[Senate Hearing 115-238]
[From the U.S. Government Publishing Office]
S. Hrg. 115-238
OBAMACARE EMERGENCY: STABILIZING THE INDIVIDUAL HEALTH INSURANCE MARKET
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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
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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
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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.
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\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.
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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\
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\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.
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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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\5\ State Health Reform Assistance Network, States Expanding
Medicaid See Significant Budget Savings and Revenue Gains, (March
2016).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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)).
---------------------------------------------------------------------------
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]