue Affordable Care Act was passed, my family's 
health insurance premiums dropped more than a third and included much 
better benefits thanks to a plan we found on Kynect--Kentucky's State-
based exchange. This was an enormous improvement over what we had 
before the Affordable Care Act, when we were basically on our own 
trying to find an insurance company to sell us a policy.
    Our State and Federal Government officials talk about helping ``the 
little guy''--the small business person and entrepreneur--yet in 
reality, they're creating an environment where only employees of large 
companies will have access to affordable health care, especially the 
large numbers of people like me with financially ruinous pre-existing 
conditions like Crohn's Disease, diabetes, cancer or heart disease. And 
in 2015, there were 57 million small business employees, comprising 48 
percent of all U.S. employees. We pay billions in taxes each and every 
year and deserve affordable health care just as much as employees of 
large corporations.
    We must unite and send a strong message to our elected officials 
that affordable health care makes Americans great and productive.
    Consumers should insist that the Affordable Care Act not be 
weakened or destroyed. If Congress truly wants to prioritize the needs 
of everyday Americans, they should focus on guaranteeing comprehensive, 
affordable health care to every American, like every other wealthy 
nation already does. Americans deserve health care every bit as much as 
people in other countries.
    I'm here today because my health and my family's health are in 
serious jeopardy with the reckless talk of repealing the Affordable 
Care Act. To truly keep America great, Congress must guarantee 
universal, affordable health care for all.
  Prepared Statement of Andrea Deutsch, Owner, Spot's--The Place for 
                           Paws, Narberth, PA
    Dear Chairman Alexander, Ranking Member Murray and members of the 
committee, my name is Andrea Deutsch, and I own Spot's--The Place for 
Paws in Narberth, PA. I am also affiliated with Small Business 
Majority, a nonprofit advocacy group that works on behalf of America's 
entrepreneurs. I respectfully submit these remarks so that you may 
understand why the Affordable Care Act (ACA) is essential to small 
employers like me.
    At the age of 15 months I was diagnosed as a Type 1 diabetic. 
Today, I need four insulin shots and multiple blood tests daily just to 
stay alive, which is why I must have health insurance.
    Prior to the implementation of the ACA, I was repeatedly denied 
coverage due to my pre-existing condition. The only reason I had any 
insurance was thanks to being grandfathered into a healthcare plan from 
a previous job, however, that plan cost me over $1,200 per month, with 
regular monthly increases. Paying for that coverage made it extremely 
difficult for me to put money back into my business.
    After the ACA was enacted and I could no longer be discriminated 
against because of my pre-existing condition, my insurance rates 
dropped by almost two-thirds. The coverage I received was of the same 
quality as before, if not better, and the money I saved was used to 
grow my business.
    If the ACA is repealed, and insurers are allowed to once again 
discriminate against those with pre-existing health issues, I will lose 
my insurance, and I will be forced to close my business and find work 
with an employer that can cover me under a group plan. I expect this 
will happen to many self-employed business owners across the country.
    But the ACA isn't just about helping me or small business owners of 
my generation. If insurers are allowed to discriminate against anyone 
with a pre-existing condition, young people who are diagnosed with a 
chronic health problem will be forever barred from creating their own 
business or working for themselves as adults.
    I ask members of Congress to make sound policy decisions that will 
protect the health of their constituents as well as the health of small 
business owners like me. Small businesses create many of America's 
jobs, which is why protecting entrepreneurs protects our economy.
    Thank you for the opportunity to contribute these remarks.
                                 ______
                                 
  State of Rhode Island and Providence Plantations,
                                 Providence, RI 02903-1196,
                                                   January 6, 2017.
Hon. Kevin McCarthy, Majority Leader,
U.S. House of Representatives,
H-107, U.S. Capitol Building,
Washington, DC. 20515

    Dear Leader McCarthy: The Affordable Care Act (ACA) is working in 
Rhode Island. Since 2011, when Rhode Island began the work of ACA 
implementation, our uninsured population has dropped from nearly 12 
percent to under 4.5 percent, one of the lowest rates in the country. 
Nearly 110,000 Rhode Islanders now have access to affordable, life-
saving care through the Medicaid expansion or our State health 
insurance exchange.
    By fully leveraging the flexibility and resources available to us 
under the ACA, Rhode Island has developed a more competitive 
environment for health insurance and positioned itself to make the 
health care system more efficient and affordable. We have been 
successfully controlling Medicaid costs without reducing benefits or 
eligibility. Unlike some States which have seen dramatic premium growth 
on the exchange, we have actually seen exchange premiums decrease in 2 
out of the last 3 years. In fact, some consumers are seeing a decrease 
of as much as 5 percent as they compare plans and enroll for 2017. Our 
aggressive rate review process, strengthened by ACA funding, has saved 
consumers nearly $220 million since 2012.
    Our progress toward full insurance has enabled Rhode Island to set 
its sights on a full-scale health system transformation that would not 
have been possible prior to the ACA. We have been working to modernize 
our payment and delivery systems by focusing on the value, not volume, 
of care and services delivered to Rhode Islanders. There remains a lot 
of work to do, and the ACA is not perfect. It is clear, however, that 
these reforms could not be successful without the framework provided by 
the ACA.
    Although the ACA has been successful in Rhode Island, it is clear 
that it could be improved. I would be open to discussing modifications 
to the law. However, I would urge that you and your colleagues grant 
the utmost priority to the following principles as you consider any 
changes to the ACA:

     Maintain the existing coverage gains States have realized 
under the ACA. We cannot allow the newly covered to lose access to 
care.
     Avoid transferring costs to States. Any such shifts would 
be unaffordable and unworkable for the States. Likewise, we must avoid 
increasing the burden of uncompensated care for our hospitals.
     Preserve the stability of the health insurance market. Any 
destabilizing changes to the financing structure or market structure 
could result in rate shock and insurer flight from the individual 
market.
     Continue to allow States the freedom to experiment and 
adopt reforms which are appropriate to their environment. In Rhode 
Island, the ACA model has proven successful, and we must be given the 
discretion to retain the pieces which work in Rhode Island.

    Finally, I urge you to retain the critical public health 
investments included in the ACA. Federal support for public health and 
prevention infrastructure has been critical to improving the health of 
our most vulnerable populations and reducing rates of obesity, 
diabetes, heart disease, stroke, tobacco use, and other conditions. 
Dollars spent on prevention not only improve health, but they also help 
reduce utilization of more expensive forms of care.
    Thank you for inviting me to provide you with feedback as you 
consider the value of the ACA and the progress that has been made over 
the past several years. I welcome the opportunity to discuss any of 
these matters further with you and your colleagues.

            Sincerely,
                                          Gina M. Raimondo,
                                                          Governor.

                     Health Insurance Commissioner,
                                     State of Rhode Island,
                                                  January 16, 2017.
Hon. Lamar Alexander, Chairman,
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC. 20510-6300.

    Dear Chairman Alexander: Thank you for the opportunity to provide 
input on potential congressional policy changes related to the 
Affordable Care Act (ACA). The ACA has worked in Rhode Island and we 
have a remarkable story to tell. As Rhode Island's Health Insurance 
Commissioner, I am, indeed, on the front lines of ACA implementation in 
our State. I lead Rhode Island's Office of the Health Insurance 
Commissioner (OHIC). Affordability and consumer protection are my 
agency's top priorities. My agency conducts comprehensive reviews of 
insurance premiums and plan designs and oversees the ACA's valuable 
consumer protection provisions. ACA funding built our comprehensive 
rate review program which has saved Rhode Island consumers and 
businesses nearly $220 million since 2012.
    As I said, Rhode Island has a remarkable story to tell. Rhode 
Island has enjoyed market stability and has avoided dramatic increases 
in premiums seen in other States. Over the last 3 years premium 
increases in the individual and small group markets have been 
relatively modest. For plan year 2017, average premium changes in the 
individual market will range from a 5.9 percent decrease to a 5.9 
percent increase, based on issuer. In the small group market, average 
premiums changes in 2017 will range from a decrease of 3.1 percent to 
an increase of 3.6 percent, based on issuer. Despite these encouraging 
trends we still have much work to do to improve affordability.
    The ACA has lead nearly 110,000 Rhode Islanders to gain access to 
health insurance through our State-based exchange (HealthSource RI) and 
Medicaid expansion. In fact, between 2013 and 2014, the size of our 
individual market more than doubled. The low-income, and those without 
access to employer-sponsored insurance, are among our most vulnerable 
citizens when it comes to accessing health insurance. For these 
citizens, who live on tight family budgets in a region hard hit by 
manufacturing losses in recent decades, health savings accounts and 
age-adjusted tax credits will likely not provide enough financial 
support to purchase health insurance, especially for our citizens in 
low-income households. Every State is grappling with the same complex 
problem: that is, how do we make health insurance more affordable and 
increase the value of our health care dollar? The ACA is a key 
ingredient to our State's solution and we ask that the law be kept 
intact.
    Health insurance is expensive because health care is expensive. The 
primary driver of health insurance premiums is the cost of medical 
care. A brief look at medical loss ratios in our State shows that, on 
average, 85 cents of every premium dollar funds the cost of medical 
care. The answer is not to make health insurance coverage less 
comprehensive by weakening the Essential Health Benefits covered or to 
throw people off the insurance rolls altogether, but to transform the 
health care delivery system and reconfigure payment methodologies to 
encourage more efficient, higher quality health care. We can't truly 
transform our health care system unless everyone has access to 
insurance, providers are being compensated for the care they deliver, 
and we have predictability in Federal health care policy.
    As I stated, Rhode Island is working on a solution to the problem 
of high health care costs. Our solution, and I believe that of every 
other State, requires a strong Federal-State partnership. Our State 
Medicaid program is leveraging authority and Federal financial support 
to transform care for Medicaid beneficiaries to save money without 
cutting eligibility and benefits. We are aligning Medicaid and 
commercial insurance payment policies with those endorsed by the 
bipartisan Medicare Access and CHIP Reauthorization Act of 2015. We are 
empowering primary care providers to deliver patient-centered team-
based care through the patient-centered medical home. Our leading 
health systems and provider groups are organizing into accountable care 
organizations to manage the cost and quality of health care for their 
patients. These are community resources that serve patients across all 
payers. By working collaboratively with providers to improve care for 
our State Medicaid population and commercially insured population, we 
can improve care for the Medicare population. This saves our State and 
the Federal Government scarce taxpayer dollars to support 
infrastructure, education, housing, and other investments.
    In response to the question posed regarding the 1332 State 
Innovation Waiver, the rigidity of the regulations as written posed 
administrative hurdles for States to be able to successfully utilize it 
to make improvements to health coverage at the State level. However, 
with added flexibility, particularly around the demonstration of impact 
to Federal deficit, the 1332 waiver could prove to be a valuable tool 
to States across the country looking to lead and innovate.
    Repeal of the ACA would harm our system transformation efforts and 
stall our momentum to make health care, and thereby health insurance, 
more affordable. Here are my specific concerns:

     Loss of coverage: For privately insured individual market 
consumers, the withdrawal of Cost-Sharing Reduction subsidies and 
Advance Premium Tax Credits would drive up consumer premiums and out-
of-pocket costs. At the same time, withdrawal of Federal funds for 
Medicaid expansion would leave our most socially and economically 
vulnerable residents without coverage and access to life-saving care.
     Destabilized Risk Pools: Healthier members of the pool may 
choose to drop insurance coverage with no individual mandate, thereby 
leading to significant premium hikes for non-group consumers who 
remain. Keeping healthy people insured is the best way to protect the 
health of risk pools.
     Economic losses: The health care sector is a core 
component of Rhode Island's economy, contributing over $6 billion to 
our gross State product and employing thousands of Rhode Islanders. ACA 
repeal would increase the burden of uncompensated care and undermine 
the vitality of our local health economy.
     Economic uncertainty: Uncertainty regarding Federal law 
may impel insurers to withdraw from the market, thus reducing choice 
and competition. Fiscal uncertainly around where the burden of 
uncompensated care will land may lead provider organizations to halt 
investments that are geared to creating a more efficient, patient-
centered health care system.

    We are on the cusp of achieving unprecedented improvements in the 
quality and affordability of our State's health care system. I 
recommend that any policy changes to the ACA keep the existing 
financing structure intact, maintain the coverage gains of recent 
years, and preserve vital consumer protections to ensure financial 
stability and access to fair coverage for Rhode Island's families. I 
would be pleased to discuss any of these issues with you and your 
colleagues in the Senate.

            Regards,
                                 Kathleen C. Hittner, M.D.,
                                     Health Insurance Commissioner.
                                 ______
                                 
     Response by Marilyn Tavenner to Questions of Senator Isakson, 
                   Senator Franken and Senator Bennet
                            senator isakson
    Question 1. If the overall health of the individual market is 
dependent on the number and health of the people within it, how can we 
get employer-sponsored coverage in the market?
    Answer 1. We believe continuous coverage incentives, as outlined in 
our written testimony, are needed to achieve a balanced mix of both 
young and healthy individuals along with older and less healthy 
individuals enrolled in the individual market. This can be achieved 
without combining the markets for employer-sponsored coverage and 
individual coverage.

    Question 2. Should employers be allowed to give their employees a 
subsidy that enables them to buy plans on the individual market?
    Answer 2. We support the system through which approximately 150 
million Americans currently receive employer-sponsored health 
insurance. We believe Congress should proceed cautiously when 
considering proposals that would create incentives for employers to 
stop offering coverage or steer their employees into the individual 
market. We are looking at the impact of a new 21st Century Cures 
provision that will permit this for certain small employers.
                            senator franken
    Question 1. Some members have proposed to reinstate high-risk 
pools, but have authorized limited amounts of funding to support them. 
What will happen to insurers, States, and patients if State high-risk 
pools are reinstated but not sufficiently funded?
    Answer 1. We believe a transitional risk pool program--funded by 
the Federal Government with a State option to design and administer the 
program within Federal guardrails--could play a useful role in 
offsetting some of the costs of serving patients who have the most 
complex health conditions and need the most care. This approach, if 
adequately funded, would help promote market stability and place 
downward pressure on premiums. However, recognizing that historically 
there has been a problem with inadequate funding of State high-risk 
pools, we believe States should be given the opportunity to implement 
approaches that work best for their State residents--such as the 
reinsurance program approach adopted in Alaska and other States.

    Question 2. Some Republicans are proposing a requirement of 
continuous coverage. Could you explain whether it would be better or 
worse for Americans in terms of making sure as many people as possible 
have affordable health insurance coverage than the individual mandate 
in the current system?
    Answer 2. We strongly support an approach that brings everyone into 
the system. Past State experience in the 1990s--in States such as 
Washington and Kentucky--yielded important lessons about the unintended 
consequences of health reforms that create incentives for healthy 
people to forego the purchase of coverage. Absent an individual mandate 
to purchase coverage, it is critical that Congress implement effective 
and well-designed continuous coverage measures, along with additional 
stabilization solutions, to minimize the impact of eliminating the 
individual mandate. To effectively replace the individual mandate, a 
continuous coverage framework must incentivize consumers to maintain 
coverage, minimize movement in and out of the marketplace and not 
enroll only when they need care, and begin with a clear set of 
requirements, which must be clearly communicated to consumers.
                             senator bennet
    Question 1. The Affordable Care Act (ACA) is not perfect but in 
Colorado there have been over 600,000 people covered including more 
than 27,000 children. Whether it's the President's Executive order or 
the lack of consensus on a comparable alternative to the ACA, there's a 
staggering level of uncertainty right now--for consumers, employers, 
providers, and health plans.
    Health plans are making decisions for 2018 right now, with fast 
approaching deadlines for rate filings. How does this uncertainty 
affect them?
    Answer 1. Health plans have a strong commitment to their 
communities and the millions of members they serve each day. But, every 
market is different, from the State regulatory environment and 
effectiveness of enrollment efforts, to the impact of provider 
consolidation and underlying health care costs. These are all 
considerations that differ from one company to the next, one market to 
the next.
    First and foremost, we need to ensure that consumers have quality 
coverage options. While the individual market has been challenged, our 
commitment is to work with policymakers to find solutions that deliver 
immediate stability and long-term improvement. Without immediate 
action, costs will continue to increase, choices will continue to 
decrease, and coverage will not be there for millions. But strong 
signals of certainty in advance of the health plan filing deadlines for 
2018 can help stabilize the market, avoiding even higher costs and 
fewer choices. As we approach the filing deadlines for 2018 coverage, 
it is critically important for insurers, as they make decisions about 
the pricing of their products, to have timely information about 
forthcoming policy changes that will take effect next year. The short-
term solutions and long-term principles outlined in our written 
testimony will allow us to build a strong, stable individual market 
that serves our citizens well.

    Question 2. As you know, the 10 Essential Health Benefits under the 
Affordable Care Act include outpatient care, emergency services, 
hospitalization, maternity and newborn care, prescription drugs, rehab 
services, lab services, preventative care such as mammograms, and 
pediatric services like routine dental exams for children.
    Without a clear replacement for the ACA, how difficult will it be 
for insurers to design 2018 policies if they are unsure whether the 
Essential Health Benefits will be in effect?
    Answer 2. Insurers are currently building individual products for 
the 2018 benefit year and will continue to operate under the laws and 
rules that currently remain in place--which include requirements for 
insurers to provide comprehensive coverage under the ``essential health 
benefit'' standards. At the same time, we believe improvements to the 
law and rules are critical to ensure that people get covered, stay 
covered, and get the care and services they need. It also is important 
to ensure that any changes affecting 2018 benefits and coverage are 
finalized before insurers submit their product filings and premiums for 
next year. While the individual insurance market has been challenged, 
our commitment is to find solutions that deliver immediate stability 
and long-term improvement.

    Question 3. Do you see any need for changes to the Essential Health 
Benefits?
    Answer 3. We believe that the implementation of EHB requirements 
has generally been successful in striking an appropriate balance 
between comprehensive coverage, affordability and State flexibility and 
do not see the need for major changes at least in the short-term. 
Longer-term, we believe States, as the primary health insurance 
regulators, should have more flexibility to develop affordable and 
lower premium individual market plans for their markets. Policymakers 
should consider additional State flexibility around coverage 
requirements, State benchmarks, and plan designs that promote 
innovation in care delivery, such as value-based insurance designs. 
However, State flexibility should not come at the expense of consumers 
and their coverage.
     Response by Steve Beshear to Questions of Senator Franken and 
                             Senator Bennet
                            senator franken
    Question 1. You were in Kentucky when the State phased out its high 
risk pool and enrolled individuals in the individual market. How did 
this help people with pre-existing conditions?
    Answer 1. Prior to implementation of the Affordable Care Act 
(``ACA''), Kentucky maintained a high-risk pool known as ``Kentucky 
Access'' to facilitate access to insurance for individuals who found it 
difficult to obtain coverage in the private market due to high-cost 
medical conditions. Created in 2000 by Kentucky General Assembly, the 
program was administered under the Kentucky Department of Insurance 
from 2001-14. To participate in Kentucky Access, individuals were 
required to meet one of two conditions:

    1. Being ``medically uninsurable,'' defined as (i) rejection for 
coverage from at least two insurance companies based on a pre-existing 
medical condition or (ii) quoted premiums more expensive than Kentucky 
Access premiums. This eligibility group made up the vast majority of 
members.
    2. Alternatively, loss of coverage due to termination of employment 
(voluntary or involuntary), would confer eligibility due to Health 
Insurance Portability & Accountability Act (HIPAA) of 1996.\1\
---------------------------------------------------------------------------
    \1\ See, Dustin Pugel, Kentucky's Experience with High Risk Pool 
Shows Dangers of ACA Repeal, Kentucky Center for Economic Policy 
(February 17, 2017).

    As in many States, the high-risk pool was extremely limited in its 
ability to expand coverage. In addition to sizable premium payments 
from members, Kentucky Access was subsidized through a combination of 
tobacco settlement money and an assessment on all insurance plans sold 
within the State (see Figure 1), but even so, the program covered only 
about 4,000 individuals at a time and only approximately 18,000 total 
over its 13-year life span. Moreover, premiums were too expensive for 
all but upper income families. For example, a 2014 article reported 
that ``the average premium for individuals was $680 per month, with the 
most popular plan with a pharmacy rider having a monthly premium of 
$1,118 for a 64-year-old male.'' \2\
---------------------------------------------------------------------------
    \2\ Joe Sonka, ``Premium savings: Kynect Premiums for Private 
Coverage Slashed by 74 percent with Federal subsidies,'' LEO Weekly 
(July 9, 2014).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Not only were the plans prohibitively expensive for most 
Kentuckians who needed them, the coverage was also markedly inferior to 
coverage under the Affordable Care Act. As the Kentucky Center for 
Economic Policy recently documented, Kentucky Access plans failed to 
cover treatment for the conditions that made its members unable to 
obtain private insurance coverage (the entire reason they sought 
coverage via Kentucky Access) until they had been enrolled for a full 
year. Thus, for example, a member with cancer would receive no coverage 
for that cancer for 12 months after initial enrollment in Kentucky 
Access, leaving members faced with both expensive premiums and 
potentially astronomical out-of-pocket health care expenses (or, more 
likely, the possibility of medical bankruptcy). Moreover, there was a 
$2 million lifetime limit on coverage, so if a member with a serious 
health condition accrued more than $2 million in health care expenses, 
the coverage would simply terminate, leaving members back where they 
started--faced with impossible choices.
    The Affordable Care Act was an infinitely better deal for 
Kentuckians than the high-risk pool. First, there was no longer a need 
for individuals with pre-existing conditions to be placed into a 
separate risk pool, because insurers were no longer permitted to deny 
coverage or to exclude coverage for pre-existing conditions for any 
period of time. Nor were they permitted to charge people higher 
premiums simply because of those pre-existing conditions, and the ACA 
abolished the annual and lifetime limits that capped coverage just when 
people needed it most. In addition, the existence of Federal subsidies 
to support the purchase of qualified health plans (QHPs) meant that 
premiums were capped for individuals between 100-400 percent of the 
Federal Poverty Level, and this group made up the vast majority of 
Kentuckians who purchased private insurance coverage under the ACA. And 
of course, the cost to Kentucky of insuring these individuals was 
considerably less--where Kentucky had to subsidize the high-risk pool 
with millions of State dollars, the Affordable Care Act was funded 
overwhelmingly by Federal funds, and the small amount of State funds 
required to support the Medicaid expansion was projected to create a 
net positive State budget impact of approximately $900 million through 
2021. The proof of the success of the ACA relative to Kentucky Access 
is readily demonstrated by the enrollment figures--where Kentucky 
Access served only a tiny fraction of uninsured Kentuckians, the 
Affordable Care Act allowed Kentucky to enroll more than half a million 
people in insurance through Medicaid expansion and the purchase of QHPs 
on kynect, Kentucky's State-based health benefit exchange. Beyond that, 
every one of the estimated 1.9 million Kentuckians with pre-existing 
conditions\3\ is protected under the Affordable Care Act.
---------------------------------------------------------------------------
    \3\ Dustin Pugel, Kentucky's Experience with High Risk Pool Shows 
Dangers of ACA Repeal, Kentucky Center for Economic Policy (February 
17, 2017).
---------------------------------------------------------------------------
    Simply put, the ACA eliminated the need for Kentucky Access. Thus, 
when the ACA became fully effective in the individual market, the 
program was discontinued and the staff at kynect assisted program 
participants with finding new plans on the exchange. In short, in every 
respect--premiums, out-of-pocket costs, scope of coverage, number of 
individuals protected--individuals with pre-existing conditions are 
better off under the Affordable Care Act than under the high-risk pool.

    Question 2. Do you think it's responsible that President Trump and 
other Republicans claim that selling insurance across State lines is an 
effective tool for lowering health care costs--an idea that has been 
tested in States like Georgia and has failed to produce the intended 
result?
    Answer 2. It is speculative at best to suggest that the sale of 
insurance across State lines will lead to lower premiums for consumers. 
As you have correctly observed, the idea has been tested in Georgia, 
which in 2011 passed a bill allowing insurers to sell any policies in 
Georgia that they offer in other States. The expected benefits were to 
derive from sale of skimpier plans that did not meet Georgia's 
requirements for insurers (e.g., required cancer screenings), and from 
increased price competition among insurers. However, as of December 
2016, not a single insurer has chosen to offer out-of-State plans in 
Georgia. The experience of the very few additional States that have 
passed similar laws has been the same--no discernible impact on cost.
    Moreover, it is important to note that the sale of insurance across 
State lines actually undermines State authority to regulate insurance. 
While the Affordable Care Act established a minimum ``floor'' of 
required benefits for plans (except in the case of self-insured 
employers, who generally offer robust benefit packages already), it 
retained the traditional State authority to mandate additional benefits 
and otherwise regulate insurers. Interstate sales would virtually 
eliminate that authority, as the National Association of Insurance 
Commissioners has explained:

          In reality, interstate sales of insurance will allow insurers 
        to choose their regulator, the very dynamic that led to the 
        financial collapse that has left millions of Americans without 
        jobs. It would also make insurance less available, make 
        insurers less accountable, and prevent regulators from 
        assisting consumers in their States.\4\
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    \4\ Nat'l Ass'n of Ins. Comm'rs, Interstate Health Insurance Sales: 
Myth vs. Reality.

    In short, there is simply no evidence that interstate insurance 
sales will help lower costs, and plenty of evidence that insurance 
markets will be destabilized through the evisceration of State 
regulatory authority.
                             senator bennet
    Question 1. Under your leadership in Kentucky, you moved to expand 
Medicaid, which resulted in coverage for thousands in your State. In 
your testimony, you highlighted that Medicaid enrollees had better 
access to care and hospitals in Kentucky saw a decrease in 
uncompensated care. We had similar results in Colorado. Over 130,000 
Coloradans gained access to coverage through Medicaid Expansion. When 
we look at how this affected hospitals, there was a 30 percent drop in 
uncompensated care. Some of these hospitals, especially those in rural 
areas, were at risk of closure before the Affordable Care Act.
    Based on your experience, what factors should we keep in mind to 
ensure that States have the resources they need and to build on these 
gains in coverage?
    Answer 1. From a Governor's perspective, one of the most 
significant aspects of Medicaid expansion is the economic benefit to 
States that chose to expand their programs under the ACA. In Kentucky, 
approximately 400,000 individuals were able to access health insurance 
via Medicaid expansion, which had considerable economic benefits to the 
State as a whole, particularly for financially vulnerable rural 
hospitals.
    As Governor, my decision to expand Medicaid rested not only on the 
morality of providing much-needed health care to the most vulnerable 
Kentuckians, but also on the economic sustainability of the program. So 
prior to committing to Medicaid expansion, I engaged 
PricewaterhouseCoopers and the University of Louisville's Urban Studies 
Institute to conduct an economic analysis of the program. The results 
were compelling. The study concluded that expanding Medicaid would 
inject $15.6 billion into Kentucky's economy over 8 years, create 
nearly 17,000 jobs, shield Kentucky hospitals from the impact of 
scheduled reductions in funding for indigent care, and create an 
overall positive budget impact of $802 million over 8 years. With that 
evidence, it became clear that Kentucky couldn't afford not to expand 
Medicaid.
    A year into the Medicaid expansion, I retained Deloitte Consulting 
and the University of Louisville Urban Studies Institute to update 
prior projections on the economic impact of Medicaid expansion using 
the actual performance data from the first full year of implementation. 
That study revealed that the economic benefits of Medicaid expansion 
were even more than had originally been anticipated, concluding that 
Medicaid expansion had already generated 12,000 new jobs and $1.3 
billion in new revenues for providers (growing to almost $3 billion in 
the first 18 months of expansion). In addition, the study found that 
Medicaid expansion was projected to have a $300 million positive impact 
on the State's 2016-18 biennial budget. And by 2021, Kentucky would see 
the creation of 40,000 new jobs, as well as a nearly $900 million 
positive State budget impact and a $30 billion overall economic impact. 
These projections included the State Medicaid funding match required 
beginning in 2017.
    The economic benefits of expansion are not unique to Kentucky--as 
the Robert Wood Johnson Foundation recently confirmed, considerable 
economic benefits of Medicaid expansion exist in every State that has 
expanded. In April 2016, RWJF found that the 30 States, plus 
Washington, DC, that expanded Medicaid in 2014 reported general fund 
savings and new revenue, along with both higher rates of health sector 
job growth and slower growth in State Medicaid spending relative to 
non-expansion States.\5\
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    \5\ State Health Reform Assistance Network, States Expanding 
Medicaid See Significant Budget Savings and Revenue Gains, (March 
2016).
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    The impact of expansion on rural hospitals deserves particular 
attention. As you noted, hospitals saw a considerable decline in 
uncompensated care, resulting from the availability of a payer source 
(Medicaid or private insurance) for the previously uninsured. In 
Kentucky, independent research commissioned by the Foundation for a 
Healthy Kentucky documented a drop of 78.5 percent in uncompensated 
care (inpatient and outpatient charity and self-pay from rural and 
urban hospitals, 2013-15) over the first 2 years of Medicaid expansion. 
This evidence is consistent with data from other States--for example, 
the RWJF report referenced above found that rural hospitals in 
expansion States are significantly more financially stable than those 
in States that have not expanded--as of September 2015, the percentage 
of rural hospitals at risk of closure was about twice as high in non-
expansion States compared to expansion States (based on measures of 
financial strength, quality and outcomes, inpatient/outpatient share, 
and population risk).\6\
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    \6\ State Health Reform Assistance Network, States Expanding 
Medicaid See Significant Budget Savings and Revenue Gains, (March 2016) 
(citing Vantage Health Analytics. ``Vulnerability to Value: Rural 
Relevance under Healthcare Reform.'' (2015)).
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    In addition to the economic benefits from Medicaid expansion, 
Kentuckians have seen markedly positive health impacts since 
implementation began. For example, the Foundation for a Healthy 
Kentucky has documented a meaningful increase in preventive care and 
substance abuse treatment utilization by Medicaid enrollees. The 
increase in substance abuse treatment is critically important in 
Kentucky, which has suffered more than most States from the opioid 
epidemic. And although improved health outcomes typically lag behind 
health policy changes (often years behind), a recent study found that 
low-income adults in Kentucky and Arkansas received more primary and 
preventive care, made fewer emergency room visits, and reported higher 
quality care and improved health compared with low-income adults in 
Texas, which did not expand Medicaid.\7\
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    \7\ Sommers BD, Blendon RJ, Orav EJ, Epstein AM. Changes in 
Utilization and Health Among Low-Income Adults After Medicaid Expansion 
or Expanded Private Insurance. JAMA Intern Med. 2016;176 (10):1501-09.
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    Going forward, if States want to retain the benefits of the ACA 
they should be extremely wary of many of the so-called ``replacement'' 
proposals on the table. Governors should be skeptical of block grants, 
per capita allotments, or other capitated funding mechanisms for the 
Medicaid program. As a Governor, I certainly would have enjoyed having 
more flexibility to administer Kentucky's Medicaid program. But 
flexibility becomes considerably less useful when accompanied by 
significant funding cuts--without adequate funding, Governors will have 
to use their enhanced ``flexibility'' to make impossible choices of 
which individuals to cut from the program, or which benefits to 
eliminate. And all Medicaid expansion ``replacement'' proposals 
currently under public discussion involve significant cuts in Federal 
funding. In a State like Kentucky, which suffers from poor health on 
virtually every front, reduced Medicaid funding would be a disaster, 
leading to fewer people having coverage, a reduced benefits package, 
and a reversal of the progress we have begun to see.
    Likewise, in the Marketplace, any proposal that results in fewer 
people being covered, or in benefits being reduced, should be rejected. 
Replacing the subsidies with fixed-dollar tax deductions or tax credits 
unrelated to financial need will be an enormous hardship for middle-
income families, many of whom will face an effective tax increase 
because the subsidies they currently receive will be reduced, leaving 
many unable to afford insurance. Relatedly, expanding the use of Health 
Savings Accounts will be meaningless for most American families, who 
lack the discretionary income to fund the accounts. Similarly, 
proposals that would lock individuals out of the market or otherwise 
penalize them for lengthy periods of time for failure to maintain 
continuous coverage are unnecessarily punitive and misunderstand the 
financial realities faced by most Americans. Finally, as discussed 
above, the sale of insurance across State lines will eviscerate the 
ability of States to regulate insurers, creating a race to the bottom 
and destabilizing insurance markets across the country.
    In short, the path forward is not a ``replacement'' plan that 
covers fewer people and provides less robust benefits. Rather, Congress 
should build on the progress to date by continuing and expanding 
measures that already have bipartisan support, such as value-based 
payment initiatives, and seeking solutions that improve the 
affordability of coverage while maintaining the robust consumer 
protections of the ACA. The starting place for discussion must be how 
to make Americans better off, not worse.

    [Whereupon, at 12:20 p.m., the hearing was adjourned.]

                                   [all]