[Senate Hearing 115-470]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-470

    STABILIZING PREMIUMS AND HELPING INDIVIDUALS IN THE INDIVIDUAL 
        INSURANCE MARKET FOR 2018: STATE INSURANCE COMMISSIONERS

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

                                HEARING

                                OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                                   ON

     EXAMINING STABILIZING PREMIUMS AND HELPING INDIVIDUALS ON THE 
   INDIVIDUAL INSURANCE MARKET FOR 2018, FOCUSING ON STATE INSURANCE 
                             COMMISSIONERS

                               __________

                           SEPTEMBER 6, 2017

                               __________

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                                Pensions
                                
                                
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          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		MARGARET WOOD HASSAN, 
                                         New Hampshire
                                  
                                         
               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                  Evan Schatz, Democrat Staff Director
              John Righter, Democrat Deputy Staff Director

                                  (ii)

  
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                      WEDNESDAY, SEPTEMBER 6, 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
Murkowski, Hon. Lisa, a U.S. Senator from the State of Alaska....     6
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of 
  Pennsylvania...................................................     7
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming..    38
Paul, Hon. Rand, a U.S. Senator from the State of Kentucky.......    41
Franken, Hon. Al, a U.S. Senator from the State of Minnesota.....    43
Collins, Hon. Susan M., a U.S. Senator from the State of Maine...    45
Bennet, Hon. Michael F., a U.S. Senator from the State of 
  Colorado.......................................................    47
Baldwin, Hon. Tammy, a U.S. Senator from the State of Wisconsin..    50
Cassidy, Hon. Bill, M.D., a U.S. Senator from the State of 
  Louisiana......................................................    52
Murphy, Hon. Christopher S., a U.S. Senator from the State of 
  Connecticut....................................................    54
Burr, Hon. Richard, a U.S. Senator from the State of North 
  Carolina.......................................................    56
Hassan, Hon. Margaret Wood, a U.S. Senator from the State of New 
  Hampshire......................................................    58
Kaine, Hon. Tim, a U.S. Senator from the State of Virginia.......    62
Young, Hon. Todd, a U.S. Senator from the State of Indiana.......    65
Roberts, Hon. Pat, a U.S. Senator from the State of Kansas.......    69
Warren, Hon. Elizabeth, a U.S. Senator from the State of 
  Massachusetts..................................................    71
Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode 
  Island.........................................................    73

                               Witnesses

McPeak, Julie, Mix, Commissioner, Tennessee Department of 
  Commerce and Insurance, Nashville, TN..........................     7
    Prepared statement...........................................     9
Kreidler, Mike, O.D., Washington State Insurance Commissioner, 
  Olympia, WA....................................................    13
    Prepared statement...........................................    15
Wing-Heier, Lori K., Director, Alaska Division of Insurance, 
  Anchorage, AK..................................................    19
    Prepared statement...........................................    21
Miller, Teresa, J.D., Insurance Commissioner of Pennsylvania, 
  Harrisburg, PA.................................................    25
    Prepared statement...........................................    27
Doak, John, Commissioner, Oklahoma Department of Insurance, 
  Tulsa, OK......................................................    33
    Prepared statement...........................................    34

                                 (iii)

  
                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.
    September 5, 2017, letter to Hon. Lamar Alexander and Hon. 
      Patty Murray...............................................    80
    September 5, 2017, letter to Hon. Mitch McConnell, Hon. Chuck 
      Schumer, Hon. Paul Ryan, and Hon. Nancy Pelosi.............    81
    September 1, 2017, letter from Mental Health Liaison Group...    82
    August 10, 2017, letter to Hon. Patty Murray.................    84
Response by Mike Kreidler to questions of:
    Senator Alexander............................................    87
    Senator Burr.................................................    87
    Senator Young................................................    87
    Senator Roberts..............................................    88
    Senator Whitehouse...........................................    88
    Senator Franken..............................................    88
    Response by Mike Kreidler to questions of Senator Whitehouse.    89
    Response by Lori Wing-Heier to questions of Senator Alexander    92
    Response by Julie Mix McPeak to questions of Senator 
      Whitehouse.................................................    94
    Response by Miller, Teresa, J.D. to questions of Senator 
      Whitehouse.................................................    95



  

 
    STABILIZING PREMIUMS AND HELPING INDIVIDUALS ON THE INDIVIDUAL 
        INSURANCE MARKET FOR 2018: STATE INSURANCE COMMISSIONERS

                              ----------                              


                     WEDNESDAY, SEPTEMBER, 6, 2017

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:05 a.m. in 
room SH-216, Hart Senate Office Building, Hon. Lamar Alexander, 
chairman of the committee, presiding.
    Present: Senators Alexander, Murray, Enzi, Burr, Isakson, 
Paul, Collins, Cassidy, Young, Roberts, Murkowski, Scott, 
Sanders, 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.
    This morning, we are holding our first hearing on 
stabilizing premiums and ensuring access to insurance in the 
individual health insurance market for 2018.
    We have five State insurance commissioners. Thank you for 
coming from long distances, some of you, to be with us to give 
your testimony on how to enable the 18 million Americans in the 
individual insurance market.
    To give an idea of how many people are interested in this, 
Senator Murray and I invited senators who were not on our 
committee--which about a quarter of the senate is on this 
committee--to come to a coffee with the five commissioners that 
we have just completed for an hour. We had 31 senators there. 
That is a remarkable level of interest.
    Senator Murray and I will each have an opening statement 
and then we will introduce our five witnesses. After their 
testimony, senators will have an opportunity to ask witnesses 
questions and we will do it in 5 minute rounds.
    As I mentioned, this committee includes 23 United States 
senators, nearly one-quarter of the members of the senate. It 
includes senators with the widest divergence of views. It has a 
republican majority of only one.
    Yet, working together during the last 2 years, we have been 
able to agree on big steps on big issues about which we have 
big differences of opinion such as fixing No Child Left Behind, 
which President Obama called a Christmas miracle; 21st Century 
Cures Act, which Senator McConnell, the Majority Leader, said 
was the most important piece of legislation that passed 
Congress last year; the first overhaul of mental health laws in 
a decade; and in early August, after 2 years of work--and I 
want to thank the staff for that 2 years of work especially--we 
passed new agreements to help speed safe drugs and devices into 
medicine cabinets and provide $9 billion in funding for the 
Food and Drug Administration.
    I congratulate Senator Murray and democratic, as well as 
republican, members of the committee for those accomplishments. 
This is the way Americans expect the U.S. Senate to work.
    Those were big steps. This hearing is about taking one 
small step, a small step on a big issue which has been locked 
in partisan stalemate for 7 years, health insurance. It is a 
step Congress needs to take by the end of this month.
    This step is not so small to 18 million Americans--the 
songwriters, the self-employed farmers--those who do not get 
their health insurance from the Government or on the job. These 
18 million buy their health insurance in the individual market, 
and about half of them have zero Government support to help buy 
that insurance.
    Eighteen million is only 6 percent of those who have health 
insurance in America. That is the individual market. Nearly 300 
million Americans have health insurance. Eighteen million buy 
it in the individual market. That is 6 percent of all the 
insured and 9 million of those 18 million have no Government 
help to buy their insurance. They are the ones most hurt by 
higher premiums, and higher co-pays, and deductibles.
    Let us take a hypothetical Tennessean, a 35 year old making 
$48,000 a year in Lynchburg would receive no tax benefit to 
cover her $7,100 per year premiums. She has an estimated take 
home pay of $39,000 after taxes, which means almost a fifth of 
her take home pay is spent on health insurance premiums, and 
this does not include deductibles or co-pays.
    Next year, the Tennessee Department of Insurance says 
premiums are going to go up by an average of 21 to 42 percent. 
That is an increase for her of between $1,500 and $3,000 more 
in premiums next year, and that does not include increases in 
deductibles and co-pays.
    She ought not to have to pay one fifth of her income for 
health insurance.
    Tennessee's Insurance Commissioner, who is here today, has 
described the State's individual market as, ``Very near 
collapse.'' At the end of September last year, Blue Cross, our 
largest insurer, pulled out of the individual market in 
Knoxville, Nashville, and Memphis. Not just for Tennesseans 
with Affordable Care Act subsidies, but for everybody.
    That could happen again at the end of this September if 
Congress does not act. And if it happens again, up to 350,000 
Tennesseans and millions of Americans could literally be left 
with zero options to buy insurance in the individual market.
    Last year, only 4 percent of American counties had one 
insurance company on the exchange. This year 36 percent have 
one insurer on the exchange. For 2018, one-half of the counties 
will have one insurer only on the exchange. In Tennessee, it is 
78 of our 95 counties.
    If we do act, we can limit increases in premiums next year, 
2018. We can continue support for co-pays and deductibles for 
many low-income families. We can make certain that health 
insurance is available in every county and lay the groundwork 
for future premiums decreases.
    I would suggest we do this by taking two actions, although 
there may be others that come from these hearings.
    One, is appropriate cost-sharing payments through the end 
of 2018 to help with co-pays and deductibles for many low-
income Americans.
    Two, amend the Section 1332 Waiver already in the 
Affordable Care Act so States can have more flexibility to 
devise ways to provide coverage with more choices and lower 
costs.
    On the first, cost sharing payments are extra subsidies--or 
discounts, really--for many low-income individuals who receive 
premium subsidies under the law. They help these individuals 
pay for out of pocket costs like co-pays and deductibles, but 
their overall effect is to lower premiums in this individual 
market.
    On the second, the Section 1332 Waivers, as I said, are 
already written into the Affordable Care Act. Under some 
circumstances, they allow a State flexibility from certain 
elements of the law, such as Essential Health Benefits. But 
they do not in any way reduce the patient protections most of 
us support, including protections for those with preexisting 
conditions, and ensuring those under 26 may remain on their 
parents' insurance and have no annual or lifetime limits.
    Right now, 23 States have begun steps to apply for a 
Section 1332 Waiver; 7 States have applied; 2 States, Alaska 
and Hawaii, have received the 1332 Waivers so far.
    To get a result, democrats will have to agree to 
something--more flexibility for States--that some may be 
reluctant to support. Republicans will have to agree to 
something--additional funding through the Affordable Care Act--
that some may be reluctant to support.
    That is called a compromise, a much smaller but similar 
agreement to the compromise that created this U.S. Senate in 
1789. When the Founders created a Senate with two members from 
each State and a House of Representatives based on population; 
that was a compromise.
    This is a compromise that we ought to be able to accept. 
Temporary cost sharing payments were included in both the 
Senate and the House republican bills to repeal and replace 
major parts of the Affordable Care Act. The Section 1332 Waiver 
is already in the Affordable Care Act, it just has not been 
very appealing to States because it is a difficult tool to use. 
We hope to hear more about that from our witnesses today.
    If we were able to take the big steps I mentioned earlier--
fixing No Child Left Behind and passing the 21st Century Cures 
Act--we ought to be able to take this small, limited, 
bipartisan step on health insurance. If we do not, millions of 
Americans will be hurt.
    Timing is a challenge. So I propose that we try to come to 
a consensus by the end of next week when our hearings are 
complete so that Congress can act on what we recommend before 
the end of September. Otherwise, we will not be able to affect 
insurance rates and the availability of insurance for next 
year. That is because the Department of Health and Human 
Services requires insurance companies to submit their final 
rates by September 20, and the Department plans to put those 
rates on healthcare.gov by September 27.
    I believe we can do it here because we are plowing very 
familiar ground. Our goal is a small step and so many Americans 
will be hurt if we fail.
    If we do not do it, it will not be possible for republicans 
to make political hay blaming democrats, or democrats to make 
political hay blaming republicans. The blame will be on every 
one of us, and deservedly so.
    Let me conclude with a word about process. We will have 
four hearings. We are hearing from State insurance 
commissioners today. We are hearing from five State Governors 
tomorrow. We will hear from various experts on State 
flexibility next Tuesday, and a variety of helpful perspectives 
next Thursday, including representatives from doctors, 
hospitals, insurers, patients, and insurance commissioners.
    This is what we call a bipartisan hearing. Most of our 
hearings are. That means that Senator Murray and I have agreed 
on the hearings, on each topic, and on who the witnesses will 
be.
    This committee has a clear jurisdiction over the rules that 
govern the individual insurance market, which is what we are 
discussing today. We have jurisdiction over private insurance, 
over the exchanges created by the Affordable Care Act, and over 
the Cost Sharing Reduction payments.
    The purpose of the hearings is to provide a forum and 
create an environment for reaching a consensus that we can act 
on quickly during the month of September.
    Note that we do have neither jurisdiction over taxes, 
including the Affordable Care Act tax credit subsidy, nor over 
Medicaid nor over Medicare. Those belong to the Finance 
Committee although there are at least nine members of that 
committee on this committee.
    There has been such great interest in this effort that 
senators who are not members of our committee are being invited 
to coffee before each of the four hearings. As I said, 31 
senators came to the one today. Senator Murray and I have 
invited them to do that and to participate in this process.
    My goal is to get a result on a small, bipartisan, and 
balanced stabilization bill. Where it makes sense, we will work 
with other committees and members to get that result.
    Health insurance has been a very partisan topic for a very 
long time, but the bottom line is 18 million Americans need our 
help, and I hope we can stay focused on getting a result.
    Senator Murray.

                  Opening Statement of Senator Murray

    Senator Murray. Thank you very much, Chairman Alexander.
    I do want to start by expressing my appreciation for your 
leadership in holding these hearings. It is refreshing to have 
an opportunity for frank and bipartisan discussions on the 
healthcare system, and is consistent, as you said, with 
longstanding tradition of working across the aisle on this 
committee. Thank you very much.
    I am also very grateful to each of the State insurance 
commissioners who have come a long way to join us today. Your 
perspective is incredibly valuable in this discussion. I am 
looking forward to hearing from each of you.
    I particularly want to acknowledge Commissioner Mike 
Kreidler, who came all the way from Washington State today. 
Good to have you here as well.
    We are beginning these conversations at an important moment 
for patients and families. There is a lot of work that needs to 
be done to undo the damage this Administration has caused 
within the healthcare system because this Administration is 
still trying to create Trumpcare by sabotage.
    Our healthcare system is more stable than President Trump's 
tweets would have you believe, but it is weaker as a direct 
result of some steps that have been taken.
    Unfortunately, the President has undermined outreach and 
consumer assistance efforts, and put forward Executive Orders 
seemingly designed to inject uncertainty into the markets.
    Just last week, this Administration cut funding for 
outreach by 90 percent and funding for consumer assistance by 
over 40 percent. Another pressing example is the threats to 
cutoff payments to reduce coverage costs for low-income people.
    Should these out of pocket cost reductions be discontinued, 
independent analysis suggests that premiums could be an average 
of 20 percent higher next year for the most popular plans on 
the exchanges. There will be even more uncertainty in the 
markets, and patients and families likely will have fewer 
options when they go to pick their plans.
    That is unacceptable and it is avoidable.
    Congress can act right away to confirm once and for all 
that out-of-pocket cost reductions will continue, and we have a 
very narrow window to do that, as the chairman said, before 
insurers finalize their plans for 2018 later this month.
    I am very glad that there are members on both sides of the 
aisle who agree that we do need to take this step, and I 
believe it is critical we work toward a multiyear solution in 
order to provide the kind of certainty that will have the most 
impact on families' premiums and choices in the marketplaces.
    It takes plans months to develop their rates. If we do not 
find a multiyear solution, we are just going to be back in this 
room trying to patch the same problem a few months from now. 
And that is simply not what certainty looks like.
    This kind of discussion around strengthening our healthcare 
system is exactly what democrats have hoped for over the last 
few years. We have put forward a number of ideas that would 
help stabilize markets and lower costs in the near term.
    As I have said before, as we work together, I am more than 
ready to consider additional ideas from the other side of the 
aisle to make our healthcare system work better for our 
families and for patients.
    But to be clear, that means moving forward, not backward, 
on affordability, on coverage, and quality of care. Families 
have rejected the damaging approach taken in Trumpcare, which 
would have raised families' costs and gutted critical 
protections like those for preexisting conditions and Congress 
should listen.
    I think we are all aware that threading this needle will 
not be easy. But I do believe an agreement that protects 
patients and families from higher costs and uncertainty, and 
maintains the guardrails in our current health system is 
possible.
    This kind of agreement would not only make a real 
difference for the patients and families that we serve, but it 
could provide a bipartisan foundation for future work. I have 
said many times before this work did not end when the 
Affordable Care Act passed. It is certainly true today.
    There is much more we need to do to strengthen the 
healthcare system, to lower costs, to expand coverage, and 
improve quality of care. These are the issues we should be able 
to work together on in a bipartisan way.
    I hope with today's conversation, we can continue to turn 
the page away from Trumpcare and partisanship that we have seen 
way too much of, and instead, start working on healthcare 
policies to help our patients and families afford the care that 
they need because that is the goal that we should all be 
focused on.
    I am so glad we have seen the interest on both sides of the 
aisle for coming together and working to find common ground on 
these issues.
    I want to, again, thank all of the commissioners and all of 
our colleagues who are joining us today.
    I will turn it back over to Chairman Alexander.
    The Chairman. Thank you, Senator Murray.
    Our first witness is Julie Mix McPeak. She is Commissioner 
of Tennessee's Department of Commerce and President elect of 
the National Association of Insurance Commissioners. She has 
testified here before. Welcome, Commissioner McPeak.
    Our second witness is Mike Kreidler. Senator Murray has 
already welcomed him and acknowledged him. He is Washington's 
eighth Insurance Commissioner, the State of Washington's, and 
the country's, longest-serving commissioner.
    I will ask Senator Murkowski to introduce the next witness.

                     Statement of Senator Murkowski

    Senator Murkowski. Thank you, Mr. Chairman.
    It is a pleasure to introduce to the committee an 
individual who has been before us before. Director Lori Wing-
Heier is Alaska's Director of Insurance. She has been in that 
position since 2014 and has done an exceptional job.
    We recognize not only her service there, but she is also 
the Chair of the American Indian and Alaska Native Liaison 
Committee on the Association of Insurance Commissioners.
    As you have noted, Alaska is one of two States that has 
received a 1332 Waiver, and it has been under the guidance of 
Director Wing-Heier that we have seen that come about.
    I thank her, not only for being here today, but for her 
leadership and her persistence in working, not only with the 
Obama administration, but with the Trump administration in 
getting that final sign off.
    The Chairman. Thank you, Senator Murkowski.
    Senator Casey, would you like to introduce the next 
witness?

                       Statement of Senator Casey

    Senator Casey. Yes. Thank you, Mr. Chairman.
    I am pleased to introduce Teresa Miller who is 
Pennsylvania's Acting Secretary of Human Services and former 
Pennsylvania Insurance Commissioner. Secretary Miller served as 
Insurance Commissioner from 2015 through August of this year, 
when she was nominated by Governor Wolf to serve as Secretary 
of Human Services.
    In her role as Insurance Commissioner, she has been a vocal 
supporter of Pennsylvania's health insurance marketplace, 
demonstrating a deep understanding of the insurance industry 
while advocating for polices in the best interests of 
Pennsylvanians.
    I congratulate her on being nominated to serve as Secretary 
of Human Services and happy to welcome her to the HELP 
Committee today.
    Secretary Miller, thank you for your testimony today. We 
are grateful you are here.
    The Chairman. Thank you, Senator Casey.
    Our fifth witness is John Doak. We welcome you back Mr. 
Doak. You were here before to help us understand the issues.
    He is Commissioner for Oklahoma's Department of Insurance. 
He is well known for hosting healthcare innovation summits 
within his State, which seek to offer cutting edge solutions to 
the country's healthcare challenges.
    As you already know from the meeting we have had earlier, 
there is a lot of interest here among senators. So if you could 
please summarize your remarks in about 5 minutes, we will then 
turn to a series of questions from senators.
    To follow that up, let us begin with you, Ms. McPeak.

 STATEMENT OF JULIE MIX McPEAK, J.D., 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.
    I am Julie McPeak, Commissioner of the Tennessee Department 
of Commerce and Insurance.
    Today, I plan to highlight Tennessee's history with the ACA 
and discuss some immediate solutions that Congress can consider 
to stabilize the individual insurance market.
    Before I get started, I would like to thank you for holding 
today's hearing and for inviting so many of my State regulator 
colleagues.
    In an interview last year, I characterized Tennessee's 
individual health insurance market as very near collapse. In 
the 12 months since, thankfully, our market has not collapsed, 
but our market is not any more stable and probably less so.
    Tennessee in 2017 has continued to see health insurance 
carriers flee the market due to the tremendous uncertainties 
surrounding the 2018 plan year, as well as year-over-year of 
substantial losses.
    As of today, and subject to change until QHP agreements are 
signed later this month, Tennessee consumers across the State 
will have at least one option for coverage, but only one in the 
clear majority of our State.
    While we feel very fortunate that Tennesseans will have an 
opportunity for coverage, I do not think that many people 
believe that having a single choice in 78 of 95 counties 
represents ideal market competition.
    To summarize, Tennessee's experience over the last 4 years, 
our consumers have seen premium prices skyrocket while their 
plan choices have diminished. Tennessee had around a dozen 
carriers offering individual health insurance coverage in 2010, 
reduced to only three companies offering ACA-compliant plans in 
2018. Tennessee's current ACA trajectory, quite simply, is not 
sustainable.
    Today's hearing could not be timelier as we are approaching 
a September 20 deadline for final determinations on 2018 rate 
filings. Tennessee's carriers filed rates assuming the CSRs are 
not funded, with each carrier attributing approximately 14 
percent of their average rate increase to CSR uncertainty.
    According to CMS data, approximately 120,000 Tennesseans 
are enrolled in CSR plans representing almost 60 percent of our 
FFM market. The CSR funding issue is the single most critical 
issue you can address to help stabilize insurance markets in 
2018. To be clear, this issue is not an insurer bailout.
    CSR funding ensures that some of our most vulnerable 
consumers receive assistance for co-pays and deductibles that 
are required to be paid under Federal law. It has the effect of 
reducing proposed premium increases and has a direct impact on 
the amount of subsidy assistance provided by the Federal 
Government.
    In fact, as you know, last month the CBO reported the 
Federal deficits would increase by $6 billion in 2018 if CSR 
funding is terminated.
    But on the other hand, should the Federal Government agree 
to fund CSRs and CMS works with the State, in Tennessee, we 
could see proposed increases for 2018 be reduced.
    Beyond CSRs, Congress should also establish a reinsurance 
mechanism that would stop losses for individual claims at a 
specified amount to increase market participation by carriers. 
For the most immediate impact, this backstop mechanism must be 
Federal as it would be impossible for many States to develop 
such a program for the 2018 plan year.
    States should have the option and flexibility to set up 
their own programs to reflect our unique dynamics and market 
conditions, but the Federal Government should set up a default 
mechanism to stabilize markets during any transition to a 
State-run program.
    Following these immediate measures--CSR funding and 
reinsurance--Congress must address broader ACA reforms, such as 
benefit design, rating restrictions, and the underlying cost of 
healthcare.
    As the cost of healthcare services increase, so too must 
the cost of health insurance. This causal relationship is 
simple to understand, yet it is too often not discussed in 
conversations of health insurance reform.
    Health insurance rate requests are subject to review by 
State insurance departments and in FFM States by the Federal 
Government.
    In Tennessee, the rate review process is an entirely public 
one. As soon as a rate is filed, it is publicly accessible to 
anyone interested. Rates are filed and approved on a plan year 
basis that prohibits rate changes during the year, and provides 
consumers' notice before a rate increase for the following 
year.
    These parallel protections are nonexistent in the 
pharmaceutical industry and this level of transparency is 
lacking in determining appropriate costs for medical services. 
These issues cannot remain to be unaddressed in our focus on 
health insurance rates and accessibility.
    In conclusion, consumers around this country need, and 
deserve, access to quality health insurance coverage at 
affordable rates. Working together, we can get back to a place 
of vibrant, competitive markets where insurers look to expand, 
rather than contract, their operations.
    Congress should focus on two critical elements to make that 
possible: CSRs and reinsurance. After addressing these issues, 
Congress should focus its attention on a broader conversation 
of our Nation's health and strategies to improve health 
outcomes while reconsidering tenets of the ACA that have led to 
challenge and potentially unsustainable markets across much of 
the country.
    Thank you again for your time. I look forward to answering 
your questions.
    [The prepared statement of Ms. McPeak follows:]
              Prepared Statement of Julie Mix McPeak, J.D.
                                summary

Highlight

    The ACA as it stands today is not sustainable in Tennessee. Our 
market remains ``very near collapse.'' Congress and the Administration 
have a tight window to enact bipartisan legislation that can provide 
immediate relief and stability for 2018 as Members continue to work 
together on longer-term solutions.

Tennessee Experience

    Tennessee's individual health insurance marketplace is no stronger 
today than it was a year ago. In fact, in 2017 we continued to see 
carriers with significant market presence flee the market due, in large 
part, to the tremendous uncertainty surrounding the 2018 plan year as 
well as to substantial losses in recent years. Today, Tennesseans in 73 
of 95 counties only have one FFM option. That number will increase to 
78 counties in 2018. Tennesseans have also seen their premium prices 
increase substantially since 2014, and those rate requests have been 
fully justified by medical claims. Tennessee has gone from having 
premiums among the lowest in the country in 2014 to among the highest 
for 2018. We have three carriers remaining in the marketplace selling 
ACA-compliant plans, and carriers have introduced narrower networks.

Immediate Stabilization

    Congress can strengthen insurance markets by fully funding CSR 
payments through the 2018 plan year and by establishing a reinsurance 
mechanism. CSR funding ensures that some of our most vulnerable 
consumers receive assistance for copays and deductibles and has the 
effect of reducing proposed premium increases that would otherwise 
increase the amount of advance premium tax credit assistance provided 
by the Federal Government if done expeditiously. Reinsurance will 
effectively stop losses for individual claims at a specified amount, 
providing more stability to the claims evaluation and projection 
process. The program should provide an immediate Federal backstop and 
then flexibility for States to set up their own programs in the future 
and ultimately reduce premiums and bring carriers into the market.

Health Care Costs

    Health insurance helps consumers shoulder the costs of health care 
services. As the costs of health care services increase, so too must 
the costs of insurance. This causal relationship is simple to 
understand, yet is too often not discussed in conversations of health 
insurance reform.

Future

    Congress must first focus on these critical stabilization measures. 
After addressing immediate stabilization measures, Congress should 
focus its attention on a broader conversation of our Nation's health 
and health insurance systems and the long-term sustainability of these 
systems.
                                 ______
                                 
                              introduction
    Good morning Chairman Alexander, Ranking Member Murray, and members 
of the committee. Thank you for inviting me to testify this morning. I 
enjoyed meeting with this committee in February and I look forward to 
today's conversation.
    As you know, I am Julie Mix McPeak. I am commissioner of the 
Tennessee Department of Commerce and Insurance (TDCI) where 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 highlight Tennessee's history with the 
Affordable Care Act (ACA) before discussing some immediate and longer-
term solutions that Congress and/or the Administration can consider to 
stabilize the individual insurance market. Before I get started, I 
would like to thank you for holding today's hearing and for inviting so 
many State insurance regulators as we have all spent a significant 
number of days working in our States and working together to ensure 
stability in the health insurance markets of this Nation.
                     tennessee's individual market
    In an interview last year discussing 2017 filings and rates, I 
characterized Tennessee's individual health insurance marketplace as 
``very near collapse.'' In the 12 months since, our marketplace has not 
collapsed. Unfortunately, however, our market is not any more stable 
than it was late last year.
    Tennessee in 2017 has continued to see health insurance carriers 
flee the market due, in large part, to the tremendous uncertainty 
surrounding the 2018 plan year as well as to substantial losses in 
recent years. Humana Insurance Company and TRH Health Insurance Company 
announced this year that they would not write ACA-compliant plans on or 
off of the federally Facilitated Marketplace (FFM) in 2018. While we 
added one new insurance carrier, Oscar Insurance Company of Texas, that 
company will only be writing in one of the State's eight rate and 
service areas--the Nashville region and its surrounding counties.
    BlueCross BlueShield of Tennessee (BCBST) has tentatively agreed to 
offer coverage in the Knoxville region and its surrounding counties. 
This is noteworthy because it means that, as of today, and subject to 
change until Qualified Health Plan (QHP) agreements are signed later 
this month, Tennessee consumers across the State will have at least one 
option through the FFM. While we feel very fortunate that all 
Tennesseans will have such an opportunity, I do not think that many 
people would argue that having a single choice in 78 of 95 counties and 
a total of three (3) insurance carriers offering ACA-compliant coverage 
in the State represents ideal marketplace competition.
    Tennesseans will face substantial rate increases for yet another 
year. BCBST and Cigna filed rate increases that averaged 21 percent and 
42 percent for the 2018 plan year, respectively. Those increases may be 
offset for the 88 percent of our FFM enrollees that receive advance 
premium tax credits (APTC), but for the other 12 percent of FFM 
enrollees and for the 37,478 individuals who purchase insurance off the 
exchange, these premium increases are substantial. And they are in 
addition to substantial rate increases absorbed by these populations 
over the last several years.
    Tennessee began the ACA experience in 2014 with some of the lowest 
rates in the country. In fact, our rates ranked the second-lowest in 
2014 and the fifth-lowest in 2015. During those same 2 years, Tennessee 
had the highest and second-highest risk scores in the Nation, according 
to metrics developed and reported by the U.S. Department of Health and 
Human Services (HHS). Tennessee is also among the many States that had 
a Co-Op experience that did not end in success. Our Co-Op provided 
coverage through the end of 2015, but due to a multitude of factors was 
ultimately placed into Supervision by my Department. We have been 
working with HHS since that time and hope to soon complete the 
company's wind-down and we fully expect that the company will be able 
to repay the Federal Government a small portion of the Federal moneys 
allocated for its startup and solvency purposes.
    To summarize Tennessee's individual market experience over the last 
4 years, our consumers have seen premium prices skyrocket while their 
choices have dropped substantially. Tennessee had around a dozen 
carriers offering individual health insurance coverage in 2010, and 
looking to 2018, the State has a total of three companies offering ACA-
compliant plans (though consumers in much of the State will only have 
one choice), and one company that sells non-compliant, underwritten 
plans. The companies' experiences and the State's population health, 
which we are working as a State to improve, have justified the rate 
increases. While we recognize that premiums for ACA-compliant plans 
were going to be pricier than non-ACA-compliant plans available before 
2014 due to their more robust benefit offerings, policies that increase 
in price significantly year-over-year has been a tremendous 
affordability challenge for Tennessee's citizens.
    Tennessee's current ACA trajectory, quite simply, is not 
sustainable into the extended future. We are thankful that consumers in 
all counties of Tennessee appear to have an FFM coverage option for 
2018, and we are hopeful that that remains the case, but for how much 
longer, as we are running out of carriers? I appreciate today's hearing 
designed to create solutions to immediately inject some level of 
stability into the market and I encourage you to continue discussions 
to more broadly address America's health insurance and healthcare 
challenges.
                            timeline & csrs
    Today's hearing could not be more timely as we are rapidly 
approaching a September 20 deadline for States and the Centers for 
Medicare & Medicaid Services (CMS) to make final determinations on 2018 
rate filings. This deadline was pushed back by CMS on August 10 from an 
original August 16 due date with a recognition that cost-sharing 
reduction (CSR) questions added a layer of complexity to the rate 
review process. The States have addressed CSR uncertainty in a variety 
of ways, including by requiring carriers to file two sets of rates: one 
set of rates that assumes CSRs are not funded and the other set of 
rates that assumes CSRs are funded by the Federal Government for the 
2018 plan year.
    Tennessee's marketplace carriers filed one set of rates assuming 
the CSRs are not funded. We asked carriers to identify the percentage 
of their rate request that is due specifically to uncertainty 
surrounding CSR funding. BCBST reported that 14 percent of its overall 
21 percent average rate increase is due to CSR uncertainty, while Cigna 
reported its impact at 14.1 percent of its overall 42 percent average 
rate request. According to CMS data, approximately 120,000 Tennesseans 
are enrolled in CSR plans, representing almost 60 percent of our FFM 
market.
    There is still potentially time for the Congress and Administration 
to provide stability to health insurance markets across the country by 
agreeing to fund CSR payments at least through the 2018 plan year. Such 
a stability measure could result in an immediate reduction in proposed 
premium rates for 2018 following coordination between the States and 
CMS.
    The CSR funding issue is the single most critical issue that you 
can address to help stabilize insurance markets for 2018 and 
potentially bring down costs. And to be clear, this issue is not an 
``insurer bailout.'' CSR funding ensures that some of our most 
vulnerable consumers receive assistance for copays and deductibles that 
are required to be paid under Federal law AND has the effect of 
reducing proposed premium increases that would otherwise increase the 
amount of APTC assistance provided by the Federal Government. In fact, 
as you know, last month the Congressional Budget Office (CBO) reported 
that Federal deficits would increase by $6 billion in 2018 if CSR 
funding is terminated.
    Should the Federal Government refuse to fund CSRs, premium rates 
will increase at rates that are otherwise unnecessary based on medical 
trend, inflation, and other cost considerations. This increase will 
impact the second-lowest silver plan rates, which in turn will increase 
the amount of available subsidy to FFM consumers. On the other hand, 
should the Federal Government agree to fund CSRs, and CMS works with 
the States, we could see proposed increases for 2018 be reduced by 
substantial margins. Those reductions could also result in the Federal 
Government paying out less in APTC than they would pay should currently 
filed rates be approved. Please act now to fully fund CSRs and provide 
that necessary certainty to our insurance markets.
                       individual market reforms

Reinsurance/Stop-Loss Mechanism

    In addition to providing certainty regarding CSRs, the Federal 
Government can take additional action to stabilize markets. To 
stabilize markets, we need to grow risk pools with healthy individuals. 
To attract new, healthier risk to the market, we need to calm rates and 
backstop losses relative to the most expensive claims. Along these 
lines, Congress should consider establishing, at the very least, a 
short-term reinsurance mechanism that would effectively stop losses for 
individual claims at a specified amount. For a most immediate impact, 
this backstop mechanism must be Federal as it would be impossible for 
many States to develop such a program for the 2018 plan year and a 
significant challenge for States to implement a mechanism for 2019 and 
perhaps 2020. States should have the option and full flexibility to set 
up their own programs to reflect their unique dynamics and market 
conditions, but the Federal Government should set up a default 
mechanism to stabilize markets during any transition to a State-run 
system.
    In Tennessee, TDCI recently issued a data call to our health 
insurance carriers to better understand the frequency of high cost 
claims. We requested claim cost numbers in specified increments 
beginning at $50,000 claims and extending beyond $5 million. 
Preliminarily, and on the aggregate as we issued this data call under 
our confidential market conduct authority, we have identified that 
between 85 percent and 95 percent of claims incurred and reported in 
2015 and 2016 respectively, fell between the $50,000 and $200,000 
range. We are continuing to review the data.

Rate Bands

    When I was here in February, I highlighted providing more 
flexibility related to rate bands as one area that Congress and/or the 
Administration could address in trying to bring younger, healthier 
individuals into the individual insurance marketplaces. In Tennessee, 
the majority of our FFM population is 45 years of age or older. We need 
younger, healthier risk to enter the market and balance the currently 
insured business that, as HHS has indicated, has resulted in a higher 
risk score than almost every other State's insured population.
    As you know, the ACA has a 3:1 age band that requires premiums to 
differ based on age by no more than a 3:1 ratio. I said in my February 
statement:

          Providing more flexibility to insurance regulators and 
        carriers in how individuals are rated, even while keeping 
        prohibitions against discrimination based on preexisting 
        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.

    I stand by that statement today and would add that a 5:1 or 6:1 
ratio should be a ceiling rather than a requirement. Before the ACA, we 
saw rates that often provided a 5:1 age ratio in Tennessee. These rates 
were actuarially justified and allowed for more variability in rates 
for younger consumers. Should the ACA be amended to provide more 
flexibility, it is possible, if not highly likely, that younger 
consumers who today want to purchase insurance but decide to instead 
pay the individual mandate penalty due to higher prices would come back 
into the markets to give themselves a sense of comfort that insurance 
provides should they need medical services.
    Yes, greater flexibility in age rating would mean lower prices for 
younger consumers. Yes, it could also mean higher prices for older 
consumers; but that's not necessarily the case and it is a situation 
that Congress could simultaneously address by adjusting APTC formulas. 
However, there is simply no denying that a bigger risk pool with a 
greater percentage of low risks will outperform a smaller risk pool 
with concentrated high risk. We should do what we can to grow our risk 
pools for the benefit of the many, including by expanding the range of 
individuals qualifying for an APTC to apply to those individuals 
falling below 100 percent of the Federal Poverty Level (FPL) who may 
not otherwise have access to affordable insurance coverage as well as 
by opening up access to catastrophic plans to everyone, rather than for 
only individuals aged 30 and younger or those who can otherwise qualify 
under special circumstances.
                            healthcare costs
    Health insurance helps consumers shoulder the costs of health care 
services. As the costs of health care services increase, so too must 
the costs of health insurance. This causal relationship is simple to 
understand, yet is too often not discussed in conversations of health 
insurance reform. While recognizing that today's focus is on immediate 
strategies to stabilize health insurance markets, I would be remiss if 
I did not urge the committee to also begin a conversation about health 
insurance cost drivers, and specifically the costs of health care 
services.
    Health insurance rate requests are subject to review by State 
insurance departments and in FFM States, the Federal Government. Health 
insurance rates are among the most highly regulated financial products 
in the country as they must be related to risk and are prohibited from 
being excessive or inadequate or discriminatory. In addition, Federal 
law specifies ``loss ratios'' for health insurance products that 
require carriers to provide rebates to consumers if the carriers spend 
too much of their premium revenue on administrative costs. In 
Tennessee, the rate review process is an entirely public one. As soon 
as a rate is filed through the Department's electronic system, it is 
publicly accessible to anyone interested. Objections to the filings, 
and questions from the Department, are also publicly accessible, as are 
responses from the companies. Insurance consumers go on healthcare.gov 
to view a menu of policy options, complete with monthly premium prices. 
Rates are filed and approved on a plan year basis that prohibits rate 
changes during a year and provides consumers notice before a rate 
increase for the following year. Are there parallels to these 
protections applicable to the pharmaceutical industry? Is this level of 
transparency achieved in determining appropriate costs for medical 
services?
    Medical and particularly pharmaceutical costs and transparency, 
balance and surprise billing, and air ambulance costs, services, and 
billing, contribute to the cost of health insurance. As we continue our 
conversation on stabilizing health insurance markets, I would encourage 
you not to lose sight of key cost drivers and to look for incentives 
and wellness programs that may help improve the overall health of our 
shared constituents.
                               conclusion
    Thank you for the opportunity to visit again with this committee. 
Health insurance markets remain ``near collapse'' in several States and 
are certainly challenged in many others. But insurance regulators are a 
resilient group, and we stand ready to work with you to provide 
immediate and long-term stability to our markets.
    Consumers around this country need and deserve access to quality 
health insurance coverage at affordable rates. Working together we can 
get back to a place of vibrant, competitive markets where insurers look 
to expand, rather than contract, their operations. The Congress should 
first focus on two critical elements to make that possible: CSRs and 
Reinsurance. Fully funding CSRs will provide immediate certainty to our 
markets, and very possibly bring requested rate increases down, and a 
Federal backstop for high-dollar claims will calm troubled markets. 
After addressing these issues, the Congress should focus its attention 
on a broader conversation of our Nation's health and strategies to 
improve health outcomes while reconsidering tenets of the ACA that have 
led to challenged and potentially unsustainable markets across much of 
the country.
    Thank you again for this conversation. I look forward to your 
questions.

    The Chairman. Thank you, Ms. McPeak.
    Mr. Kreidler.

 STATEMENT OF MIKE KREIDLER, O.D., WASHINGTON STATE INSURANCE 
                   COMMISSIONER, OLYMPIA, WA

    Mr. Kreidler. Good morning, Mr. Chairman, and Ranking 
Member Murray, and members of the committee.
    My name is Mike Kreidler and I am the Insurance 
Commissioner for the State of Washington. I want to thank you 
for your bipartisan commitment to address the challenges that 
we, as insurance commissioners, are facing, but also you are 
facing in the coming months.
    This is especially true for the individuals and families 
who buy their own health insurance, some 330,000 people in the 
State of Washington. The health of that market is really the 
canary in the coal mine. If there is a problem in the 
individual market, it is a problem for all of us.
    This is made up, as you pointed out, Chairman Alexander, of 
early retirees, self-employed people who work for employers who 
do not offer health insurance. The individual market is clearly 
a very critical safety net. They are relying on us to find a 
path forward that offers a great deal more certainty than what 
we have right now.
    Washington State has fully embraced the Affordable Care Act 
from the very beginning. We have a very stable market since 
2014. Our uninsured rate has plummeted from 15 percent down to 
under 6 percent in the State of Washington, but this year, 
there has been a serious jolt to the system.
    Initially, we had two counties in the State of Washington 
that did not have any health insurers. We solved that problem, 
thankfully, but I am nervous about what is going to happen next 
year. Because of the growing uncertainty and actions by the 
Administration, our individual health insurance markets are in 
serious peril.
    The proposed average rate increases that we have seen for 
2018 are 23 percent. In years past, it has been under 10 
percent. Nine rural counties have only one insurer. One major 
insurer largely pulled back in our State completely from 
western Washington where most of the people live.
    The next 2 weeks are going to be very telling. Insurers 
will be making their final decisions as to whether they are 
going to participate in the health insurance marketplace or 
not. Congress must act quickly to address these growing 
uncertainties.
    You must permanently fund the Cost Sharing Reduction 
payments. That is something that is going to help a great deal 
in our marketplace. It affects some 72,000 people in the State 
of Washington. For a low-income family in the State of 
Washington, the deductible is the difference of being $1,200 
with the CSRs or $14,000.
    I urge you to create a Federal reinsurance program this 
year. Doing this would show your commitment to stabilizing the 
market. It worked very well in the State of Washington for the 
first 3 years that we had a reinsurance program. We would like 
to see it continue and go forward.
    It is another way of reassuring the insurance market and 
insurance carriers. It does not help them financially, but it 
gives them predictability and helps us hold down the rates.
    Make sure that you maintain the coverage and affordability 
guardrails in the 1332 Waivers. We are willing to play by the 
rules. What we do not want to see is Essential Health Benefits 
and the guarantees on out of pocket costs eroded away. Those 
are consumer protections that nobody wants to see leave the 
marketplace.
    In closing, let me say that you must take bold action now 
to shore up these markets. Millions of hardworking families and 
individuals are counting on us. In Washington State, we have 
firsthand experience with what can happen when violating basic 
insurance principles are allowed to occur, and they are 
occurring right now.
    We tried this in the 1990s and we saw the individual market 
in the State of Washington totally collapse. Believe me, that 
is something no one wants to go through.
    Let me be a harbinger here and say this. It can and will 
happen if you do not take action now. That is how critical it 
is out there in that insurance market and to make sure we do 
not have that kind of collapse we saw in Washington happen for 
the whole country in the individual market. Lives depend on it. 
Our lives rest on your bipartisan efforts.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kreidler follows:]
               Prepared Statement of Mike Kreidler, O.D.
                                summary
    Washington State's individual market insures 330,000 people. Most 
of these people are self-employed, early retirees, or work for 
employers who don't offer coverage.
    This is a vulnerable population of individuals who have no 
negotiating power, and the market is increasingly unstable, especially 
in today's regulatory climate.
    Washington State successfully implemented health reform, and until 
this year, has had a stable individual health insurance market with 
many insurers and lower-than-average rates.
    This year was a jolt to our system. We're seeing higher proposed 
rates, fewer plans being offered, and a major insurer pulling back from 
Western Washington.
    All of these actions are a direct result of growing instability in 
the individual market and the lack of predictability for insurers.
    To stem this trend, Congress must take swift, bipartisan action in 
three areas:

     Permanently fund cost-sharing reduction subsidies.
     Create a Federal reinsurance program.
     Maintain coverage and affordability guardrails of 1332 
waivers.

    Washington State has firsthand experience with the dangers of 
ignoring signs of instability in its insurance market.
    We passed reform in the 1990s that ignored basic insurance 
principles and saw a total collapse of our individual market in only a 
few years.
    Let our experience be your warning. This can and will happen on a 
national level if Congress does not take appropriate action now.
                                 ______
                                 
    Chairman Alexander, Ranking Member Murray and committee members, 
thank you for the opportunity to testify today regarding the challenges 
facing our individual health insurance market and possible solutions to 
address those challenges. I welcome the commitment of the Health, 
Education, Labor, and Pensions Committee to work on a bipartisan basis 
to address this critical issue.
    In Washington State, approximately 330,000 people (or about 5 
percent of our population) purchase their own individual health 
insurance coverage. Most work for employers who don't offer health 
insurance, are self-employed or are early retirees. People who buy 
individual insurance often have no other option for coverage; the 
individual market is their safety net.
    As Washington State's insurance commissioner, it is my 
responsibility to do everything in my power to ensure that these 
Washingtonians have access to a stable insurance market. But I cannot 
do it alone--my success depends upon a strong partnership with the 
Federal Government. Now, this month, critical Federal actions are 
needed to stabilize the individual health insurance market in 
Washington State, and in the country. This burden rests on you.
    It is with the well-being of my State's residents clearly in mind 
that I offer my testimony today.
    Following enactment of the Federal Affordable Care Act (ACA), 
Washington State launched a bipartisan effort that fully embraced all 
aspects of the new law. We acted quickly to establish our own State-
based marketplace, the Washington Health Benefit Exchange (Exchange), 
and to implement Medicaid expansion. I strongly believe that these 
early decisions are why we have cut our uninsured rate by 60 percent. 
Today, the percentage of people in our State without health insurance 
is at a record low of about 6 percent.
    There are several additional reasons for our success. We are 
fortunate to have ``home grown'' local insurers who have made a strong 
commitment to our State. We have the benefit of being a lower health 
care cost State--our use of hospital services is among the lowest in 
the Nation. And in 2014, I, along with 22 other States and the District 
of Columbia, made the difficult decision to not allow legacy or non-
ACA-compliant plans to continue to be offered in the individual market 
so that our individual market risk pool could be as large and as 
healthy as possible.
    As a result, since 2014, Washington State has enjoyed a stable and 
competitive individual health insurance market. Before this year, we 
have experienced an average annual premium increase of near or below 10 
percent. For 2017, we had 13 health insurers offering 154 plans in our 
individual health insurance market.
    Let me be clear, the Affordable Care Act is not perfect even in 
Washington State. I am concerned about bringing as many healthy, young 
people into coverage as possible. And, like other States, we have seen 
a recent trend to narrower health plan networks. Deductibles and cost-
sharing are growing, presenting real affordability challenges for some 
consumers. We share the national challenge of rising pharmaceutical 
costs. Yet, despite all this, the ACA has had a major positive impact 
on our overall market, providing life-saving benefits to many of our 
most vulnerable citizens.
    This year, our progress forward is threatened by uncertainty around 
the fate of the ACA, including continued payment of cost-sharing 
reductions, weakened enforcement of the individual mandate, and Federal 
investment in outreach and marketing to promote enrollment in health 
coverage.
    For plan year 2018, this uncertainty has caused a serious 
disruption to our individual health insurance market in these ways:

     Insurers have proposed rate increases averaging 23 
percent.
     After evaluating proposed filings in June, we discovered 
two ``bare'' counties without any individual plans offered for sale. 
Working closely with our health insurers to see who was willing to step 
up to this challenge, we ultimately achieved statewide coverage.
     We anticipate having nine rural counties with only one 
insurer offering coverage on the Exchange.
     One major insurer left all counties in Western Washington, 
the most populous part of our State.
     Eleven insurers filed 74 plans for the 2018 individual 
health insurance market.
     The number of proposed health plans offered through our 
Exchange dropped substantially. Two insurers will no longer offer 
bronze plans on the Exchange.

    These 2018 filings cause me grave concern for the fundamental 
stability of our individual insurance market.
    The next 2 weeks will be telling, as insurers decide whether to 
follow up on their proposed filings for 2018 and commit to actual 
participation in the Exchange and in all of the counties they have 
proposed to serve. Congress must act quickly to address the uncertainty 
in the individual health insurance market. Clear opportunities are 
readily available to substantially strengthen it.
                        cost-sharing reductions
    First, and foremost, Congress should bring certainty to cost-
sharing reduction payments by making a permanent appropriation for 
them. Cost-sharing reductions are not insurance company bail-outs; they 
benefit lower-income people and families by directly reducing their 
health care costs. For those who struggle to meet basic needs such as 
food and housing, cost-sharing reduction payments will make a 
difference in whether they decide to purchase insurance. These payments 
also make a difference in whether they can afford to see a doctor, even 
when they do have insurance. The reduced cost burden will literally 
make the difference between their seeking care or not.
    To illustrate this impact, I offer the following chart showing 
cost-sharing reductions by income level for various services. Consider 
a 40-year-old man living in Pierce County, Washington earning wages at 
150 percent of the Federal poverty level, around $23,000 per year. 
Suppose he chooses to buy a silver plan with the lowest premium. With 
cost-sharing reduction payments, his annual deductible is $2,000. 
Without them, it increases to $7,050. With cost-sharing reduction 
payments, he can visit his primary care provider without having to make 
a copayment.

                 40-Year-Old Non-Smoker in Pierce County Selecting the Lowest Cost Silver Plan*
----------------------------------------------------------------------------------------------------------------
                                                                         Primary care                Urgent care
                                                                        visit to treat   Specialist   centers or
                          Income                            Deductible   an illness or  visit copay   facilities
                                                                         injury copay                   copay
----------------------------------------------------------------------------------------------------------------
150% FPL..................................................        $600       No charge           $5          $50
200% FPL..................................................      $2,000       No charge           $5          $50
250% FPL..................................................      $5,250             $15          $40          $75
400% FPL..................................................      $7,050             $30          $60         $100
----------------------------------------------------------------------------------------------------------------
* Ambetter Balanced Care 4 (2017).

    Here and around the Nation, States have been spending countless 
hours during the last several months trying to find an approach to rate 
setting in 2018 that does the least harm to consumers if cost-sharing 
reduction payments are suddenly curtailed. I can assure you there is no 
solution that doesn't hurt consumers, especially those who do not 
receive advance premium tax credits.
                      federal reinsurance program
    Congress should enact a Federal reinsurance program with a minimum 
duration of 3 years. This level of clear and sustained commitment by 
the Federal Government is necessary, and will significantly help 
stabilize the individual health insurance market. In Washington State 
between 2014-16, we experienced the benefit of a Federal reinsurance 
program. We have concrete evidence of the impact that a reinsurance 
program can have on premiums and insurers' willingness to participate 
in this market.


    Some have asked whether enactment of a Federal reinsurance program 
in late 2017 can impact rates in 2018. Health insurance rates for plans 
that will be sold in late fall open enrollment are filed in the spring 
and approved by late summer. At this time in the year, 2018 rates have 
been filed and approved, and a Federal reinsurance program enacted now 
would not change them.
    However, it would have a strong effect on insurer participation in 
the 2018 market. As I stated earlier, insurers have filed proposed 
rates but have not yet committed to participate in the Exchange and the 
counties they have identified. If insurers know that a Federal 
reinsurance program will be in place for calendar year 2019 and beyond, 
there will be greater confidence and certainty related to market 
participation in calendar year 2018. Insurers will be motivated to 
participate in the market. And in calendar year 2019, a Federal 
reinsurance program would positively affect both premium rates and 
participation. Insurer confidence means more insurers participate in 
the market, which means more competition among insurers on price and 
quality of care. Fostering healthy competition among insurers is good 
for consumers.
    In the short term, a Federal reinsurance program modeled on a 
Federal transitional reinsurance program would provide the most 
stability. Insurers are familiar with the program and can adapt quickly 
to its implementation. They will have certainty regarding the level of 
Federal funding available and the likely payment parameters, given 
their previous experience with the program. This experience will 
translate directly to lower premiums beyond plan year 2018.
    If Congress has an interest in offering States more flexibility in 
the Administration of market stability funding, I strongly urge you to 
choose a funding allocation approach that fairly distributes funds 
across States, without regard to the approach selected. States can be 
valuable laboratories of innovation, and even-handed funding will 
ensure the widest array of methods. I remind you that implementation of 
a flexible option will require considerable lead time; States will need 
time for stakeholder discussions to determine the appropriate use of 
funding, to enact State legislation authorizing policy and spending 
authority, and to implement program parameters. States will also have 
to take into account the long lead time necessary for insurers to 
incorporate new options into their planned filings.
    Like several other States, Washington is currently exploring 
reinsurance as a policy option to help stabilize our individual 
insurance market for 2019. We will determine, given the number of 
insurers in our market and our lower premium costs, whether use of a 
1332 waiver would be viable in our State. Any program that we develop--
if viable and if the necessary State funding is available--would 
supplement and enhance a Federal reinsurance program.
                      1332 waiver approval process
    As an elected insurance commissioner, I believe that coverage and 
affordability guardrails in the current 1332 waiver statute set an 
appropriate national coverage benchmark. These guardrails ensure that a 
1332 waiver will not result in reductions in the number of people 
covered, the scope of their benefits, or affordability. By creating a 
level playing field, they promote competition among insurers based upon 
quality and choice in a more stable market. They also promote improved 
population health.
    I do agree that flexibility and efficiency could be improved in the 
1332 waiver approval process. I believe that a 10-year economic 
analysis is not necessary. In addition, given that proposed insurance 
plans and rates are filed more than 6 months in advance of the plan 
year, the current 9-month period for the Centers for Medicare and 
Medicaid Services (CMS) to determine completeness and to review an 
application creates too much delay for the States. This is compounded 
for those States, like Washington, that have a part-time legislature.
    It is my understanding that CMS is working to develop an expedited 
process for review of 1332 waiver applications, and I strongly support 
those efforts.
        federal investments in outreach and enrollment marketing
    A key to a stable individual health insurance market is maximizing 
the number of people enrolled, especially those who are young and 
healthy. As noted earlier in my testimony, Washington State has its own 
Exchange. Yet the effectiveness of our own outreach and marketing is 
greatly magnified by the Federal Government's outreach and enrollment 
activities.
    In the past, we have enjoyed an effective collaborative effort with 
the Federal Exchange in the months leading up to the start of open 
enrollment. Yet this year, that activity among the Administration, 
other States and major stakeholder groups is not occurring. These 
informative discussions included sharing of best practices, leveraging 
community infrastructure, developing consistent enrollment messaging, 
and sharing plans for marketing and advertising buys.
    Pre-open enrollment emails and outreach support reports, 
newsletters and social media announcements suitable for sharing with 
our partners or socializing on our media channels are no longer being 
prepared. These resources support the larger message at a national 
level of the importance of having insurance, and for many of our most 
vulnerable--those who have English as a second language or live in 
harder-to-reach rural areas--they are a critical source of information.
    Federal marketing and advertising of open enrollment on broadcast, 
print and social media channels is a critical element of outreach 
nationally. These ads provide essential open enrollment messages that 
keep the need for finding, selecting and enrolling in health insurance 
front and foremost during the busy holiday season. For many people, 
these ads may be the only time they may see information on open 
enrollment. Removing this key part of the strategic engagement strategy 
is damaging not only to the Federal marketplaces but to all 
marketplaces nationwide and, ultimately, come at the highest price for 
our consumers.
           washington state's past individual market failure
    In Washington State, we know firsthand the consequences of an 
unstable individual market. Following passage and partial repeal of 
health reform legislation in the 1990s, our individual health insurance 
market went into a death spiral. By 1998, we had no individual health 
insurance options in the State other than a costly high-risk pool.
    The failure of our individual market was caused by three factors:

     Health insurance rules requiring guaranteed issue and 
prohibiting pre-existing condition exclusion periods of more than 3 
months.
     Repeal of an individual mandate.
     Lack of premium and cost-sharing subsidies to make 
coverage affordable.

    I make my recommendations to you today to ensure that other States 
do not experience the same market failure that we did in Washington. 
Millions of people--hard-working families and individuals--are relying 
upon us to ensure that the individual health insurance market will be 
there for them now and in the future. Yet uncertainty related to 
payment of cost-sharing reductions, high premiums, and weakened 
enforcement of the individual mandate have placed our individual health 
insurance markets at serious risk. There are three concrete steps that 
Congress must take to address this crisis:

    1. Fund cost-sharing reductions for at least 3 years.
    2. Establish a Federal reinsurance program with a duration of at 
least 3 years.
    3. Invest in enrollment outreach and education.

    Thank you for this opportunity to share my recommendations with 
you.

    The Chairman. Thank you, Mr. Kreidler.
    Ms. Wing-Heier.

 STATEMENT OF LORI K. WING-HEIER, DIRECTOR, ALASKA DIVISION OF 
                    INSURANCE, ANCHORAGE, AK

    Ms. Wing-Heier. Thank you for the opportunity to testify 
today about the health insurance market in Alaska and the need 
for congressional action to help the people in the individual 
insurance market in 2018 and beyond.
    Alaska has amongst the highest cost of healthcare in the 
Nation due to low population density and limited healthcare 
provider or facility competition in much of the State. While 
the individual mandate reduced the number of uninsured 
Alaskans, an unintended consequence was that the high cost of 
the individual health insurance premiums increased even 
further.
    Premiums in the individual market in Alaska have increased 
by 203 percent since 2013. On average, an Alaskan in 2013 was 
paying a monthly premium of $344 per month and in 2017, that 
premium is $1,041 per month.
    To stabilize this volatile market, the Division of 
Insurance worked with Governor Bill Walker to create the Alaska 
Reinsurance Program. The 29th Alaska State Legislature passed 
the Governor's bill in 2016 with overwhelming bipartisan 
support.
    The Alaska Reinsurance Program is intended to provide 
stability to the individual health insurance market, mitigating 
rate increases by removing high cost claims. As planned, this 
had an immediate impact on rates.
    Prior to enacting the Reinsurance Program, indications were 
that the rate filing from the single insurer in Alaska would be 
close to 40 percent in 2017. After enactment, the rate increase 
was a moderate 7.3 percent.
    An independent actuarial analysis estimates the Reinsurance 
Program will increase enrollment in the individual market by 
1,650 individuals. Modeling also indicates that the program may 
attract healthier members to the individual market further 
reducing premiums.
    After enacting the Reinsurance Program, Alaska then 
applied, and was subsequently approved, for a Federal ACA 
Section 1332 State Innovation Waiver.
    Alaska waived the requirement of a single risk pool and 
proposed that the Federal Government provide pass through 
funding for a period of 5 years to secure the State's 
Reinsurance Program. The pass through funding is based on the 
savings generated as a reduction in the Advanced Premium Tax 
Credits.
    It is estimated that the Alaska Reinsurance Program will 
save the Federal Government $51.6 million in Advanced Premium 
Tax Credits in 2018 relative to what would have been the tax 
liability had the Program not been put into place.
    After the Federal pass through funds are accounted for, the 
State will be responsible for providing approximately 15 
percent of the $55 million Program cost necessary to stabilize 
the individual market.
    As you consider congressional action to stabilize premiums 
across the country in 2018, we offer the following 
perspectives.
    We would urge Congress to not disrupt the health insurance 
market, but instead, focus immediately on stabilization. Any 
decision made after the filings are approved could cause 
unintended, unfavorable disruption to insurance markets. 
Uncertainty destabilizes the market.
    Committing to funding Cost Sharing Reduction payments 
through at least 2019 will keep premium rates from increasing 
at an even higher rate.
    We support collaborative reforms developed in consultation 
with State regulators that strengthen markets with a goal of 
health insurance not only being accessible, but affordable. 
Programs that allow States to address the unique needs of their 
citizens, such as the Section 1332 Waivers, are vital to the 
long-term stability of health insurance markets.
    Further deliberation on health insurance taxes is needed. 
In particular, citizens of States like Alaska that already face 
extremely high healthcare costs may be unfairly penalized by 
the Cadillac Tax.
    Additionally, exempting insurers from health insurance tax 
in counties or States served by one insurer may be an effective 
way to increase the choice or competition that will benefit 
citizens, but should be considered for all States as a 
moratorium.
    Please consider continuing and funding the Navigator and 
Assister Programs. In rural areas of Alaska, insurance brokers 
and consultants are hard to find. These programs reduce the 
number of uninsured citizens and maximize market participation. 
Media and public announcements are vital to open enrollment 
being successful.
    A review of regulations may reveal some that are 
unnecessarily burdensome and costly to both medical providers 
and insurers.
    We are also interested in coordinated efforts with 
healthcare providers to address the underlying drivers of 
healthcare spending.
    Even under the extreme tight considerations you face to 
address 2018 premiums, please make your decision in a 
bipartisan manner after thorough analysis.
    We are here to assist you in any way we can and I look 
forward to your questions.
    Thank you.
    [The prepared statement of Ms. Wing-Heier follows:]
                Prepared Statement of Lori K. Wing-Heier
                                summary
    An unintended consequence of the Affordable Care Act was that the 
already extremely high cost of health insurance in Alaska increased 
even further. Premiums in the individual market in Alaska have 
increased by 203 percent since 2013, the year before the ACA was 
enacted.
    To address the critical situation and stabilize the volatile 
market, the Division of Insurance worked with Governor Bill Walker to 
develop the Alaska Reinsurance Program, which the 29th Alaska 
Legislature subsequently passed with overwhelming bipartisan support in 
2016. The Alaska Reinsurance Program provides stability to the 
individual health insurance market, mitigating rate increases by 
removing high cost claims from the individual market. The program had 
an immediate impact on rates.

      Prior to the enactment of the program, indications were 
that the rate filing from the single insurer in Alaska's individual 
market would include an increase of close to 40 percent. After the 
enactment, the 2017 individual rates had an average increase of just 
over 7 percent.
      Independent actuarial analysis estimates the reinsurance 
program will increase enrollment in the individual market by nearly 
1,650 individuals relative to what enrollment would be absent the 
program. Modeling also indicates that the program may attract healthier 
members to the individual market, further reducing premiums.

    To solidify the Alaska Reinsurance Program, the State was awarded 
an ACA Section 1332 State Innovation Waiver. Alaska waived the 
requirement of a single risk pool and will receive Federal pass-through 
funds for 5 years. The funding is based on the savings generated as a 
result of the estimated $51.6 million reduction in the Advanced Premium 
Tax Credits liability to the Federal Government in 2018, relative to 
what it would have been absent the reinsurance program.
    As you consider congressional action to stabilize premiums across 
the country in 2018 and beyond, we offer the following considerations 
from the perspective of the Alaska health insurance markets,

         We urge Congress not to disrupt health insurance 
        markets, but instead to focus on stabilization.
         Any decisions made after the filings are approved next 
        week could cause unintended, unfavorable disruptions to 
        insurance markets.
         Committing to funding Cost Sharing Reduction payments 
        through at least 2019 will keep premium rates from increasing 
        at an even higher rate.
         Until a viable alternative is proposed on the national 
        level or via State waivers, the individual and employer 
        mandates are necessary in the short term to keep markets 
        stable.
         We support collaborative reforms, developed in 
        consultation with State regulators, that strengthen markets 
        with a goal of health insurance not only being accessible but 
        affordable.
         Programs that allow States to accommodate the unique 
        needs of their residents, such as the Section 1332 State 
        Innovation Waiver, are vital to the long-term stability of 
        markets.
         Further deliberation on the health insurance tax is 
        needed.
         A review of regulations may reveal some that are 
        unnecessarily burdensome and costly to both medical providers 
        and insurers.
         We are also interested in coordinated efforts with 
        health care providers to address the underlying drivers of 
        health care spending, considering all aspects including 
        pharmaceuticals, air ambulance, inpatient, and outpatient.

    Even under the extreme time constraints you face to address 2018 
premiums, please make your decisions in a bipartisan manner after 
thorough analysis. My fellow insurance directors/commissioners and I 
are here to assist you in any way we can to inform the difficult 
decisions before you.
                                 ______
                                 
            alaska's individual health care insurance market
    The cost of health care is very high in Alaska, and access is 
limited compared to other States, particularly for specialty services. 
Low population density and limited healthcare provider and facility 
competition in much of Alaska are primary contributors to Alaska's high 
health care costs. With a population of 738,432 spread across 570,641 
square miles, Alaska has a small population and is the largest and one 
of the most geographically isolated States in the Nation.
    Access to care has long been a challenge in Alaska due to its large 
geographic size, rural population, and insufficient health care 
provider competition. Because of these challenges, common managed care 
practices such as legislated network adequacy levels, closed network 
plans, and the development of Health Maintenance Organizations have not 
been successful. Alaska has among the highest cost of health care in 
the Nation; correspondingly, Alaska also leads the States in the cost 
of health care insurance and workers' compensation insurance.
    As intended, the Affordable Care Act's individual mandate increased 
health care insurance enrollment in Alaska. Prior to the ACA's 
enactment in 2014, Alaska's uninsured population was estimated at 
approximately 134,000 residents, mostly non elderly adults. After 2 
years of expanded ACA enrollment opportunities, the number of uninsured 
residents in Alaska was estimated to be approximately 100,000 people.
    However, the unintended consequence was that the already high cost 
of health insurance in Alaska increased even further. Many Alaskans who 
do not qualify for the Advanced Premium Tax Credits or subsidies are 
unable to afford plans offered in the individual market. According to 
data from the Division of Insurance and the Department of Health and 
Human Services, as reported by the Office of the Assistant Secretary 
for Planning and Evaluation in May 2017, premiums in the individual 
market in Alaska have increased by 203 percent since 2013, the year 
before the ACA was enacted. On average, the increase means that an 
Alaskan in the individual market who was paying a monthly premium of 
$344 per month in 2013 is paying $1,041 per month in 2017.
    The high costs do not only affect those in the individual market. 
Participants in group markets are not eligible to receive the subsidies 
or tax credits available to those in the individual market. Even though 
many Alaskans are covered by employer' sponsored plans, employer 
contributions typically only apply to the employee's premiums; costs to 
dependents are still prohibitive.
    Therefore, many Alaska families in the group market are unable to 
afford employer-sponsored insurance.
The Alaska Reinsurance Program Stabilizes Rates
    To address the critical situation and stabilize the volatile 
market, last year the Division of Insurance worked with Governor Bill 
Walker to develop the Alaska Reinsurance Program (ARP).
    The legislation (HB 374) received overwhelming bipartisan support 
from the 29th Alaska Legislature.
    The ARP is intended to provide stability to the individual health 
insurance market, mitigating rate increases by removing high cost 
claims from the individual health market. By removing high cost 
conditions from the risk pool, the benefits of the ARP are shared by 
the entire individual health insurance market regardless of income, 
age, race and ethnic group, or any other demographic characteristic.
    As anticipated, the program had an immediate impact on the rates in 
the individual market. Prior to the enactment of the ARP, indications 
were that the rate filing from the single insurer in Alaska's 
individual market would include an increase of close to 40 percent. 
After the enactment of the ARP, however, the 2017 individual rates had 
a moderate average increase of just over 7 percent. Still, it should be 
noted that Alaskans who had to switch insurers because their carrier 
left the market in 2017 experienced increases of over 35 percent from 
what they were paying in 2016.
    Actuarial modeling indicates that the ARP will continue to help 
reduce the rates necessary for insurers in the Alaska individual market 
and thus the premium amounts charged to Alaskans. The slowing of the 
growth of rate increases (and potential for rate decreases) due to the 
ARP may also draw additional Alaskans into the market. Independent 
analysis estimates the ARP will increase enrollment in the individual 
market by nearly 1,650 individuals relative to what enrollment would be 
absent the program. Modeling also indicates that the ARP may attract 
healthier members to the individual market, further reducing premium 
rates.
    Additionally, there is potential that the ARP will encourage 
competition in the State's insurance market. In 2014, Alaska had three 
national insurers and one regional insurer participating in the 
individual market. In 2015, two insurers departed the Alaska market, 
cutting the number of insurers in half. In 2016, the insurer covering 
approximately two-thirds of those enrolled in the individual market 
also exited the market, leaving only one insurer to serve Alaska's 
individual market in 2017. There is optimism that in subsequent years 
there may be interest from other insurers to provide health care plans 
if the market remains stabilized. If additional companies move into the 
Alaska individual market, consumers will benefit from natural market 
forces.
State Funding of the Alaska Reinsurance Program
    Historically, like many other States, Alaska had a high-risk pool 
to provide access to health insurance to those who were unable to 
purchase insurance in the commercial market because of pre-existing 
conditions. Unlike many other States, however, Alaska did not dissolve 
the pool when the ACA was enacted because there were a few hundred 
people that purchased Medicare supplement policies, which are not sold 
in Alaska by a commercial insurer. The Alaska Comprehensive Health 
Insurance Association (ACHIA) is financed by an assessment on health 
insurers in the market and the State of Alaska.
    HB 374 amended current statute, expanding the responsibilities of 
ACHIA to include the ARP. The ARP legislation also appropriated $55 
million from various premium taxes to stabilize the health insurance 
market in 2017. Before being appropriated, these taxes would have been 
forwarded to the State's general fund and used for other obligations of 
the State, including matters such as education, economic development, 
infrastructure, and public safety.
    Alaska is using the funds to reimburse the one insurer in the 
individual market for incurred claims from high-risk residents. The 
high-risk residents are defined as people who have been diagnosed with 
one or more of the covered conditions identified in regulation. The 
insurer still administers the claims; ACHIA receives the State funding, 
audits the claim requests, and upon acceptance of the claims, disburses 
the funds to the insurer on a periodic basis.
    Due to the State of Alaska's ongoing fiscal concerns, the State 
legislature gave no assurances that the ARP would be funded beyond 
2017, putting the sustainability of the ARP and the stabilization of 
Alaska's individual health insurance market in jeopardy if longer term 
sources of funding were not identified.
Federal Support of the Alaska Reinsurance Program
    In early January of 2017, Alaska submitted an application to the 
Department of Health and Human Services (Centers for Medicare and 
Medicaid Services) and the Department of Treasury (Internal Revenue 
Service) for a Section 1332 State Innovation Waiver. As authorized 
under the ACA, an innovation waiver allows State-by-State amendments 
within specific parameters. For instance, coverage must be at least as 
comprehensive and affordable as what existed prior to the waiver, the 
number of State residents covered must be comparable to the baseline 
without a waiver, and the scenario must not increase the Federal 
deficit.
    Alaska's application waived the requirement of a single risk pool 
and proposed that the Federal Government provide pass-through funds for 
a period of 5 years to stabilize the ARP. The pass-through funding is 
based on the savings generated as a result of a reduction in the 
Advanced Premium Tax Credits (APTC). It is estimated that the ARP will 
save the Federal Government $51.6 million in APTC in 2018, relative to 
what the tax liability would have been absent the program.
    Premium tax credits associated with the ACA will continue to be 
paid based on Federal methodology, but the growth of such payments is 
slowed by the ARP. Independent actuarial analysis showed that the 
amount in APTC paid by the Federal Government to Alaskans was 
significantly reduced when the ARP went into effect in 2017:

 
----------------------------------------------------------------------------------------------------------------
                                                                    Baseline-No
                          Calendar year                                 ARP        APTC with ARP    Difference
----------------------------------------------------------------------------------------------------------------
2017............................................................    $185,716,278    $185,716,278             $00
2018............................................................    $233,898,461    $182,260,689     $51,637,772
2019............................................................    $258,351,449    $202,372,542     $55,978,906
2020............................................................    $279,343,570    $219,162,267     $60,181,304
2021............................................................    $312,617,789    $247,210,983     $65,406,805
2022............................................................    $342,289,634    $272,477,673     $69,811,961
----------------------------------------------------------------------------------------------------------------

    There was also difference in APTC paid during calendar year 2017, 
but the waiver is not applicable until 2018; the ARP is wholly funded 
by the State of Alaska in 2017.
    In July, Governor Walker was notified that Alaska's waiver had been 
approved. Director Seema Verma's letter to the Governor indicated that 
the State will receive an estimated $322,652,234 to fund the ARP over 
the next 5 years:

 
------------------------------------------------------------------------
                    Calendar year                      Estimated funding
------------------------------------------------------------------------
2018.................................................        $48,362,287
2019.................................................        $61,536,998
2020.................................................        $65,716,251
2021.................................................        $71,177,767
2022.................................................        $75,858,931
    Total............................................       $322,652,234
------------------------------------------------------------------------

    After the Federal pass-through funds are accounted for, the State 
will be responsible for providing approximately 15 percent of the 
funding needed to stabilize the individual market through the ARP. In 
2018, Federal funds will cover $48,362,287 and State funds will cover 
$6,637,713 of the $55 million program costs.
    Actuarial modeling shows that, at least in part due to the ARP, 
Alaska's 2018 premiums are expected to decrease by approximately 20 
percent. While the premium decrease may not directly affect those 
currently receiving tax credits, Alaskans who do not receive Federal 
tax credits will benefit from the premium reductions. Additionally, if 
Federal funding of the Cost Sharing Reduction payments continues, the 
decrease could be as high as 25 percent, bringing the cost in the 
individual market back to within reach of many Alaskans.
    The State will continue to pursue programs that would benefit 
Alaskans both in the individual and small group markets, possibly 
including a second Section 1332 State Innovation Waiver.
            need for congressional and administrative action
    The ACA was a well-intended piece of Federal legislation that 
brought insurance to millions of Americans. The expectation was that as 
provisions of the ACA alleviated insurance underwriting restrictions 
that previously made it impossible for many people with pre-existing 
conditions to obtain insurance, millions of uninsured Americans with 
chronic or severe illnesses would become eligible for health insurance. 
Through mechanisms such as the Advanced Premium Tax Credits and Cost 
Sharing Reduction payments, low and moderate-income individuals who 
would otherwise not be able to pay monthly premiums would also be able 
to obtain health insurance. The insurance markets would be stabilized 
by the 3Rs-risk adjustment, reinsurance, and the risk corridor.
    The idea was that millions would enroll and that the premiums 
generated would support the expenses of the whole. However, this well-
intended fundamental concept failed in most States, forcing insurers to 
either withdraw from entire counties/States or increase the premiums in 
the individual market to a point that ACA plans were not affordable to 
consumers. The 3Rs had mixed impact on the markets and have not 
stabilized the ACA as they were intended to do, which has also led to 
some of the turbulence the health insurance markets are now facing.
    As you consider congressional action to stabilize insurance 
premiums across the country in 2018 and beyond, I offer the following 
considerations from the perspective of the Alaska health insurance 
markets,

     We urge Congress not to disrupt health insurance markets, 
but instead to focus immediately on stabilization.
         Rate filings are to be approved next week. Any 
        decisions made after the filings are approved could cause 
        unintended, unfavorable disruptions to insurance markets.
         Uncertainty destabilizes the market. Committing to 
        funding Cost Sharing Reduction payments through at least 2019 
        will keep premium rates from increasing at an even higher rate.
         The individual and employer mandates keep the markets 
        stable. Eliminating the mandates would most likely result in 
        fewer individuals participating in the market, resulting in a 
        smaller health care pool and higher costs to all enrollees. 
        Until a viable alternative is proposed on the national level or 
        via State waivers, the mandates are necessary in the short term 
        to keep markets stable.

     We support collaborative reforms, developed in 
consultation with State regulators, that strengthen markets with a goal 
of insurance not only being accessible but affordable.
         Amendments to the ACA must be carefully vetted with 
        State regulators to examine whether expectations of the States 
        are reasonable and how the structure of potential programs may 
        adversely impact States. Program costs should not be shifted to 
        the States, creating undue financial burdens.
         Programs that allow States to accommodate the unique 
        needs of their residents, such as the Section 1332 State 
        Innovation Waiver, are vital to the long-term stability of 
        health insurance markets.
         Further deliberation on the health insurance tax is 
        needed. In particular, citizens of States like Alaska that 
        already face extremely high health care costs may be unfairly 
        penalized by the current structure of the Cadillac tax. 
        Additionally, exempting insurers from the health insurance tax 
        in counties/States served by only one insurer may also be an 
        effective way to increase choice/competition that will benefit 
        citizens.
         Consider continuing the navigator and assister 
        programs. In rural areas of Alaska, insurance brokers are not 
        always available. These programs reduce the number of uninsured 
        citizens and maximize market participation.
         A review of regulations may reveal some that are 
        unnecessarily burdensome and costly to both medical providers 
        and insurers.

     We are also interested in coordinated efforts with health 
care providers to address the underlying drivers of health care 
spending, considering all aspects including pharmaceuticals, air 
ambulance, in-patient, and outpatient. Last year, Alaska established a 
health care authority feasibility study to begin to look at cost 
controls. With the support of the Federal Government, a similar 
national effort could go a long way toward addressing the underlying 
market dynamics that are driving unsustainable increases in health care 
costs.
    We are down to days to address the number of insurers, the cost, 
and the subsidies for 2018. Even under such extreme time constraints, 
as you consider congressional action to stabilize premiums to help 
people in the individual insurance markets, please make your decisions 
in a bipartisan manner after thorough analysis. Any decision that you 
make, large or small, will affect access to health care insurance, an 
extremely important and deeply personal subject to all Americans.
    My fellow insurance directors/commissioners and I are here to 
assist you in any way we can to help inform the difficult decisions 
before you.
    Thank you.

    The Chairman. Thank you, Ms. Wing-Heier.
    Ms. Miller, welcome.

  STATEMENT OF TERESA MILLER, J.D., INSURANCE COMMISSIONER OF 
                  PENNSYLVANIA, HARRISBURG, PA

    Ms. Miller. Good morning, Chairman Alexander, Ranking 
Member Murray, and members of the committee.
    I am honored to be here today and want to applaud the 
committee for hosting such an important conversation at such a 
critical point in time.
    I am not going to sit here this morning and tell you that 
the ACA is perfect. I think we all know that it is not. But the 
narrative that the ACA is failing and imploding is just false 
and ignores the coverage requirements that the law put in 
place.
    Millions of Americans have benefited from the ACA. The 
employer markets, where the majority of people get their 
insurance, have actually seen a moderation of costs since 
passage of the ACA.
    Pennsylvania's uninsured rate is now the lowest it has ever 
been thanks to improvements in the individual market and 
Governor Wolf's expansion of Medicaid in 2015.
    Pennsylvania has about 426,000 people on the individual 
marketplace and about 80 percent of these enrollees receive 
subsidies to help them pay their premiums and more than half 
benefit from Cost Sharing Reductions to help them pay their out 
of pocket costs like co-pays and deductibles. So for most 
individuals in this market, the ACA is working well.
    The ACA has resulted in millions of Pennsylvanians no 
longer being denied coverage due to a preexisting condition, or 
facing financially devastating annual or lifetime limits, and 
benefiting from quality, comprehensive coverage because of 
preventative care and Essential Health Benefit requirements.
    Pennsylvania's market has experienced difficulties, but our 
individual market is not collapsing. Our individual market 
insurers filed for an average increase of 8.8 percent for 2018, 
assuming no changes to the ACA.
    I am pleased to report that our insurers are finally seeing 
improved experience with this market and that is reflected in 
their rate increases. But I am also very concerned that that 
stability is on fragile ground because of the ongoing 
uncertainty surrounding the future of the ACA and, in 
particular, payments for Cost Sharing Reductions.
    I cannot stress enough how difficult this uncertainty is on 
our markets. These payments have a significant impact on rates 
and failing to make a long-term commitment will do nothing but 
drive up costs for consumers. This will further hurt the 1 to 2 
percent of Pennsylvanians, roughly 125,000 people, who do not 
receive subsidies because those who do will be shielded mostly 
from these premium increases if their insurer stayed in the 
market, that is.
    Ultimately, rates have to be finalized based on finite 
assumptions. Pennsylvania consumers will be left to bear the 
burden of premium increases or lessen choices necessitated by 
continued uncertainty.
    Congress should allocate money for these payments through 
at least 2019 to give insurers the predictability they so 
desperately need.
    We also must make sure that we are properly encouraging 
enrollment in the individual market. The health of any 
insurance market depends on the strength of its risk pool and 
reduced enrollment strains the risk pool and contributes to 
rising costs for all of those in it. I worry steps the Trump 
administration has taken could further erode the risk pool.
    Just last week, we found out the extent of cuts to outreach 
and enrollment efforts funded by the Federal Government. Health 
and Human Services will spend just $10 million advertising 2018 
open enrollment compared to the $100 million spent for 2017.
    In addition to this, funding granted to health insurance 
Navigator organizations to help people enroll was almost halved 
from the levels given under the previous administration.
    Reducing outreach efforts at the Federal level, combined 
with a shortened enrollment period for 2018, will do nothing 
but leave more people without coverage and could raise rates 
for people left in the market.
    In Pennsylvania, we are implementing our own outreach 
program. We are working alongside insurers, healthcare 
providers, consumer advocates, and other stakeholders to reach 
our common goal of increasing covered Pennsylvanians.
    Encouraging enrollment helps everyone. People have access 
to coverage, insurers have a more robust risk pool, and 
providers are more likely to receive compensation for care they 
provide. Over time, a more robust risk pool should also result 
in lower premiums for consumers.
    As we work toward providing stability in the market, we 
should consider all options to moderate the premium increases 
caused by market instability.
    A $15 billion reinsurance program in the context of a 
careful, bipartisan approach to improving our healthcare system 
would be a great place to start, especially if the individual 
mandate were preserved and outreach was boosted to increase 
enrollment.
    The ACA's Reinsurance Program successfully moderated 
premiums while it was in place and a reintroduction of a long-
term reinsurance program could be an effective way to scale 
back the premium increases that we currently see.
    Finally, I do think we need to have a serious national 
conversation about healthcare costs in this country. These 
costs are constantly growing and even if we bring stability to 
our markets, we must still address healthcare costs if we want 
to ensure that our current system is sustainable in the long-
term. This is a national issue and even as States work to 
address rising costs in our own markets, we are not going to be 
able to fix this completely on our own.
    While the healthcare reform debate has been, without 
question, partisan the goals that we are trying to achieve are 
not and neither is recognizing the real problems that exist in 
our system. We all want Americans to have access to the care 
they need and be able to afford that care. We all want them to 
have choices and that means supporting a competitive health 
insurance marketplace that provides that choice.
    I am grateful for your leadership, Chairman Alexander, and 
I am so thankful that we are finally moving in the direction of 
working together to find real solutions to ensure all consumers 
have access to quality, affordable care.
    Thank you.
    [The prepared statement of Ms. Miller follows:]
               Prepared Statement of Teresa Miller, J.D.
                                summary
    As we discuss the importance of stabilizing the individual market, 
we must recognize the impact the Affordable Care Act (ACA) has on 
Pennsylvanians. Before the ACA, people often couldn't get health 
insurance due to a pre-existing condition. If they did they often paid 
significantly more, and these polices did not always cover their pre-
existing condition. Individuals faced financially devastating annual 
and lifetime limits, and women could see higher premiums than men and 
not have contraception or maternity care covered. Critical services 
like mental health and substance use disorder treatments were often 
difficult if not impossible to find coverage for.
    Governor Wolf has been an active participant in a group of 
Governors working to ensure Congress's approach to health care reform 
is bipartisan and strengthens our Nation's health insurance system. 
Additionally, the Governors urge Congress to take steps to make 
coverage more affordable and stable in the interim. Governor Wolf and I 
applaud the committee's efforts to work toward a solution on this 
important issue. Because of the ACA, more than 1.1 million 
Pennsylvanians have accessed comprehensive coverage through the ACA. We 
need to buildupon this foundation and make targeted, common sense 
changes that will improve the ACA.
    Pennsylvania's market is on a path to stability and will not 
implode unless the Federal Government takes adverse action. If cost-
sharing reductions payments are not made, this stability will be 
jeopardized. These payments have a significant impact on insurers' 
rates, and failing to make a long-term commitment will increase prices 
for consumers in the individual market. Making these payments is the 
simplest way to ``fix'' the ACA that I can offer. It will very soon be 
too late to avoid rate increases for 2018, so Congress must act 
quickly.
    Improvements to the ACA's 1332 State innovation waivers and how 
they are obtained could be made, but greater State flexibility should 
not come at the cost of the baseline coverage improvements that the ACA 
has made. Doing so would only create more plans that offer very little 
coverage and have high out-of-pocket costs when care is accessed.
    Both ACA replacement proposals considered by the U.S. House and 
Senate did contain reinsurance programs for 2018. A $15 billion 
reinsurance program in the context of a careful, bipartisan approach to 
improving our health care system would be something I would view 
favorably, especially if the individual mandate were preserved and 
outreach was boosted to improve enrollment in individual market plans. 
The ACA's reinsurance program successfully moderated premiums while it 
was in place and the reintroduction of a long-term reinsurance program 
could be an effective way to scale back the premiums we currently see.
    The health of any insurance market depends on the strength of its 
risk pool, and reduced enrollment strains the risk pool and contributes 
to rising costs for those in it. I worry about some steps the Trump 
administration has taken that could further erode the risk pool, such 
as shortening the open enrollment period and making substantial cuts to 
funds used to advertise the open enrollment period and support 
enrollment efforts coordinated by health insurance navigators. In 
Pennsylvania, we are working alongside stakeholders to increase covered 
Pennsylvanians and inform them of important changes to this year's open 
enrollment period so people are covered, insurers have a robust risk 
pool, and providers are more likely to receive compensation for care 
provided.
    While the health reform debate has without question been partisan, 
the goals we are trying to achieve are not, and recognizing the real 
problems that exist in our health care system should not be either. I 
am hopeful that we can move away from proposals that would jeopardize 
the health and financial security of millions of Americans, and focus 
on solving real problems with common sense solutions like these.
                                 ______
                                 
    Good morning Chairman Alexander, Ranking Member Murray, and members 
of the U.S. Senate Committee on Health, Education, Labor, and Pensions. 
Thank you for the opportunity to be here today to speak about an issue 
that is so critical for residents of the Commonwealth of Pennsylvania.
    I am pleased to have been recently chosen by Governor Wolf to serve 
as acting secretary for the Pennsylvania Department of Human Services 
after having been insurance commissioner since shortly after Governor 
Wolf took office in 2015.
    Governor Wolf has been an active participant in a group of 
Governors working to ensure Congress's approach to health care reform 
is completed in a bipartisan manner that strengthens our Nation's 
health insurance system. Additionally, the Governors urge Congress to 
take steps to make coverage more affordable and stable in the interim.
    Both Governor Wolf and I applaud the committee's efforts to work 
toward a solution on this important issue. As we begin to talk about 
the importance of stabilizing our individual health insurance markets 
under the Affordable Care Act (ACA), we should first recognize the 
impact that the ACA itself has had on Pennsylvanians and why it is 
imperative that we fix the law rather than undoing the progress we have 
made. Before the ACA, sick people often couldn't get health insurance 
due to a pre-existing condition. If they were able to get coverage, 
they often paid significantly more for it than someone without a pre-
existing condition. In some cases, these individuals would be offered a 
policy, but it would not include coverage for their pre-existing 
condition. Individuals with chronic medical issues or anyone who 
underwent a costly procedure like a transplant could face financially 
devastating annual and lifetime limits. Women could see higher monthly 
premiums than men and perhaps not have contraception or maternity care 
covered. Other critical services like mental health and substance use 
disorder treatment services and prescription drugs were often difficult 
if not impossible to find coverage for. Most importantly, more than 10 
percent of Pennsylvanians and 16 percent of Americans nationwide went 
uninsured.
    Since the ACA's passage, the national uninsured rate has fallen to 
8.6 percent and Pennsylvania's uninsured rate has dropped to 6.4 
percent--the lowest it's ever been. More than 1.1 million 
Pennsylvanians have accessed coverage through the ACA, and that 
coverage is much more comprehensive than what was previously available. 
There are 12.7 million Pennsylvanians, and more than 40 percent of 
them--5.4 million--have pre-existing conditions and cannot be denied 
health insurance coverage due to the ACA. Today, 4.5 million 
Pennsylvanians no longer have to worry about large bills due to annual 
or lifetime limits on benefits, and 6.1 million Pennsylvanians benefit 
from access to free preventive care services. In addition to this, more 
than 175,000 Pennsylvanians have also been able to access substance use 
disorder treatment services through their exchange and Medicaid 
expansion coverage. These services are critical as our commonwealth and 
other States around the country strive to combat the overwhelming 
impact of the opioid epidemic.
    The positive impact of the Governor's efforts to expand Medicaid 
and help Pennsylvanians access treatment services for substance use 
disorder have become even more evident to me as I've taken the helm at 
the Department of Human Services. These are expansions that are making 
a significant difference in people's lives.
    While the ACA has not been perfect, it is critical that we level 
set and talk about the issues that exist and who those issues really 
impact. The ACA has had minimal impact on the Medicare program and 
enhanced the already very popular Medicaid program by expanding access 
to millions more around the country. Further, since the passage of the 
ACA, the employer markets, where small and large businesses can 
purchase insurance products for their employees, have been stable and 
even seen costs grow at a slower pace than before the ACA. The 
individual market, where we see problems, is a very small market 
relative to these others, covering only about 5 percent of 
Pennsylvanians. However, this market is very important because it is 
where individuals and families who do not have access to coverage 
through their employer or public programs go to purchase insurance.
    This market is heavily subsidized because of the ACA. About 80 
percent of Pennsylvanians who purchase their coverage through the 
exchange receive tax credits to help pay their premiums. Because of the 
way the tax credits are structured based on income, these consumers do 
not feel the full impact of premium increases. Currently more than half 
of Pennsylvania consumers who enroll in the exchanges are also eligible 
for cost-sharing reductions, additional financial assistance that helps 
them pay for their out-of-pocket costs like deductibles and co-pays. 
The payments the Federal Government makes to insurers to cover the 
costs of this additional financial assistance are in jeopardy because 
President Trump has not committed to making them longer than a month-
to-month basis. I am seriously concerned about the destabilizing effect 
failing to commit to these payments could have on both Pennsylvania's 
market and others around the country and how this will impact premiums 
for people in the individual market, but I will address this at length 
later in this testimony.
    I believe we need to buildupon the foundation of the health care 
system we have and make targeted, common sense changes that will 
improve the ACA and make it work better for the people it is not 
working perfectly for today. We still have a serious affordability 
problem in the individual market, especially for the 1-2 percent of 
Pennsylvanians who rely on the individual market for coverage but are 
not eligible for financial assistance and those facing rising 
deductibles. Their concerns are legitimate and must be addressed, but 
starting over or moving backwards will not better serve Pennsylvanians 
or Americans throughout the Nation. I applaud this committee's efforts 
to work together to strengthen this law so it may better serve everyone 
rather than undoing the good it has accomplished around the country. 
With that context, I would like to offer Pennsylvania's thoughts on the 
issues we currently face and what reasonable bipartisan solutions that 
would improve the ACA for all could look like.
           guaranteeing payments for cost-sharing reductions
    While the individual market is facing issues, in some States more 
than in others, I can tell you that Pennsylvania's market is on a path 
to stability and will not implode unless the Federal Government takes 
adverse action. Our market saw some issues last year and lost two 
carriers, but I worked closely with our remaining insurers to ensure 
that we did not have any bare counties for 2017. For 2018, our 
individual market insurers filed for a statewide average increase of 
just 8.8 percent, assuming no changes come from the Federal level. An 
analysis on the drivers of 2018 premium increases puts our requests at 
or below what we would expect based on trends in annual medical costs 
and a Federal tax on health insurance plans that comes into effect for 
the 2018 plan year. I am very happy that our insurers are finally 
seeing improved experience with this market and that is reflected in 
the rate increases they filed, but I am very concerned that this 
stability is on fragile ground because of all the uncertainty here in 
Washington.
    When rates were initially filed, I asked our insurers to provide 
information on what they would need to request if cost-sharing 
reduction payments were not made or if the individual mandate was not 
enforced. The differences are stark. If cost-sharing reductions are not 
paid, they estimated that they would need to request a statewide 
average increase of 20.3 percent. If the individual mandate is not 
enforced, they said they would seek an estimated 23.3 percent increase. 
If both changes occur, our insurers estimated that they would seek an 
estimated increase of 36.3 percent, assuming they continue to 
participate in the market at all. I'd be lying if I said these numbers 
didn't worry me, especially as we prepare to finalize rates. At this 
point, we have no more certainty on cost-sharing reductions than we had 
in April when I, along with executives from all five of Pennsylvania's 
on-exchange insurers, first wrote to Secretary Tom Price on this issue.
    What's most frustrating about the situation we are in is that it is 
entirely avoidable. I have sent multiple letters to Secretary Price 
asking the administration to not take steps to undermine the progress 
we have made and the pathway to stability that we put our market on. I 
reiterated this urgent need for stability in an answer to a request for 
information on how to stabilize the individual market issued by the 
Centers for Medicare and Medicaid Services in June. Governor Wolf and a 
bipartisan group of Governors have asked congressional leaders to 
address stability, too. And, yet here we are, 2 weeks out from when 
States need to send final rates for 2018 to the Department of Health 
and Human Services (HHS)--a deadline that was already extended--and the 
Trump administration still refuses to make anything longer than a 
month-to-month commitment on these payments.
    I cannot stress enough how difficult this uncertainty is on our 
insurers. These payments have a significant impact on their rates, and 
failing to make a long-term commitment will do nothing but drive up 
prices for consumers in the individual market. This will further hurt 
the 1 to 2 percent of Pennsylvanians--roughly 125,000 people--who do 
not receive subsidies as those who do receive subsidies would be 
shielded from most of the increases--if their insurer stayed in the 
market at all. At the end of the day, rates have to be finalized based 
on finite assumptions and insurers will sign contracts to participate 
on the exchange or they won't participate at all. Pennsylvania 
consumers will be left to bear the burden of premium increases or 
lessened choices necessitated by this instability.
    Failing to make payments for cost-sharing reductions does not serve 
any goal aside from trying to make markets fail. According to the 
Congressional Budget Office's analysis on the matter, doing so would 
result in higher premiums, more counties without individual market 
coverage options for 2018, and would increase the Federal deficit by 
$194 billion through 2026 due to the payment of additional premium 
subsidies because of higher premiums. The Congressional Budget Office 
further estimates that premiums would rise an additional 20 percent in 
2018. This will undoubtedly create more problems, especially for 
individual market consumers who are not eligible for financial 
assistance.
    If the Trump administration is not going to do the right thing for 
consumers and stabilize the law, Congress should allocate funds to 
ensure payments for cost-sharing reductions continue for 2018. Making 
these payments is the simplest way to ``fix'' the ACA that I can offer. 
I fear that it will very soon be too late to avoid rate increases for 
2018, so Congress must act quickly.
             supporting opportunities for state innovation
    Under Section 1332 of ACA, States have the opportunity to obtain 
waivers on portions of the law as long as they do not increase the 
Federal deficit, reduce affordability or quality of coverage sold in 
the State, or have a negative quantitative impact on the State's 
insured population. States currently must offer a public notice and 
comment period, hold public hearings, and pass legislation outlining 
the State's intent to pursue and implement a Section 1332 waiver. 
Governor Wolf and I join the sentiments outlined in the bipartisan plan 
presented by Governors Hickenlooper and Kasich to streamline the waiver 
process in order to improve State flexibility.
    Changes that permit States to easily buildupon waivers obtained and 
successfully implemented by other States, coordinating the waiver 
submission and approval process, and easing the process of applying for 
waiver extensions would be viewed favorably. We would value the ability 
to pursue a waiver without requiring action from our State's 
legislature. If States are making small, targeted changes to stabilize 
the market like what is needed now, the current process can be too long 
and cumbersome when you consider a State's budget cycle and legislative 
process. An extensive process should be in place if States were to make 
significant changes to the structure of their market, but streamlining 
the current process would allow States to use Section 1332 waivers to 
make incremental changes as issues arise. The Wolf Administration would 
also look favorably on the opportunity to combine multiple waivers into 
a coordinated effort and consider deficit neutrality across the 
comprehensive plan.
    However, we strongly believe that the baseline coverage 
improvements that must be maintained during the waiver process must be 
preserved. Eliminating these provisions--often called ``guardrails'' 
would likely result in a race to the bottom. Insurance companies would 
sell plans that offer less comprehensive coverage at a lower monthly 
cost, leaving consumers vulnerable to large out-of-pocket costs when 
care is accessed--something we all do at some point. These protections 
exist to ensure that Americans around the country have access to 
equitable, quality coverage regardless of the State in which they 
reside. The baseline protections contained in the ACA and the coverage 
improvements that have resulted should not be jeopardized as we 
consider opportunities for greater State flexibility.
                   preserving the individual mandate
    Since the ACA was passed, the individual mandate has historically 
been an unpopular feature of the law. However, it is imperative to 
making sure the law functions as it was intended.
    The ACA included a ``three-legged stool''--the individual mandate, 
non-discrimination requirements for people with pre-existing 
conditions, and subsidies and cost-sharing reductions that helps 
insurers balance the added risk of individuals with pre-existing 
conditions while avoiding the risk of adverse selection where people 
only enter the market when they are sick and need care. Proposals to 
replace the ACA have eliminated the mandate in exchange for a 
continuous coverage requirement. Because purchasing insurance would no 
longer be mandatory under a continuous coverage requirement, the people 
who seek coverage during the open enrollment period will likely be a 
less healthy population and the risk pool would deteriorate, thus 
driving up premiums for those who need coverage the most.
    I know that the individual mandate is not popular, but we must have 
adequate incentives to encourage people to purchase coverage and bring 
healthy people into the market. Over time, this should help stabilize 
and even lower premiums for everyone as more young and healthy people 
enter the market and help offset the cost of sicker enrollees.
            adequate funding for risk stabilization programs
    When the ACA was passed, it contained three premium stabilization 
programs to help insurers experiencing higher than anticipated claims 
as they adjusted to the new market. Two of these programs--risk 
corridors and reinsurance--were designed to be temporary and have 
expired, but many insurers around the country, including those in 
Pennsylvania, are still owed significant risk corridor payments. Last 
year, Highmark, one of the Pennsylvania insurers, sued HHS for these 
payments, and the Pennsylvania Insurance Department filed an amicus 
brief in support of their suit because insurance companies who entered 
this market under a set of expectations should be made whole for 
payments they were anticipating. Many of these insurers experienced 
significant losses in the first few years, and making these payments 
would be a good way for the Federal Government to demonstrate good 
faith and a long-term commitment to the success of this market.
    Both ACA replacement proposals considered by the U.S. House and 
Senate contained reinsurance programs for 2018. Implementing a 
reinsurance program would be another effective way to demonstrate a 
long-term commitment to the health of this market for insurers and 
consumers who rely on this market for coverage.
    A $15 billion reinsurance program in the context of a careful, 
bipartisan approach to improving our health care system would be 
something I would view favorably, especially if the individual mandate 
were preserved and outreach was boosted to improve enrollment in 
individual market plans. The ACA's reinsurance program successfully 
moderated premiums while it was in place and the reintroduction of a 
long-term reinsurance program could be an effective way to scale back 
the premiums we currently see. Increasing participation in the 
individual market would create a more stable, healthy risk pool, while 
the reinsurance program would help off-set the costs of enrollees with 
abnormally high claims costs. Together, these steps would moderate 
premiums for all while retaining the critical protections and robust 
benefits required by the ACA.
                continuing enrollment outreach programs
    Encouraging people to enroll in this market through active outreach 
programs is extremely important to ensuring the market's success. The 
health of any insurance market depends on the strength of its risk 
pool, and reduced enrollment strains the risk pool and contributes to 
rising costs for those in it. I worry about some steps the Trump 
administration has taken that could further erode the risk pool, such 
as shortening the open enrollment period and ending HHS's contracts to 
support outreach and enrollment efforts for the marketplace. In total, 
the Trump administration intends to spend $10 million nationwide on 
advertising for 2018 open enrollment compared to $100 million spent 
last year. The Administration also recently announced that funding 
granted to health insurance navigator organizations to help people 
enroll was almost halved from levels given under the previous 
Administration. I worry that these decisions will result in fewer 
people enrolling and relatively fewer healthy people enrolling, 
exacerbating the issues that already exist in the risk pool.
    Pennsylvanians are accustomed to having 3 months to enroll in 
coverage. In the past, December 15 has been an important deadline 
because it was previously the last day to enroll in coverage that was 
effective January 1, but enrollment still continued for the remaining 6 
weeks of open enrollment. During 2017 open enrollment, more than 
130,000 Pennsylvanians enrolled in coverage after the initial December 
15 deadline. That is roughly one third of our market. I am extremely 
concerned that a shortened open enrollment period coupled with low 
outreach from the Federal Government will catch consumers off guard and 
result in people who want or need coverage being left out of the market 
because they missed the enrollment window.
    In Pennsylvania, we are working to ensure that our marketplace 
population and potential enrollees understand this change through our 
own insurance outreach program. We are working alongside insurers, 
health care providers, consumer advocates, and other stakeholders to 
reach our common goal of increasing covered Pennsylvanians and 
informing them of important changes to this year's open enrollment 
period. Encouraging enrollment helps everyone--people have access to 
coverage, insurers have a more robust risk pool, and providers are more 
likely to receive compensation for care provided. Overtime, a more 
robust risk pool should result in lower premiums for consumers. I hope 
the Trump administration ultimately sees the value in this outreach 
too, but for now Pennsylvania will work to fill the gap created by the 
Administration.
               addressing underlying costs of health care
    Stabilizing the individual market is an important first step to 
addressing cost concerns we hear from consumers, but we still need to 
get to the root of what really drives insurance costs: the cost of 
health care. To put it simply, insurance is expensive because the 
health care it pays for is expensive. Unfortunately, it gets more and 
more expensive every year, which means premiums will continue to rise 
every year even if there are no detrimental changes to the market.
    We need to have a serious national conversation about how we can 
moderate the unsustainable growth in health care costs, especially in 
areas experiencing astronomical growth in cost like we currently see 
with pharmaceutical costs. There is no silver bullet to reduce the cost 
of health care and the conversation is not easy, but it is essential as 
we look to the future and the long-term viability of our health care 
system. We continue to look for solutions to these problems at the 
State level, but these are national problems that I believe merit 
national solutions. So, I am hoping all of you and your colleagues in 
Congress will work alongside the States in tackling this complex and 
multifaceted issue.
                      the need for bipartisanship
    While the health reform debate has without question been partisan, 
the goals we are trying to achieve are not, and recognizing the real 
problems that exist in our health care system should not be either. I 
am very thankful that we are finally moving in the direction of working 
together, and I am optimistic that the ideas shared today will be a 
strong foundation moving forward. We all want Americans to have access 
to the care they need and be able to afford that care. We also want 
them to have choices, and that means supporting a competitive health 
insurance marketplace that can provide that choice. Let's start by 
recognizing where consumers may not have that access or affordability, 
and let's understand where we are not supporting the competitive market 
we need. Then, taking a lead from Governor Wolf and the group of 
bipartisan Governors, let's look for solutions that can solve those 
problems, both in the short-term and in the long-term.
    As my testimony outlines, I believe some of those short-term 
strategies must be to provide clarity and stability of the rules in the 
market by appropriating funds to ensure payment of cost-sharing 
reductions and robustly enforcing the individual mandate while 
enhancing outreach and enrollment efforts to get more healthy people 
into the market and improve the risk pool. A reinsurance program could 
also contribute to stability and the moderation of premiums and show 
insurers that the government wants to work with them for the benefit of 
consumers--your constituents--to make this market an attractive place 
to do business. In the long-term, it is imperative that we begin to 
look for ways to moderate the growth of health care costs to ensure our 
health care system is sustainable and will meet the needs of those that 
need it now as well as those that will need to rely on it in the 
future. I am hopeful that we can move away from drastic proposals that 
would jeopardize the health and financial security of millions of 
Americans, and focus on solving real problems with common sense 
solutions like these.
    Again, thank you for allowing me to speak with you today. I would 
be happy to take any questions that you might have.

    The Chairman. Thank you, Ms. Miller.
    Mr. Doak, welcome.

STATEMENT OF JOHN D. DOAK, COMMISSIONER, OKLAHOMA DEPARTMENT OF 
                      INSURANCE, TULSA, OK

    Mr. Doak. Thank you, Senator. Good morning, Chairman 
Alexander and Ranking Member Murray.
    One of the things, before we get started today, our hearts 
and prayers are with those folks that are in the line of the 
hurricanes. We want to keep them in our prayers today. We would 
ask for speedy consideration of the Flood Reauthorization Act 
with all that on our minds.
    Good morning. I appreciate the opportunity to testify today 
to provide an Oklahoma perspective on stabilizing the 
individual health insurance market for 2018.
    For years, Oklahoma has been dealing with the negative 
consequences of Obamacare. I have been warning about spiking 
rates, narrowing networks, rising deductibles, general market 
instability for too long. My warnings have been ignored at the 
Federal level. I look forward to seeing how Congress will 
finally address these problems in time for carriers to meet 
their 2018 deadlines.
    The implementation of Obamacare in Oklahoma has been a 
failure. It has created severe market disruptions without 
meaningful reductions in the number of uninsured in our State.
    In 2014, our citizens chose plans from five different 
carriers on the federally facilitated marketplace. Those 
carriers sustained heavy losses and by 2017, that number had 
dropped to only one carrier. What is happening now cannot be 
sustained and we can expect eventually Oklahomans will have no 
market and no options.
    Not only do Oklahomans have one marketplace carrier to 
choose from this year, but over the past 4 years, rates in our 
marketplace have increased by 130 percent. Studies estimate 
that approximately 30,000 individuals, who do not quality for 
premium assistance, exited the non-group market in Oklahoma 
between 2016 and 2017. Small business owners and self-employed 
individuals, who are the backbone of Oklahoma's economy, are 
suffering.
    As premiums have spiked, enrollees have experienced 
deductible shock and cannot afford the coverage. Many people in 
Oklahoma, where the average per capita income is just above 
$25,000 annually, are being forced to pay higher premiums for a 
policy they cannot afford to actually use.
    Further, as carriers have sustained large losses in the 
marketplace, they have responded by narrowing their provider 
networks. It turns out, you cannot always keep your doctor.
    Many other States are facing similar issues. Unfortunately, 
all recent efforts to repeal and amend Obamacare have failed 
and States like mine have been left holding the bag.
    I am encouraged by the Trump administration's priorities, 
particularly in encouraging State flexibility and autonomy. In 
Oklahoma, Obamacare gives us no other options at this point.
    Oklahoma has submitted a 1332 Waiver application under the 
Obamacare framework. This application focuses on the creation 
of a market stabilization program using Federal pass through 
funding and State-based assessments. This would create a 
reinsurance program for carriers operating in the marketplace.
    This initial plan is estimated to reduce premiums and 
increase enrollment in the marketplace in 2018. Subsequent 
Waivers will regain State control over other Obamacare 
requirements. However, I am not convinced that Obamacare 
Waivers are going to be the solution to our problem.
    What we really need is an innovative, long-term solution 
that truly returns powers back to the States to implement ideas 
tailored to fit each State's specific needs in health 
insurance.
    That is why I have been encouraged that proposals that are 
out there, like ones from Senators Graham and Cassidy, which 
would repeal the individual and employer mandates, and allocate 
block grant dollars to the State. This is the kind of 
leadership and flexibility to the long-term stability of our 
markets.
    If some States want to keep their regulations from 
Obamacare, that is great if that works for them. But that is 
not working for Oklahoma and we should have the opportunity to 
do something different, or else we face an uncertain and 
difficult future on this current flawed path.
    In conclusion, former senator, Dr. Tom Coburn, recently 
said, ``If you want to fix healthcare, fix the markets.'' I do 
not think government will ever fix healthcare. Only markets 
will.
    For more information, please see my written testimony, 
which includes letters I sent in January to House Majority 
Leader McCarthy and Chairman Alexander. These letters outline 
several other innovative solutions to our insurance problems.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Doak follows:]
                   Prepared Statement of John D. Doak
                                summary
    Insurance commissioners across the country have been dealing with 
the consequences of the Affordable Care Act (ACA) on State markets 
since its inception: rising rates, constricting networks, rising 
deductibles, fewer consumer choices, and market instability. What we 
have now in our individual market is the consequence of encumbering a 
functional market with the burdens of becoming a Federal tax 
distribution system.
    The consequences of the ACA on Oklahoma's individual market have 
been severe. We have seen a reduction in competition down to only one 
carrier on the marketplace, drastic rate increases, constricting 
networks, higher deductibles, and market instability. These problems 
were not caused by uncertainty about cost sharing reduction (CSR) 
payments, but have all occurred while CSR payments have been made to 
insurers.
    The construction of the ACA intentionally left States like mine 
with limited ability to affect any real and lasting changes to these 
Federal programs. However, I am encouraged by the shift in priorities 
from a new Presidential administration and a focus on State flexibility 
and autonomy. We are continuing to look for solutions while we await a 
more comprehensive change at the Federal level.
    Over the last few years I have worked on several State initiatives 
in an effort to improve our health insurance markets. In 2012, the 
Oklahoma Legislature passed a bill allowing small employers to purchase 
group health insurance through an employer association. In 2017, the 
Oklahoma legislature passed a bill creating a framework in which 
insurers licensed in other States, such as those sharing geographic 
borders and communities with Oklahoma, can sell health insurance 
policies across State lines. These types of State innovations should be 
encouraged by Congress, not preempted.
    For the last year, Oklahoma's 1332 Waiver Task Force has been 
working to formulate a number of recommendations for modernizing 
Oklahoma's health insurance market. The first waiver application 
submitted on August 16, 2017, focuses on the establishment of the 
Oklahoma Individual Health Insurance Market Stabilization Program, 
which proposes to utilize Federal pass-through funding and State-based 
assessments to create a reinsurance program for carriers operating on 
the FFM. I remain unconvinced that this Program is a long-term solution 
to Oklahoma's health insurance problems.
    While I would advocate for greater State flexibility and a return 
of authority over health insurance regulation to the States, there are 
many things that Congress can do within its existing authority to help 
us, including: repeal all fees and taxes that increase the price of 
health insurance; repeal the individual and employer mandates and 
replace them with a meaningful continuous coverage premium discount or 
a surcharge and waiting period for interrupted coverage; eliminate the 
use of Navigators in the distribution of health insurance; allow States 
to define what qualifies as a short-term medical plan not subject to 
the requirements of the ACA; and adopt a series of proposals intended 
to reduce the cost of health care and give individuals more control 
over their health care dollars, including expanding the use of HSA's, 
addressing the cost of prescription drugs, and supporting transparency 
in pricing for the delivery of medical services.
                                 ______
                                 
                              introduction
    Chairman Alexander, Ranking Member Murray, and members of the 
committee, thank you for the invitation to testify today. My name is 
John Doak, and I am the elected Insurance Commissioner for the State of 
Oklahoma. On behalf of my State, I appreciate the opportunity to 
provide you with information regarding Oklahoma's experience with the 
Affordable Care Act (ACA) as well as my recommendations for the future 
of individual insurance markets.
    Insurance commissioners across the country have been dealing with 
the consequences of the ACA on State markets since its inception: 
rising rates, narrowing networks, rising deductibles, fewer consumer 
choices, and market instability. Since my election in 2010, I have 
opposed the type of top-down Federal intrusion into our health 
insurance markets we have experienced with the ACA because this system 
removes the traditional understanding of health insurance as a transfer 
of risk. What we have now in our individual market is the consequence 
of encumbering a functional market with the burdens of becoming a 
Federal tax distribution system.
                         oklahoma's experience
    The consequences of the ACA on Oklahoma's individual market have 
been severe. During the first 4 years of federally facilitated 
marketplace (FFM) activity, Oklahomans have seen a drastic decrease in 
competition, leaving them fewer choices each year. In 2014, Oklahoma 
consumers seeking coverage on the FFM could choose plans from five 
carriers. This number dropped to four in 2015, two in 2016, including a 
new entrant to the market, then finally to one in 2017. While the one 
carrier remaining has indicated its continued commitment to the market 
in 2018, the lack of competition limits plan options for consumers.
    Oklahoma's FFM enrollees have also faced numerous significant rate 
increases for their dwindling plan options. The last carrier left 
standing endured over $300 million in losses for its first 3 years of 
FFM business leading to a 76 percent average rate increase for 2017 
qualified health plan (QHP) enrollees. Over the past 4 years, rates 
have increased for Oklahomans on the FFM by 130 percent and 
approximately 30,000 Oklahomans exited the non-group market because of 
unaffordability. These increases are especially harmful for individuals 
with QHPs who make too much money to qualify for Advanced Premium Tax 
Credits (APTCs) or Cost Sharing Reductions (CSRs), or who purchase an 
individual policy off the FFM. These people-- often small business 
owners or self-employed individuals--are bearing the brunt of these 
increases.
    These rising premiums impact consumer decisions about other policy 
provisions, like deductibles. As premiums have risen, enrollees have 
been pushed to accept higher deductible levels in order to offset the 
cost of coverage. These higher deductibles have frustrated the 
intention of health insurance for many customers who cannot afford to 
pay the out-of-pocket costs for their health care.
    Further, as carriers have suffered losses on FFM business they have 
responded by narrowing their provider networks, which can result in a 
disruption in the primary care relationship for many consumers. In some 
instances, all of the specialists involved in a procedure may not be in 
the same network, resulting in surprise bills for the consumer. This 
uncertainty only adds to the affordability and accessibility problem 
the consumer already faces.
    The question is frequently asked whether Congress should expressly 
fund cost sharing reduction (CSR) payments to insurers. It should be 
noted that the instability in Oklahoma's market, the spike in premiums, 
the rise in deductible levels, and the constriction of networks have 
all occurred while CSR payments were being made to insurers. While the 
nonpayment of CSRs would exacerbate Oklahoma's numerous individual 
market problems, CSRs are not the source of those problems. Oklahoma's 
market instability is the result of the ACA's foundational flaw: it is 
a top-down Federal Government intervention into health insurance 
regulation that distorts natural, cost-controlling market forces and 
stifles innovation in a sector in need of new ideas.
                          oklahoma's response
    The construction of the ACA intentionally left States like mine 
with limited ability to affect any real and lasting changes to these 
Federal programs. However, I am encouraged by the new outlook and shift 
in priorities from a new Presidential administration. It is clear that 
President Trump and Health and Human Services Secretary Price want to 
provide each State more flexibility and autonomy to develop solutions 
to fit its particular needs. In Oklahoma, we are continuing to look for 
solutions while we await more comprehensive change at the Federal 
level.
    In the last few years I have worked on several State initiatives in 
an effort to improve our health insurance markets. In 2012, the 
Oklahoma Legislature passed Senate Bill 1621, which allows small 
employers to purchase group insurance through an employer association. 
The bill requires associations to meet the requirements of a ``bona 
fide'' association. In 2017, the Oklahoma Legislature passed Senate 
Bill 478, which creates a framework in which insurers licensed in other 
States, such as those sharing geographic borders and communities with 
Oklahoma, can sell health insurance policies across State lines. 
Allowing for increased State control over the benefits required in 
health insurance plans through broader legislative changes could lead 
to greater competition and stability in the individual marketplace. 
These types of State innovations should be encouraged by Congress, not 
preempted.
    This April, I held a Healthcare Innovation Summit during which 
presenters at the cutting edge of their fields discussed price 
transparency and medical care value, innovative insurance product 
design, health insurance underwriting, Project ECHO, digital delivery 
models, and government participation in the health insurance and health 
care markets, along with other current issues. These discussions are 
available online to watch any time and I encourage the committee to 
review these discussions as a part of your study on these issues.\1\
---------------------------------------------------------------------------
    \1\ A video recording of the Healthcare Innovation Summit is 
available online at https://www.youtube.com/user/okinsurance411.
---------------------------------------------------------------------------
    Other agencies and groups in Oklahoma are looking for solutions as 
well. For the last year, Oklahoma's 1332 Waiver Task Force has been 
working to formulate a number of recommendations for modernizing 
Oklahoma's health insurance market.\2\ The first waiver application 
submitted on August 16, 2017, focuses on the establishment of the 
Oklahoma Individual Health Insurance Market Stabilization Program 
(``the Program'').\3\ The Program proposes to utilize Federal pass-
through funding and State-based assessments to create a reinsurance 
program for carriers operating on the FFM. The impact of the Program is 
unclear at this point, and several groups have expressed their interest 
in submitting legal challenges to stop its implementation. I remain 
unconvinced that this Program is a long-term solution to Oklahoma's 
health insurance problems.
---------------------------------------------------------------------------
    \2\ A copy of the Task Force's concept paper can be found at 
https://www.ok.gov/health/documents/
1332%20Waiver%20Concept%20Paper.pdf.
    \3\ The 1332 waiver application can be found at https://www.ok.gov/
health2/documents/1332%20State%20Innovation%20Waiver%20Final.pdf.
---------------------------------------------------------------------------
    If the initial 1332 waiver is approved, the Task Force's focus will 
shift to developing the next 1332 waiver to pursue its additional 
recommendations. While well-intentioned, the Task Force's proposals 
will always remain constrained by the overarching regulatory scheme 
constructed by the ACA. States would only be able to exercise the 
authority they once held through a system controlled by the Federal 
Government. As I have stated repeatedly in my time as Insurance 
Commissioner, this is authority that should have been left to the 
States all along. What we really need is an innovative, long-term 
solution that returns power back to the States to implement ideas 
tailored to fit each State's specific needs. I have been greatly 
encouraged by the recent proposals I have seen from Senators Graham and 
Cassidy, which would allocate block grant funding to States to be used 
as each State sees fit.
                      recommendations for congress
    While I would advocate for greater State flexibility and a return 
of authority over health insurance regulation to the States, there are 
many things that Congress can do within its existing authority to help 
us. On January 18, 2017, I sent a letter to House Majority Leader Kevin 
McCarthy outlining my recommendations for reforming this sector.\4\ An 
identical letter was sent to Chairman Alexander's office and shared 
with every Representative and Senator from Oklahoma. I won't reiterate 
every recommendation I made in the letter, but I would like to 
emphasize a few key points.
---------------------------------------------------------------------------
    \4\ A copy of this letter can be found at https://www.ok.gov/oid/
documents/McCarthy percent20Letter%20Draft%20Final%20clean.pdf.
---------------------------------------------------------------------------
    First, Congress should repeal all fees and taxes that increase the 
price of health insurance, including the Patient-Centered Outcomes 
Research Institute (PCORI) fees, the Health Insurance Tax (HIT), and 
FFM user fees. Second, Congress should repeal the individual and 
employer mandates and replace them with a meaningful continuous 
coverage premium discount or a surcharge and waiting period for 
interrupted coverage. Third, Congress should eliminate the use of 
Navigators in the distribution of health insurance because the program 
has disrupted the longstanding vital role of agents and brokers in the 
marketing and sale of health insurance. Fourth, Congress should allow 
States to define what qualifies as a short term medical plan not 
subject to the requirements of the ACA.
    Finally, Congress should look beyond health insurance and adopt a 
series of proposals that would help reduce the cost of health care and 
give individuals more control over their health care dollars. We should 
expand the use of health savings accounts to allow people to choose 
more affordable high-deductible health plans, work to address the 
skyrocketing cost of prescription drugs in America, and support 
transparency in pricing for the delivery of medical services like the 
model instituted by the Surgery Center of Oklahoma so that market 
forces can work as intended.
                               conclusion
    Oklahoma is facing the collapse of our individual health insurance 
market. We are down to only one carrier on our FFM and we have seen a 
rise in premiums of 130 percent over the last 4 years. While many in my 
State are taking steps within the existing regulatory framework to 
hopefully stop some of the damage the ACA has caused, we still need 
help in the form of regulatory rollback and clarity to establish a more 
solid long-term footing. In addition, Congress should take steps to 
encourage price transparency in the delivery of medical services and to 
reign in the high cost of prescription drugs. It is time for serious 
leaders to make serious decisions to help out the people of every State 
as we move into 2018. I appreciate the committee's focus on this 
important issue and I thank you for the opportunity to present this 
testimony.

    The Chairman. Thank you, Mr. Doak. And thanks to each of 
you.
    We will now begin a round of 5 minute questions. We will 
begin with Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman.

                       Statement of Senator Enzi

    I want to thank the panel for, not only what you have said, 
but what is in your testimony. It will be helpful to us in a 
number of solutions.
    I will begin with Ms. Wing-Heier. I know that Alaska has 
been faced with some dramatic premium increases in the country 
and potential loss of carriers on the exchange. You set up that 
Reinsurance Program to address premiums and working through 
that Section 1332 Waiver now that also includes several market 
reforms.
    Can you talk about what you are seeing from the Waiver, and 
what you might look for, and what some of the impediments might 
have been to getting the Waiver?
    Ms. Wing-Heier. The Waiver process is somewhat onerous in 
the fact that there is not a defined application to submit.
    So the States that are applying are hoping that they are 
providing the data requested by CMS including the actuarial 
analysis, the economic impact, and proving that they are 
staying within the guardrails to be given the Waiver.
    After that is done, the part that is stifling States right 
now is the 6-month waiting period before they receive final 
approval.
    The first part of the Waiver, as far as the application, 
the actuarial analysis, and such can be done in a period of a 
couple of months. But then you wait--after CMS has given the 
first approval--for up to 6 months to know if you will receive 
final approval, your funding, or the ability to go forward with 
any State innovation that you may find would benefit the 
citizens in your State.
    I will tell you that CMS was very helpful to us, but it 
still was a rather lengthy process.
    Senator Enzi. So you can probably provide us with some 
suggestions as you just did for simplifying that process.
    Ms. Wing-Heier. We submitted and worked with CMS on some 
reforms that we thought would help. I do not believe they have 
been adopted. I am quite sure they have not been adopted. But 
we did submit some comments to CMS on things that could improve 
the Waiver process.
    Senator Enzi. Thank you.
    Mr. Doak, Oklahoma faces some similar challenges to 
Wyoming. We are practically neighbors. We have only one insurer 
offering individual coverage on the exchange.
    Can you talk about the challenge that it creates with one 
carrier holding all the risk? I know that Wyoming's Blue Cross 
sustained some real losses last year--and I might talk about 
those later--in their first year as the only carrier offering 
coverage.
    What changes would you suggest that could encourage more 
competition in the individual market for States like Oklahoma 
and Wyoming? I know you had some of that in your testimony, if 
you could share that with us.
    Mr. Doak. Yes, sir, Senator. Thank you very much for that 
question. We do share some of the similarities with your State. 
Our Blue Cross had a huge amount of losses, much like yours.
    One of the things I think that we can do is as long as we 
are under the current framework that we are operating under, 
under Obamacare, the 1332 Waiver--and funding the CSRs--is the 
right way, the path to go ahead unless we make other, dramatic 
changes in the future. In my letter as you have stated, I see 
many options for Oklahomans in the future to be able to----
    Small businesses in Oklahoma are really bearing the brunt 
of many of these unintended consequences. I think the 
associational health plan bills, other types of vehicles that 
can be used.
    I, for one, believe that buying across State lines is a 
possibility. But again, also offering maybe more catastrophic 
type plans, as we talked about earlier this morning, for 
Oklahomans to be able to have choices for what types of 
carriers, and services, and deductibles they have.
    The more choices we can give consumers, in my opinion, is 
the right thing to do for my State and others.
    Senator Enzi. Thank you.
    I noticed that Ms. McPeak mentioned a stop loss of a 
specific amount. Mr. Kreidler mentioned a Federal stop loss. 
And unusual market changes were mentioned by virtually all of 
you.
    I know in Wyoming, we had a carrier that found out that two 
boys each had a $30,000 prescription each year, but that was 
bought out by the primary company. The generic went away and it 
went to $1.3 million each. They had a $2.6 million hit from 
just one family.
    I appreciate your comments on that and my time is about to 
expire here. I will be asking in writing for some suggestions 
from you on ways to do that stop loss, a specified amount, and 
how the Federal Government ought to have a role in it, and what 
the States' role should be.
    Senator Enzi. Thank you.
    The Chairman. Thank you, Senator Enzi, and thank you for 
staying within 5 minutes and setting a good example. We have 
lots of senators here today.
    Senator Casey.
    Senator Casey. Mr. Chairman, thank you. I want to thank the 
chairman and Ranking Member Murray for making this hearing 
possible and the subsequent hearings, as well as the 
roundtables.
    When I was going across Pennsylvania in August, I was in 32 
of our 67 counties, and when I could announce that we were 
having bipartisan healthcare hearings, there was an audible 
sigh of relief. So we are grateful for the opportunity.
    Secretary Miller, I wanted to ask you in particular that we 
have, I think, a broad consensus emerging, at least, about the 
importance of the Cost Sharing Reduction payments, the so-
called CSRs. I think more discussion now, as well, about 1332, 
the Waiver.
    You said in your testimony that you felt that the 1332 
Waiver process could be streamlined to minimize administrative 
burden--I am paraphrasing here--while also protecting the 
guardrails of the Waiver program.
    Can you walk through that? In particular, the concerns you 
have about maintaining those so-called guardrails. Explain 
that.
    Ms. Miller. Thank you, Senator Casey.
    I think from Pennsylvania's perspective, as we think about 
potentially looking at a 1332 Waiver, the current process is 
very cumbersome. We would have to pass legislation. We would 
have to go through public hearings and then go through the 
process that, I think, Alaska is familiar with in terms of 
working with CMS. So it is a long process to get there.
    I think the more we could streamline that process, the 
better off it would be. I think if States have the opportunity 
to submit a letter from their Governor--as opposed to having to 
pass legislation to move forward on a 1332 Waiver--that would 
be very helpful in allowing us to respond to market changes and 
trying to make sure our markets are stable going forward.
    I do not mean to sound greedy, but if we could have some 
planning funding available to help us really think through how 
this would work, I think, that would also be very helpful.
    Also, having flexibility around the 1332 Waivers and 1115 
Waivers, the Medicaid waivers, to think about those in 
conjunction with the terms of the budget neutrality 
requirements, as opposed to looking at them individually for 
those requirements. But I think as we move forward trying to 
make----
    The Chairman. Could you explain what you mean by that, 
please?
    Ms. Miller. Sure. The 1332 Waivers and the 1115 Waivers, 
each have requirements for budget neutrality. I think for 
States, if we want to be even more innovative, being able to 
think about those Waivers together instead of having to think 
about them separately, and having the overall budget neutrality 
requirement looked at as a pool. From just a strict, ``Is this 
budget neutral together?'' would be very helpful and would 
allow States to be more innovative in thinking about that.
    To your point, Senator Casey, I do think that the baseline 
coverage requirements are really important in ensuring that 
whatever we do does not result in fewer people covered or does 
not erode the coverage.
    I think a lot of us up here hear from consumers on a 
regular basis about high deductibles and concerns about other 
out of pocket costs that maybe they do not expect when they go 
to use their care.
    I think we want to keep those baseline coverage 
requirements intact as much as possible, but the more we can 
streamline that process, make it easier for States to respond 
to market dynamics, that would be helpful.
    Senator Casey. The other thing I wanted to ask you about is 
what happens to folks in the age category of 50 to 64?
    We know, for example, that the rate of uninsured adults 
ages 50 to 64 dropped by some 47 percent from 11.6 to 6.1 
percent between December 2013 and March 2015. Obviously, good 
news there of a huge drop by almost 50 percent.
    In the context of your experience in Pennsylvania, how has 
Pennsylvania stabilized its marketplace while also protecting 
older Pennsylvanians who are not yet eligible for Medicare, 
meaning that 50 to 64 age category?
    How have we done in terms of accessing more affordable 
care?
    Ms. Miller. I think the current system protects older 
Americans and older Pennsylvanians. I think the 3-to-1 age band 
that we currently have in the ACA helps makes sure that older 
Pennsylvanians can afford that coverage.
    I think a lot of us, as we think about stabilizing these 
markets, are really focused on getting more young and healthy 
people into the risk pool. And I think if we can find ways to 
do that that are not on the backs of older Americans, that is 
the way to do it.
    I think a lot of us have talked about expanding enrollment, 
funding, advertising, and funding Navigators so that we have 
assistance getting people enrolled. All of those are ways that 
we can boost enrollment without doing it on the backs of older 
people.
    Senator Casey. Great. Thank you, Mr. Chairman.
    The Chairman. You have some time, if you have another 
question here?
    Senator Casey. I am good.
    The Chairman. Thank you.
    Senator Paul.

                       Statement of Senator Paul

    Senator Paul. I think the Chairman has done a good job at 
focusing on the problem and so has the panel. We have problems 
in the individual market and it is 6 percent of the 
marketplace.
    I think, though, that we have ignored where they are and 
what is working in the insurance market. If there are parts of 
the insurance market that are working, maybe we should look at 
those and try to figure out how we get more people into the 
parts of the marketplace that are working and how we get them 
out of the marketplace that is not working.
    Six percent of the people are in the individual 
marketplace, 36 percent of the people are in the large group 
self-insured marketplace. This is the ERISA marketplace and I 
think you can make the argument that it works better than 
anything else.
    It probably has the lowest increase in rates over time. 
People are protected. They have large groups. They can have 
leverage to get cheaper prices. They have a pool of people that 
they are a group of, where they are protected against one 
person getting sick.
    I would argue that the worst place, an impossible place in 
the whole world to be is in the individual market. You should 
not want to be there.
    My question is a more fundamental question: can you fix it? 
And is it morally or ethically right to take money from the 
taxpayer and give it to insurance companies to subsidize people 
in the individual market?
    Maybe we ought to give people an exit. Let us let people 
get out of the individual market.
    Mr. Doak has talked a little bit about this with the health 
associations in his State. I would go a step further.
    There are 2 million fast food restaurants in our country. 
About 15 million people work in the fast food industry. These 
are our lower wage, working class citizens. These are the 
people who are struggling. These are the people who are still 
not even insured under Obamacare. These are the people we 
should want to help.
    Let us let them become part of the ERISA plans. Let us have 
nationwide health associations.
    What if one person was negotiating for 15 million people, 
fast food restaurant workers? You are bound to get a better 
price. It is the phenomenon of Wal-Mart. Wal-Mart gets a better 
price because they are a bigger purchaser of things.
    Let us legalize that. It would cost the taxpayer nothing. 
Let us just say, ``People can associate with other people and 
buy insurance.'' Get the heck out of the individual market.
    I would prefer there be no individual market. I think it is 
an artificial construction of attaching insurance to your 
taxes. When we did that, we created the individual market and 
then we have Big Insurance come to Washington with their hands 
out.
    They made $6 billion a year in profit before Obamacare. 
They now make $15 billion a year. CSRs are money you are giving 
to the insurance companies. All this money is being given to 
Big Insurance. Do not give it to them.
    Let the individuals get into the group marketplace and 
guess who pays for that? It comes out of the $15 billion in 
profit they make in the group market.
    What a scam. They come here and they make billions of 
dollars in the group market, but then they whine that they 
cannot make it in the individual market. They cherry pick. They 
love the group market, and they stay in it, and they say, ``We 
are not going to sell in the individual market.''
    Let us equalize the individual and give them the power to 
negotiate with the insurance company. It does not cost 
anything. All we are doing is legalizing collective bargaining 
for consumers. We should like it on this side of the aisle.
    While Senator Sanders and I do not often agree on things, 
if there are a few people left that are uninsurable or have a 
preexisting condition, I would rather buy them healthcare than 
give money to the insurance companies.
    It makes no sense to try to buy insurance for people who 
cost $1 million a year who we already know what is wrong with 
them. Put $1 million in for somebody and buy them healthcare. 
Do not buy them insurance.
    You can do all these fancy reinsurance things and all these 
backstops. They do not work. We are subsidizing an individual 
market that does not work. It just is nonfunctional. You can 
never get there.
    People say it is too expensive. New cars are too expensive. 
Why do we not subsidize it? You can have a stabilization fund 
for new cars, for iPads, for iPhones, college education; 
anything that costs too much. We can just put a bunch of 
taxpayer money in and say we are going to make it lower by 
giving money to the people who provide these things; people who 
make the iPhones, people who supply college.
    I think we ought to look at it a different way. Let us do 
not try to fix the individual market. Let us try to give people 
an exit ramp to get out of the individual market completely. 
For those who cannot or who do not that we have to provide 
healthcare for, why do we not look at actually buying 
healthcare for them rather than buying insurance for them?
    Mr. Doak, if you want to respond. If you have any numbers 
on what your health associations have done and whether or not 
it has put a little bit of a dent in helping people from the 
individual market get into the group market, I would appreciate 
it. Thank you.
    Mr. Doak. Yes, sir. Thank you.
    At this current time, the Oklahoma health, we have the 
legislation in place at the State level, but there are some 
frameworks around the bona fide, the actual definition of an 
association which, I think, needs a closer scrutiny to be to 
open up.
    I do agree with you that associational healthcare plan 
bills, while I may differ from my colleagues respectfully, but 
I do think that there is, that could be a very viable market 
for folks to band together. Whether they are, as you mentioned, 
folks in the restaurant business, or whether they are from the 
flower industry, wherever that might be to band together to 
purchase coverage. We know that there are folks that can 
facilitate that in the marketplace.
    I do agree with you on that, Senator.
    Senator Paul. Thank you.
    The Chairman. Thank you, Senator Paul.
    Senator Franken.

                      Statement of Senator Franken

    Senator Franken. Before I begin, I want to thank you, 
Chairman Alexander, and I want to thank the Ranking Member, 
Senator Murray, for holding this series of hearings on the 
individual insurance market reforms.
    Healthcare is such an important personal issue that affects 
millions of Americans. That is why I am heartened that we are 
having these bipartisan hearings to discuss common sense 
reforms that will stabilize markets and lower healthcare costs 
for consumers.
    I just wanted to spend a moment on the correct 
pronunciation of insurance, which is insurance not in-surance.
    [Laughter.]
    Thank you.
    Whether the commissioners here today pronounced it 
correctly, I think you all agree that we should have 
reinsurance or rein-surance. I believe that all but Mr. Doak 
who, by the way, mispronounced it, spoke explicitly on the 
importance of continuing the cost sharing and all of those who 
talked about cost sharing for multiple years.
    Mr. Doak, are you for continuing the cost sharing?
    Mr. Doak. Is that Franken or Frank-en?
    [Laughter.]
    Senator Franken. I cannot mispronounce Doak.
    Mr. Doak. That is good. That is good, sir.
    My position is that under the current Obamacare network, we 
must continue under the current framework we are working under 
unless it is changed. We do need to continue the cost sharing 
agreements.
    Senator Franken. Right.
    Mr. Doak. So I think we have consensus.
    Senator Franken. Good. We all have consensus on this panel 
of actual people--who are the heads of insurance in their 
States--that we should continue cost sharing and that we should 
do reinsurance.
    Commissioner McPeak, it is nice to see you again. As you 
know, Minnesota has applied for a 1332 Waiver to set up a 
Federal-State reinsurance program to help reduce health 
insurance premiums. My hope is that the Administration will 
approve this Waiver quickly.
    As documented in a ``New York Times'' article that ran this 
past weekend, my State insurance program has bipartisan support 
and passed in the State legislature, bipartisan support. If 
approved, it would reduce health insurance premiums by about 20 
percent.
    As the article notes, this reduction would help all 
Minnesotans buying health insurance on the exchange, not just 
those with the most costly healthcare needs. Other States like 
Mr. Doak's Oklahoma are considering similar proposals.
    Senator Alexander, I would like to ask unanimous consent 
that this article from ``The New York Times'' be submitted for 
the record.
    [The New York Times article referenced above may be found 
at https://www.nytimes/2017/09/02/us/politics/minnesota-health-
care-reinsurance.html.]
    The Chairman. It will be.
    Senator Franken. Commissioner McPeak, in your testimony you 
talked about the importance of a Federal reinsurance program.
    What advantages does a Federal reinsurance program offer 
compared to a State-based approach?
    Ms. McPeak. Thank you for the question and I will try to 
pronounce insurance correctly, but I am from the south, so I do 
not have any guarantees there.
    [Laughter.]
    I will say the Federal reinsurance program has a benefit 
for States like mine. It may not have the ability to upfront 
the seed money to get our own program started, even in a 1332 
Waiver process.
    Then, to use the Waiver process to create our own State 
fund would require the legislative approval that can sometimes 
be very difficult to obtain, even when your legislature in the 
State is in session, which ours is not again until the first of 
the year 2018.
    I see the additional benefit of the reinsurance program, 
not only to reduce premiums for consumers, but I think that it 
would add market competition. It would entice insurers back 
into the market because it would provide the economic certainty 
about a stop loss attachment point for a reinsurance program, 
so insurers could better estimate the risk of entering the 
market.
    Senator Franken. Would anyone else care to--Ms. Wing-Heier, 
I know that Alaska has a reinsurance program. You have had the 
1332 Waiver.
    Would anyone care to talk to the wisdom of a permanent 
Federal reinsurance program like the one that was established 
under Medicare Part D?
    Mr. Kreidler, I see you nodding. I like people nodding when 
I say something.
    Mr. Kreidler. Certainty is one of the things that we are 
really looking for, for 1332. Tell us if our application is 
going to be accepted. Do tell us whether it meets the criteria. 
Speed is what we are really interested in.
    In answering it, we are exploring it right now as one of 
our options in the State of Washington. We are also looking at 
a public option particularly in counties where there are not 
any other insurers that we could make available, either through 
our public employees, or expansion of the Medicaid program, or 
we have a high risk pool; some other way of being able to 
guarantee it.
    But when it comes to the 1332, because of the 6-month 
waiting period that we have right now in filing the 
application, because we have to go back to the legislature, it 
really compresses.
    We are trying to make a difference and see if we can make a 
change for 2019. We will not be able to do it for 2018, but we 
are pretty confident in our State that things are going to be 
stable for 2018. We are really worried about what is going to 
happen in 2019.
    Getting the CSRs funded will help in 2018 because it starts 
to restore their confidence. But give us some certainty on the 
1332 Waivers.
    We do not want to see our backs turned to the issues of the 
Essential Health Benefits or the protections on out of pocket 
expenses.
    Senator Franken. The guardrails that----
    Mr. Kreidler. The guardrails.
    Senator Franken [continuing]. Ms. Wing-Heier talked about 
this morning.
    Mr. Kreidler. Exactly. And you have heard that from other 
commissioners too. We are concerned about the guardrails, that 
they are not eroded away. Thank you.
    Senator Franken. I am out of time.
    I just want to say one thing, which is all of these 
things--cost sharing, reinsurance--have virtual cycle that 
bring down the costs of premiums and ultimately bring healthier 
people in. So does enforcing the mandates. So does more 
advertising and more people to help you navigate.
    That is what I am for.
    The Chairman. Thank you, Senator Franken.
    Senator Collins.

                      Statement of Senator Collins

    Senator Collins. Thank you, Mr. Chairman.
    Commissioner McPeak, it is good to see you back again. I 
want to followup on the reinsurance issue as well.
    Since the soaring costs of premiums in the individual 
market is a major concern of mine, and I would say of all of 
us, we heard today of the success of the reinsurance pool that 
Alaska has set up.
    Similarly Maine, between 2012 and 2013, had a reinsurance 
pool that was successful in lowering rates in the individual 
market by 20 percent, on average. I think if you look at the 
experience of those two States alone, it shows the benefit of 
reinsurance pools.
    As a practical matter, however, many States are simply not 
in a position to immediately stand up a reinsurance or a high 
risk pool. Therefore, I have two questions for you.
    One, do you see a role for the Federal Government in the 
short term in either establishing a high risk pool or assisting 
States in doing so?
    Second, the analysis that I have seen by Milliman has 
suggested that the cost to replicate the kind of reinsurance 
pool that Maine had would be about $15 billion annually.
    Does the NAIC agree with that and could you comment on both 
of those issues?
    Ms. McPeak. Certainly. Thank you for the question.
    I do believe that the reinsurance mechanism, or a high risk 
pool, either one, has the effect of removing from the risk pool 
the highest cost claims, which provides certainty to the 
insurers. It helps them actually price products for those other 
individuals in the risk pool. It should bring premiums down 
remarkably.
    Plus, as I said, I think it would also entice insurers to 
write in areas where you have very limited options because you 
have an idea of what your ultimate risk might be for writing in 
that area.
    As for the Milliman report, I do not know that we have 
provided any analysis on that figure. Fifteen billion dollars 
does seem like that would be a good place to start to set up a 
Federal mechanism until States could get on their feet to have 
their own system, which might be a reinsurance program or it 
could be a high risk pool, depending on the individual State 
needs.
    I think in Tennessee, we would be more interested in 
creating a reinsurance program. But as you mentioned, we do not 
have the ability to set that up immediately and certainly not 
to affect the 2018 rates.
    Senator Collins. Thank you.
    Ms. Wing-Heier, thank you for being here and sharing your 
experience. One of the keys to driving down rates in the 
individual market is to broaden the market and to get as many 
people as we can enrolled. Let me ask you about two ideas and 
one comes from conversations that I have had with insurance 
experts in the State of Maine.
    Right now under the Affordable Care Act, if you are over 
age 29, you cannot purchase the Copper Plan and get the 
subsidies that would be available even if your income would 
warrant that subsidy. And if you do not qualify for the 
subsidy, you are also prohibited from buying the Copper Plan 
unless you are under age 29.
    Should we change that, is my first question to you?
    Ms. Wing-Heier. We believe that being able to have a 
catastrophic or a Copper Plan available for a younger 
population is beneficial to growing the market; getting the 
healthier individuals in.
    We also think that it should probably be combined with a 
Health Savings Account. It will be somewhat of a learning 
experience for the younger population, the healthier 
population, to come in, and purchase insurance that they are 
not now doing mostly because of the prohibitive cost.
    So we are in support of finding, if you call it the Copper 
Plan or a catastrophic plan, bundled with an HSA for the 
younger population.
    Senator Collins. That is a great combination because then 
the HSA can be used to help pay the out of pocket costs.
    Ms. McPeak, I have only 8 seconds left, so you may have to 
answer this for the record. But another idea, which Senator 
Cassidy and I proposed many months ago, was auto-enrollment 
instead of an individual mandate where someone could opt out. 
But we know from the experience with 401(k) plans that if 
people are automatically enrolled, they are likely to stay 
enrolled.
    Do you have any thoughts on that as a way to help broaden 
the individual market?
    Ms. McPeak. I will just say very briefly. I do think that 
auto-enrollment could assist people in staying enrolled.
    The issue is if we have more than one carrier, which I hope 
that we return to that competitive environment some day, I 
would like to have the ability for consumers to choose because 
there are such detrimental options with provider networks and 
drug formularies that I would want to have some ability to make 
sure that you are enrolled in a plan that works for your 
family.
    Senator Collins. Thank you.
    The Chairman. Thank you, Senator Collins.
    Senator Bennet.

                      Statement of Senator Bennet

    Senator Bennet. Thank you, Mr. Chairman.
    I also want to thank you and Patty Murray, the ranking 
member, for holding this hearing. It is long overdue that we 
begin to approach this in a bipartisan way. I was so pleased to 
see so many senators at the session this morning that you held. 
It suggests very strong bipartisan interest in trying to figure 
out how to fix this.
    I also think it is important to underscore something you 
said at the beginning of the hearing, Mr. Chairman, because it 
is an important perspective for people to have. We are talking 
about 6 percent of the folks that are insured in America. If we 
can solve these issues for that 6 percent in a bipartisan way, 
that would be a very important book of business for us to take 
care of, but it is not the end of what needs to be done.
    When I hear from people in my State whether they support 
the Affordable Care Act or whether they oppose the Affordable 
Care Act, they are deeply dissatisfied with the way their lives 
intersect with America's healthcare system.
    I think it is because they know they are being forced to 
make choices that people in other industrialized countries do 
not have to make about healthcare, about their business, about 
the predictability of being able to go to a doctor. A lot of 
that has to do with the underlying costs in our healthcare 
system and a lack of transparency in our healthcare system that 
we still have not found a meaningful way to address.
    My hope, more than a plea, is that once we get this piece 
of work done that we will continue to work in a bipartisan way 
to try to deal with the root causes of what this panel is 
talking about today, which is that we spend too much money on 
our healthcare without getting the result that we should have 
reason to expect.
    The question that I would like to ask the panel is that to 
me the most solid critique of the Affordable Care Act, as 
opposed to our healthcare system generally, is when people say 
to me, ``Michael, you are forcing me to buy something, 
insurance, that costs too much because there is no competition 
in my area.'' This is very often in rural parts of the State, 
in mountainous parts of the State. ``The deductible is so high 
that it is of no use to my family.''
    I think that is a legitimate criticism of the Affordable 
Care Act. I was somebody who supported the Affordable Care Act, 
but I am willing to take criticism.
    The question is, how do we solve that problem? How do we 
introduce more competition into these rural areas than we have 
to drive the price down?
    Mr. Kreidler, maybe I will start with you just because you 
were saying that Washington State was considering the 
possibility of a public option for some of these counties. I 
would be interested in other thoughts that other folks on the 
panel have as well.
    I understand the backdrop of reinsurance and all of that. 
We probably do not need to revisit all of that. But just 
specifically talk about what has happened in rural areas.
    Mr. Kreidler. Thank you, Senator Bennet.
    Something to remember is that rural counties were a problem 
before the Affordable Care Act. They have been historically a 
challenge for every State.
    We have nine counties right now that have only one insurer 
in them and they are all rural counties.
    Mr. Bennet. We have 14 and it is the same.
    Mr. Kreidler. Yes. I think what we can wind up doing is 
offering some incentives for carriers to go out there, but then 
there is always the potential of looking toward a public 
option. That is what we are considering right now in the State 
of Washington on a very broad group of insurers and providers.
    Our health insurance exchange is working very closely with 
us and we are doing a joint effort here as to how we can 
analyze the various options. The 1332 Waiver is one of them. I 
do not know if it will work for the State of Washington.
    But we do have the opportunity here to take a look at a 
public option that might exist for those counties so that we 
are offering them something, which is, right now, not 
acceptable to be in a position either with very limited 
competition or no competition.
    Senator Bennet. Do you need the 1332 Waiver to do the 
public option or are those two separate ideas?
    Mr. Kreidler. These are two separate ideas.
    Senator Bennet. Thank you. I have 1 minute left if there is 
anybody else who would like to answer.
    Ms. Miller. I would just say there was a bipartisan group 
of Governors that sent a letter to Congress last week and in 
that letter, they have some recommendations around offering 
choices in underserved counties.
    One of the proposals, which I thought was interesting, was 
allowing residents in underserved counties to have access to or 
to buy into the Federal Employees Health Benefits Program.
    I think ideas like that would be great places to start.
    Senator Bennet. Ms. McPeak, do you have something quickly?
    Ms. McPeak. Thank you.
    I would just like to suggest that if we could provide some 
flexibility to States to provide maybe a less robust schedule 
of benefits still within the EHB categories, but providing 
first dollar coverage for things like preventative care, but on 
a lesser scale than what is currently in the market in the 
Silver Plan.
    That could really attract a lot of folks into the market 
with a more affordable option because we hear the same thing 
that you do is that, ``I am forced to buy something that, at 
the end of the day, I really cannot use to access healthcare.''
    Senator Bennet. I am out of time, but I just would respond 
to that by saying also that it is really important for 
Americans not to be forced to buy lousy insurance. Insurance 
that no one else in the industrialized world has to settle for. 
It needs to be real, but I appreciate the desire for 
flexibility.
    Thank you, Mr. Chairman.
    The Chairman. Thanks, Senator Bennet.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    I want to follow-up with some of the comments that Senator 
Bennet has just made, also, to thank the chairman and the 
ranking member for this very important beginning of a good, 
constructive dialog.
    Speaking to the issue of how we deal with those in our 
rural areas and, of course, Alaska is always the Poster Child 
when it comes to real rural.
    When we are talking about our individual market, it is a 
group of 18,000 people. We cannot construct a market off of 
18,000 people. In Alaska, we have been looking at where could 
they fit?
    I was actually pleased to read the letters from the 
Governors in suggesting that maybe it might be a workable idea 
to have residents in underserved counties to buy into the 
Federal Employees Health Benefits Program. I do not know if 
that is the place.
    [Applause.]
    I do not know if it is the State employees program. I do 
not know if it is the other programs that we have out there.
    We have a big V.A. population in Alaska. We have a big 
population of our Native people that are served through IHS. So 
trying to construct something for 18,000 people, to me, just 
does not seem like a measure that works.
    Another proposal that has been out there a lot, and Mr. 
Doak, you raised the opportunity for purchasing across State 
lines and Ms. Wing-Heier, I would ask you to address that as a 
viable alternative for us in Alaska.
    As people have asked me, I have said, ``We are not 
attractive to anybody. We are high cost. We are high risk. Why 
does anyone want to adopt Alaska into their pool?''
    But is that something that has merit, even for a State like 
ours?
    Ms. Wing-Heier. It could possibly have merits. There is 
some concern with consumer protections in selling across State 
lines, which we have discussed.
    But Alaska is unique in the fact that when insurers look at 
us, as we are right now, I do not know that it is going to 
matter if we are joined with a Wyoming or an Idaho. I mean, we 
have looked at possibly doing a co-op or an arrangement with 
other western, rural States to see if we could come up with the 
numbers that 18,000 here, 20,000 there, if we could develop our 
own co-op, so to speak, of enrollees.
    But we still have not come up with the numbers and right 
now our experience has been so bad that you are exactly right 
when we have talked. No one has wanted us because of our cost 
of healthcare and what that translates, then, into insurance. 
We would be bringing the rest of the market down and that is 
not a position that we want to be in.
    It is just the fact of living in Alaska. Very rural, 
limited facilities in very rural areas that are hard to access. 
There is no magic answer for us.
    But selling across State lines is certainly something we 
could explore, but right when we have talked prior to insurers 
and when we have talked to other States, we have not been an 
attractive risk.
    Senator Murkowski. Let me ask about the issue of cost 
sharing. It has been raised by everyone. I think we recognize 
that uncertainty within the market is deadly. You cannot move 
with accuracy.
    There have been some that have suggested, I believe it was 
the chairman in his remarks, said that we need to extend the 
cost share subsidies through 2018. Another date that has been 
out there is 2019. I think the Governors, in fact, ask for 
extension at least through 2019.
    If we were to do it just through 2018, does that provide 
sufficient certainty, or does it need to be a longer year, 
2019, or even beyond to give the certainty? Right now, we are 
going month-to-month and we know that that does not work.
    Can you all speak to that?
    Ms. Wing-Heier. I believe it has to be at least 2 years. I 
think that right now there is enough consternation in the 
market that the insurers looking to remain are looking for more 
than a 1-year commitment.
    Senator Murkowski. I am seeing two head nods; at least 
2019?
    Mr. Kreidler. Senator, I would say it even needs to go 
further than that because insurers right now are already 
planning the 2019. So we are, so to speak, 2 years out already.
    In order to give them that predictability, you have to give 
them a little bit more certainty going into the future that it 
is going to be there so that they do not bolt and leave the 
market. That is the biggest concern that I have is that 
somebody will yell, ``Fire!'' in a crowded theater and they 
will all leave.
    We have seen it happen in Washington State in the 1990s and 
it should not be replicated for the rest of the country.
    Senator Murkowski. Thank you, Mr. Chairman.
    The Chairman. Thanks, Senator Murkowski.
    Senator Baldwin.

                      Statement of Senator Baldwin

    Senator Baldwin. Thank you, Mr. Chairman.
    I want to underscore what many of my colleagues have 
already said that I am deeply grateful for your bipartisan 
leadership, both of you.
    I really believe we can find common ground to stabilize the 
health insurance markets, to improve coverage, and to reduce 
costs for the constituents we represent.
    Yet, while this committee is working together to achieve 
this goal, the Administration continues to play dangerous 
political games that are destabilizing the market and causing 
premiums to rise.
    Wisconsin insurers are requesting between 10 and 46 percent 
premium increases. They are pointing to President Trump's 
failure to provide certainty in the markets and the threats to 
end the Cost Sharing Reduction payments as they announce these 
plans.
    I would also note, in addition, it has gotten a little bit 
less attention, although some of you did raise it in your 
testimony. The 90 percent reduction in funding for enrollment 
programs that get the word out, especially to young people and 
healthy people to help with the enrollment process.
    The cuts to the Navigator programs that in my State have 
provided such useful assistance to those enrolling; the shorter 
enrollment period; all of these add up. Beyond that then the 
issue of whether the individual mandate will be enforced at 
all.
    I want to focus a little bit more deeply on some of those 
today and invite my republican and, frankly, my democratic HELP 
colleagues to partner as we explore policies to enhance 
enrollment, again, particularly among young and healthy people.
    Mr. Kreidler, why is it critical to market stability and 
affordability, particularly in this upcoming 2018 enrollment 
period, to boost the coverage of younger and healthier 
individuals? What do we need to do in this stabilization effort 
that we are talking about on a bipartisan basis to achieve that 
right now?
    Mr. Kreidler. Yes, Senator. It is critically important that 
you have good risk along with bad risk in the insurance pool.
    If you only have bad risk, no one can afford the insurance. 
You have to have good risk. Typically, the younger individual 
is going to represent better risk in the overall market as 
opposed to somebody who is older. One part of that is certainly 
doing that kind of outreach effort.
    We are a State exchange. I think I am the only one who does 
have a State exchange here at the table. So I am not in the 
position of really having to rely on the Federal Government. 
But there are a lot of help to come because of the marketing 
approaches that they have taken at the national level. We are 
in the slipstream. We pick up benefits even though we have our 
own State exchange.
    I would certainly encourage that we continue to have a very 
strong outreach that it allows us to really get the message out 
to individuals. There are problems with individuals to sign up 
for it if they are younger and healthier.
    We need to make sure that they get health insurance. They 
need to listen to mom on these issues and that, ``Health 
insurance is something you should not be ignoring.'' To the 
extent that that message is being delivered, it becomes much 
more effective.
    Senator Baldwin. That is great.
    Ms. Miller and Mr. Doak, for both of you, I would like to 
hear your comments on this because, as noted, Washington has a 
State exchange. You are working in a different context.
    Ms. Miller. Thank you.
    I think from Pennsylvania's perspective, we are very 
concerned about the decrease in funding for advertising for the 
exchange, which we rely on, for the decrease in funding around 
the Navigators, and the critical assistance they provide to get 
people enrolled. All of those things, I think, we are very 
concerned about the mandate and the enforcement of that 
mandate. That has an impact on premiums.
    Even if we get Cost Sharing Reduction payments paid into 
the future, which is critical, I think there is still a lot of 
concern. We hear from our insurers in Pennsylvania that because 
we are not sure how effective that mandate is going to be going 
forward because of all the conversations about eliminating it, 
I think we are going to see that uncertainty built into our 
rates going forward. So that is a major concern for us.
    Senator Baldwin. Thank you.
    Mr. Doak. Senator, I would just like to make a comment 
regarding a couple of your earlier statements.
    We are here because many things have failed. We have had 
increases in Oklahoma even while we have had cost sharing in 
place.
    Your other comment about Navigators is I would ask for the 
full senate committee to do an audit of the Navigator program 
to find out are they doing the job that they are supposed to be 
doing? Where are the checks and balances there for the millions 
of dollars that have been spent in that area? Has it achieved 
the outcomes that you thought it did? Navigators are not 
incentivized regarding healthcare.
    I fallback to the position of that always should have been 
handled by licensed agents and brokers in the United States 
and, in particular, in Oklahoma because I have been in every 
county of Oklahoma, all 77 counties. There is an insurance 
agent on every corner that is readily available and they are 
the insurance professionals that should be helping folks.
    I think that the Navigator program needs some oversight. 
That is one of the things we are going to be looking at in 
Oklahoma is, where those dollars were spent and were they 
worthwhile?
    The Chairman. Thank you, Senator Baldwin.
    Senator Cassidy.

                      Statement of Senator Cassidy

    Senator Cassidy. I had the privilege of being with you this 
morning, so some of what I say will be built upon that.
    I am going to set a context, and layout three questions, 
and ask you all to respond very quickly and concisely to that 
which you pick.
    We spoke this morning, Ms. Miller, regarding the individual 
mandate. Jonathan Gruber, the so-called architect of Obamacare, 
has an article both in the ``New England Journal of Medicine'' 
and the ``NBER,'' which says that the individual mandate really 
does not do anything. It is actually Governors. If a Governor 
gets engaged, my gosh, things happen, but the individual 
mandate? Minimal effect.
    Then, as I have learned about this, Maine and Alaska have 
done great things, innovative things as regards the reinsurance 
program which, in turn, have lowered costs and a potential to 
increase coverage.
    I say that and here is the first of my three questions. In 
the Cassidy-Collins plan, in the Graham-Cassidy-Heller plan, we 
want to give States flexible block grants allowing States to do 
what they wish to do. That is an overview, and my colleague 
from Maine may say, ``Well, wait a second. There is a nuance 
here,'' and she is absolutely right.
    But the reality is we allow States to innovate. That is No. 
1. Commissioner, you had said earlier, that you want to make 
sure the money is there. As much as possible, we know the money 
for Obamacare is there, but maybe not because I can tell you it 
is already a little bit threatened.
    Let us just assume the money is going to be there. Would 
you prefer a flexible block grant? Could you do more with it? 
You have to spend it on healthcare.
    Second, I am concerned about Oklahoma. My State, 
Louisiana's ability to afford a 10 percent match on the 
Medicaid expansion, that 10 percent match on the Medicaid 
expansion is going to be huge in my State, $310 million. We are 
an oil State. Revenue is down. We are sucking wind right now. 
Can we afford that?
    Third, even aside from expansion versus non-expansion, 
there are some States that have dramatically increased costs of 
care relative to others. Washington State has done such a good 
job in controlling costs; others not so good. How do we 
compensate for that?
    Should we attempt to equalize the payment that goes to 
States or should we prejudice toward high cost States, frankly, 
as opposed to those which manage costs well?
    Take your pick. You have 2 minutes 45 seconds. Try and be 
concise.
    Ms. McPeak. I will begin. I will say that your comments on 
the individual mandate really reflect the experience in 
Tennessee. I do not know that it has driven a lot of our 
consumer behavior.
    We see a lot of our individuals being willing to risk the 
penalty for not having ACA-compliant coverage, actually 
accessing other products available in the market, both non-ACA 
compliant plans or other cost sharing mechanisms which would 
still require a penalty to be paid if the mandate were 
enforced.
    I also ask our insurers to break out a provision on 2018 
rate increase requests attributable to non-enforcement of 
mandate and it was negligible. It was about 5 percent increase 
where the CSR uncertainty was about 14 percent.
    Senator Cassidy. So really, it is the State getting 
engaged.
    To my other points, what do you all think about it?
    Mr. Doak. Senator, I might just respond to your comment 
about the cost of the expansion is that there is, and I was 
trying to find some notes, and we will get it sent to you.
    Former Oklahoma Governor Frank Keating wrote a really good 
article on the ultimate cost to the State of Oklahoma, which is 
something that needs to be taken into account.
    On your other point, I am 100 percent in favor of all the 
funds coming to the State of Oklahoma, giving the State of 
Oklahoma, our legislature, our Governor, and the people of 
Oklahoma the ability to put together the best plan.
    If California wants to come up with universal healthcare, 
let California do that. If Washington, my friend from 
Washington, if they want a different type of policy.
    I think the laboratory of democracy and the success we 
could all learn from each other, but get those moneys back to 
the State where we can take care of Oklahomans.
    Senator Cassidy. Amen, brother. Anyone else?
    Mr. Kreidler. Senator, I would certainly hope that the 
block grants would not vary from one State to another just 
because----
    Senator Cassidy. On a per beneficiary basis; you would have 
to do it per enrollee. Correct?
    Mr. Kreidler. We do a good job in the State of Washington 
holding down spending on healthcare better than most States. It 
is really not appropriate that we should wind up being 
essentially punished for doing a good job.
    Senator Cassidy. Equity across States, you think would be 
important?
    Mr. Kreidler. Equity and make sure that it is guaranteed 
going forward so that we do not wind up seeing a diminishment 
as opposed to an entitlement program, as we have to today.
    Senator Cassidy. Ladies, I have 20 seconds left. Any 
comments?
    Ms. Wing-Heier. I would add that in the block grants, we 
would ask that you take into consideration the cost of 
healthcare and the rural-ness of Alaska because of our cost of 
healthcare and the diminished facilities that we have just due 
to what Alaska is.
    Senator Cassidy. Simple answer: we do.
    I yield back. Thank you.
    The Chairman. Thank you, Senator Cassidy.
    Senator Murphy, good entrance.

                      Statement of Senator Murphy

    Senator Murphy. My timing is never going to get better than 
that.
    The Chairman. That is right.
    Senator Murphy. Thank you very much, Mr. Chairman.
    Ms. McPeak, I wanted to ask you to expand a little bit on 
your opening comments, in which you talked about predicting 
last year that your marketplaces were on the verge of collapse, 
and as you testified today, they have not collapsed during that 
time.
    I guess it speaks to a worry that I have about how the 
rhetoric gets overheated with respect to the stability of these 
exchanges and the overall stability of the Affordable Care Act.
    I am so appreciative of the process that both Senator 
Alexander and Senator Murray have begun. I acknowledge the fact 
that we need to make some changes. Changes the democrats want 
and changes the republicans want in order to provide some 
certainty.
    Maybe you can talk a little bit about what happened over 
the last year. You said you were on the verge of collapse. You 
did not collapse. What does that say about how these 
marketplaces are, and have been holding together?
    Just tell us a little bit about that story.
    Ms. McPeak. Thank you.
    Certainly, I am very grateful that the market, in fact, in 
Tennessee has not collapsed. But I would still say that we are 
on the verge of being in a very difficult situation and 
probably still on the verge of collapse.
    What we have experienced is carriers fleeing the market 
year over year. We did have one of our nine rating areas that 
did not have any options when Humana decided to withdraw from 
the exchange earlier this year.
    We did, in fact, receive coverage for that area through one 
of our other carriers. But still, 78 of 95 counties having one 
option on the exchange is not a place where I like to be. We 
need to have a competitive environment so that our consumers 
actually have choice and we can do something to address premium 
rates.
    When you have one insurer that is threatening to pull out 
of rating areas, it is very, very difficult to really challenge 
the rate increase requests that we are receiving on a lot of 
different factors. The worse possible situation would be for a 
carrier to flee the market and our consumers not have any 
choice in the market.
    We are still very much concerned about that possibility 
until the QHP contracts are signed at the end of this month by 
the carriers.
    Senator Murphy. Thank you. Yes, I just think it is a 
caution for everybody to be a little careful about how fast we 
declare that the sky is falling. Here the popular phrase is 
``death spiral.'' And yet, during the period of time that we 
have been debating the bill, there have been less and fewer 
bare counties rather than more. So I appreciate that 
explanation.
    Mr. Kreidler, I wanted to talk to you about the importance 
of advertising and marketing. I think Senator Baldwin raised 
this question. You are an interesting State because you have 
pretty much every type of population that exists: rural 
communities, suburban communities, communities with easy access 
to information resources, places where it is a little bit hard 
to get the word out.
    There is a study out of Kentucky that looks at what 
happened when the marketing efforts effectively stopped. You 
had a democratic Governor who is doing robust marketing and 
then the new republican Governor has effectively shut down 
funding for ACA advertising.
    What happened there was that there were 450,000 fewer page 
views per week on the website for the State marketplace. There 
were 20,000 fewer unique visitors per week to the website. And 
guess what? ACA enrollment fell by 100,000 people to 94,000 
people in 2016 to now 81,000 people.
    So there seems to be a pretty direct correlation between 
telling people that these options exist and people actually 
going and taking a look at the information that would lead them 
to get coverage. That speaks to what is happening right now 
with a 90 percent reduction in Federal funding.
    I just would love to hear you talk about how you 
communicate effectively and how instrumental those 
communications are in making effective marketplaces that 
insurers want to be a part of.
    Mr. Kreidler. Senator, actually we saw an increase in the 
number of people who were signing up through our health 
insurance exchange even while the Federal exchanges were 
showing a slight decrease, we were actually showing an 
increase.
    I think part of that is we do have a very active website 
through our health insurance exchange. It makes it very 
convenient and easy for people to go there and shop. It was not 
as robust an increase as we had anticipated.
    That really is because of the effect that you have when 
they are doing it on a national basis, the kind of sharing of 
information and strategies going forward. That really assists 
us a great deal and helps to address the issues around 
language, which are a particular issue for many of us.
    I think that is where we can really make a difference from 
the standpoint of getting people to sign up for health 
insurance if you have that kind of outreach out there. It helps 
to offset the enforcement of the individual mandate, though I 
would argue quite strongly that you need an individual mandate 
that is effective. If it is not the one we have now, then you 
have to come up with something that is comparable.
    Senator Murphy. I support the Chairman's goal of getting a 
narrow package that can pass quickly.
    But I hope that we do include in our discussion this 
dramatic reduction in advertising and marketing funding which, 
I think, does have a fairly, just positive effect on the health 
of these exchanges.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murphy.
    Senator Burr.

                       Statement of Senator Burr

    Senator Burr. I have listened intently to this discussion 
and I am reminded, as we talk about how to bring healthcare 
costs down, that each State is unique, but healthcare cost 
reduction is a function of a change in outcomes. Change 
outcomes, you change the cost of healthcare. So let us not lose 
focus on what the most important thing is.
    Ms. Miller, I have to admit that I was moved by a statement 
you made that everybody should be able to buy into FEHBP that 
cannot fit in a box. I came from the private sector, and my 
experience in Government is my healthcare went up and my 
benefit went down.
    Then the ACA came and I am now a participant in the DC 
exchange. My premium costs went up, my deductible went up, and 
my benefits went down. I would love to buy into FEHBP as a 
Member of Congress again, wholeheartedly.
    I am not sure that is the answer, though, for a population 
that is scattered, most of it rural, most of it without the 
delivery system that is needed to change the health outcome.
    This is not just about coverage. This is about placing them 
in some type of delivery system. I am going to start at this 
end and I am going to go up to Mr. Doak.
    All I want to know, yes or no, are you supportive of your 
State having control over how your healthcare plan looks in 
your State? In other words, you have a 1332 Waiver, or a 1215 
Waiver, you can decide exactly how it is going to look. We will 
figure out the financing.
    Yes or no, Ms. McPeak?
    Ms. McPeak. Absolutely. I think Tennessee can better mange 
our health outcomes for our consumers.
    Senator Burr. Mr. Kreidler.
    Mr. Kreidler. I would very much like to see, the answer 
would be yes, but let us make sure we protect consumers and not 
take away their protections.
    Senator Burr. You would have full control over that, so you 
would be the one to be held responsible.
    Ms. Wing-Heier.
    Ms. Wing-Heier. One State size does not fit all and Alaska 
needs to be in control of its health insurance program for its 
residents.
    Senator Burr. Ms. Miller.
    Ms. Miller. As long as we are not talking about reduced 
Federal funding and requiring States to come up with that 
funding, which Pennsylvania could not do, then yes. I think we 
are in a great position to regulate our markets.
    Senator Burr. All right. So we have agreement that one of 
the things we should look at is to empower States to design 
their healthcare, to structure their healthcare system to meet 
the unique delivery system capabilities within their States.
    I think we have made tremendous progress.
    The Chairman. What about Mr. Doak?
    Senator Burr. He already answered that they were supportive 
of it. That is what I played off of.
    Ms. McPeak, in order to solve the healthcare crisis facing 
our country today, we need to think of ways to leverage all of 
the new tools provided through innovation in healthcare.
    The insurers have access to tremendous amounts of data on 
the individuals enrolled in their plans in a way that was not 
imaginable just a decade ago. With this new information, 
healthcare insurers have the opportunity to design plans that 
incentivize the best possible health outcomes for their 
customers.
    As an insurance commissioner, have you had an opportunity 
to review plan designs for your State?
    Ms. McPeak. No. Unfortunately in the individual market, the 
carriers are limited by the ACA to the plan design and 
underwriting factors in the law.
    Senator Burr. Do you believe that should be also a function 
of the commissioner in the State?
    Ms. McPeak. Absolutely, I do.
    Senator Burr. Is that, in your estimation, a way to 
leverage healthcare data to offer more health insurance?
    Ms. McPeak. I do and actual benefits that are accessible 
and usable by our consumers.
    Senator Burr. Do you believe you have the tools you need to 
review innovative plan designs working to keep pace with the 
new capabilities of healthcare data?
    Ms. McPeak. I believe we do because we review those plans 
and rates for the employer markets and small group market 
already today.
    Senator Burr. I am reminded that we are headed for a decade 
of disruption, where technology is going to impact every sector 
of our economy; probably healthcare as big, if not bigger, than 
anywhere else.
    Some of the challenges we are trying to build into our 
construction of policy today will be trumped--for the lack of a 
better word--by our capabilities of connecting an individual in 
a rural or non-covered area where there is not a hospital, not 
a doctor.
    But because every American has this device that there is 
going to be software that enables them to send their own vitals 
that are needed to a lab that will give them a reading without 
a hospital, without a doctor, without a nurse.
    How do we take advantage of this incredible innovation if, 
in fact, we have constructed in concrete what insurers can and 
cannot do?
    Mr. Doak.
    Mr. Doak. Yes, sir. Great question and you are absolutely 
right with the mobile phone devices the innovation is 
definitely taking on.
    One of the things, we just held an Innovation Summit in 
Tulsa in partnership with Oklahoma State University and the 
University of New Mexico. They presented on a Project ECHO 
which actually has dramatically helped and assisted rural 
outcomes across the country.
    I think when you take a look at this program, it is in my 
report, and see what they are doing and the partnerships that 
they are doing. They are able to drive great healthcare sent 
through programs to rural America. The innovation is happening 
at such a quick level that you are absolutely right.
    I think that is why the NAIC, and the leadership under 
President Ted Nickel from Wisconsin, formed the Innovation 
Committee that we really have to stay ahead of the curve. So 
you are on the right track, sir.
    Senator Burr. Mr. Chairman, could I ask all of the 
witnesses to provide, in writing for the committee, thoughts 
that they might have on offering multiyear access to plans?
    In other words, for individuals in the individual market, 
not signing up for 1 year, but signing up for 5 years or 
longer. So that we can truly see the benefits of the investment 
by the insurer to get people healthy, to keep them healthy, and 
to eliminate the risk that drives up these premiums so 
drastically.
    Senator Burr. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Burr. That would be very 
helpful if you could do that.
    Senator Hassan.

                      Statement of Senator Hassan

    Senator Hassan. Thank you, Mr. Chairman and Ranking Member 
Murray for holding this hearing and the hearings we are going 
to have.
    I know I share with what Senator Casey said. People around 
New Hampshire, when I said we were going to have bipartisan 
hearings and listen to experts who actually deal with the 
nitty-gritty of how health insurance and healthcare works, 
there was a real sigh of relief. So I am very grateful for the 
hearings.
    I am very grateful for a panel that pronounces insurance in 
all different ways because I am the daughter of a southerner 
and a New Englander. You sound like my family to me.
    [Laughter.]
    I also think it is really important that you are all here 
because it is essential that we really drilldown to how things 
actually work as opposed to just talking about big concepts.
    One of the concerns I have from when we talk about letting 
people buy into ERISA or employer sponsored plans is, that 
sounds great, but most people have their employer subsidize the 
plans. Remember when we enacted COBRA, so people who terminated 
their employment could still buy their plan, a lot of people 
could not afford it once the employer subsidy went away.
    It is really important as we have these discussions that we 
hear from all of you about how things work.
    To that point, Secretary Miller, I would like to just start 
with you. Right now, about 5 percent of people who buy health 
insurance coverage in the individual market represent almost 60 
percent of healthcare claims' costs.
    We have talked about reinsurance. We have talked about the 
importance of what a Federal reinsurance plan could have as 
kind of the biggest bang for the buck idea.
    I wanted to ask you a little bit about how the temporary 
reinsurance program that the ACA had at the beginning of the 
program, how did it successfully moderate premiums in your 
State?
    Ms. Miller. Senator, in Pennsylvania in the last year of 
the program, we saw between a 4 and 7 percent increase because 
of the end of the program. In other words, it moderated 
premiums by 4 to 7 percent and that is when we saw an increase 
happen between 2016 and 2017 was when that program went away.
    Senator Hassan. Thank you.
    That brings me to another question which is for 
Commissioner Wing-Heier. When you talked about using the 1332 
Waiver to establish Alaska's reinsurance program, as I 
understand it, the 1332 Waiver program initially was not really 
to help States establish reinsurance. It was to help them 
innovate within the insurance market in their State in ways 
that could really help move us forward, and gain efficiencies, 
and really tailor the insurance programs to the State.
    The question I have is if we had a Federal reinsurance 
program, could the States then turn to 1332 Waivers to do some 
of the other work that we all need to do and that States need 
to do to tailor their insurance to their State?
    Ms. Wing-Heier. You most certainly could. The flexibility 
should be great within the Waivers. It should be only limited 
by the innovation that the State can come up with.
    At the time, Alaska was down to one insurer, as we still 
are.
    Senator Hassan. Yes.
    Ms. Wing-Heier. And we felt that we were in enough of a 
crisis mode that we took the appropriate action at the 
appropriate time.
    Our legislature agreed to fund for 2 years the reinsurance 
program, which led us to then apply for the Section 1332 
Waiver, which will allow us for a 5-year funding mechanism for 
this.
    We will certainly be looking at other waivers in the future 
to benefit our citizens and to make sure that our program is 
uniquely designed for Alaskans and our conditions.
    Senator Hassan. And I applaud you all for doing what you 
did. I just think if we had the Federal reinsurance program, 
like the first one we had as a part of the ACA for the first 2 
years, then you all could be doing that second stage of work 
that you are approaching now.
    Secretary Miller, I want to come back to another issue. I 
know that your State is grappling with the opioid addiction 
crisis as so many of our States are, and as you may know, New 
Hampshire has been particularly heavy hit by it. I know that 
you have been both an insurance commissioner and now, as I 
understand it, you are Acting Secretary of Health and Human 
Services.
    So if the Administration decided to cutoff the Cost Sharing 
Reduction payments, how would that affect access to coverage 
for people who are suffering from opioid addiction?
    Ms. Miller. Senator, I think Pennsylvania, as all States 
right now, we are grappling with this issue and it is having 
such a huge impact on our communities.
    We need to stabilize this market so consumers have options 
in terms of quality coverage. The Essential Health Benefits and 
that requirement ensures that people have access to that 
coverage if they have ACA-compliant coverage.
    So we need to stabilize this market, keep insurers in it, 
and by doing that, we will have more competition.
    The problem right now is that it is not a very attractive 
market to be in because of all the uncertainty and that is 
hurting the competition.
    That is why this conversation we are having today is so 
important because if we can stabilize this market, we can 
increase the competition, make sure consumers have options that 
include that quality coverage that has that treatment available 
for people who are struggling with addiction.
    Senator Hassan. Thank you very much.
    And thank you, Mr. Chair.
    The Chairman. Thank you, Senator Hassan.
    I am going to go ahead and ask my 5 minutes of questions 
now because I want to ask the whole panel about reinsurance, as 
all of you have mentioned it.
    I have two questions. I will ask them and then let you just 
answer them.
    One is, how can we make it easier for you to use the 1332 
Waiver to set up a State reinsurance program as Alaska and 
Minnesota have done?
    As I understand it, Ms. Wing-Heier, you are not getting any 
more Federal money than you did before. You are just using it 
better because you are able to use some of the Federal money to 
pay for 85 percent of the reinsurance program. The State pays 
for 15 percent and you lower premiums 20 percent with basically 
the same amount of Federal dollars.
    Is that basically right?
    Ms. Wing-Heier. That is correct. Our innovation waiver was 
based on the fact that the reinsurance program reduced the 
liability of the Federal Government to pay the advanced premium 
tax credits----
    The Chairman. Right.
    Ms. Wing-Heier [continuing]. That would have been paid.
    The Chairman. Then here are my two questions.
    If we need reinsurance, why can States not do it? They are 
the same taxpayers. Let us take Maine, for example. Not a rich 
State.
    Maine set up a reinsurance program, $4 per month applied to 
all policies and insurance plans, plus insurance seeded 90 
percent of the premiums of the risk given to the pool, and paid 
the first $7,500 in claims.
    The Federal Government has a $20 trillion debt. The Federal 
Government is paying an average, according to the Congressional 
Budget Office, of $4,200 for each individual in the individual 
market who qualifies for a subsidy.
    If a reinsurance program is such a good idea--and Alaska 
was able to set one up using some State funds and Minnesota was 
using some State funds--why do States not do it? All it takes 
is money. State budgets are balanced. The Federal Government is 
$20 trillion in debt, already contributing a lot.
    All of you could put a $4 tax on every policy, create 
enough money to take the sickest people out of your individual 
market and lower premiums for everybody else.
    So my questions are: why do you not do it? No. 1.
    What can we do to make it easier for you to use Section 
1332 to pay for it? And if the answer is, ``Well, our 
legislature will not approve any more money,'' that is not a 
very good answer to those of us in this legislature who have a 
$20 trillion debt.
    Who wants to answer that?
    Ms. Wing-Heier. The States that I have talked to like the 
concept of the reinsurance waiver and the application. But the 
requirement for Alaska was that we seeded the program for the 
first year.
    We do hear from States that they cannot get the funds from 
their legislature for that first year to show that there is an 
impact to the rates that would bring down the rates so that 
there is the money in the premium tax credits.
    It is a chicken and an egg. That they want to see the 
results of the premiums coming down so there is that savings in 
the premium tax credits to then put the pass through funding 
back to the State.
    The Chairman. But there is nothing to keep you from raising 
taxes or putting a charge on every policy in Alaska to help pay 
for your insurance fund. Right?
    Ms. Wing-Heier. That is true, but I would tell you that in 
the State of Alaska, we would have a hard time putting that tax 
through strictly because we are such a small market.
    The Chairman. Yes.
    Ms. Wing-Heier. We would be taxing the market we are trying 
to help.
    The Chairman. Yes.
    Ms. Wing-Heier. The 18,000 that we are trying to help.
    The Chairman. Who else has an answer?
    Why cannot States do it and what can we do to help you use 
1332 to set up your own reinsurance fund, at least initially?
    Mr. Kreidler. Senator, what you can do is certainly make it 
an easier process than we have right now so that when you file 
for a waiver that you have a quicker turnaround time; that you 
get definitive answers on much shorter notice.
    We also heard the description here of saving us from having 
to wait until our legislature is in session before we have to 
return to them. The States like Washington and Oklahoma where 
we are elected as Insurance Commissioners turn it over to the 
insurance commissioners to make that decision and the other 
States can leave it to the Governors to make the call.
    We are not asking to increase the national debt at the 
Federal level when it comes to 1332. What we are asking for is 
to make it more predictable as to whether it is going to work 
or not.
    In the end, even though you might wind up having some 
impact on the Federal budget, it is one that is going to have 
to meet the budget neutrality standard and I am in favor of 
that. I think that is not unreasonable to have that standard 
apply when it comes to these 1332's.
    We are not asking for more money. Just make the process 
work a little bit smoother than what we have right now. It is 
with some certainty.
    The Chairman. Thank you.
    Mr. Doak. Senator Alexander.
    The Chairman. Yes, and then we will stop there.
    Mr. Doak. I agree with my other elected colleague from 
Washington is that let the States make more of their decision.
    In Oklahoma, it is going to be a $2.15 charge for folks in 
the self-insured market to come up with approximately $325 
million, which is going to have the reinsurance program pick up 
everything from 15 to 400,000. It is a fee. It is a tax 
disguised as a fee, basically, on Oklahomans.
    It is up to Oklahomans to decide how they should put this 
together and how we should actually come up with that money 
with a State that is having a very challenging time as you are 
probably going to hear from some of the other Governors' 
tomorrow. That is kind of where we are in Oklahoma.
    The Chairman. Thank you, Mr. Doak. My time is up.
    Senator Kaine.

                       Statement of Senator Kaine

    Senator Kaine. Thank you, Mr. Chair.
    Again, to the chair and ranking member, I am so happy we 
are here in this set of hearings hearing from the people who 
are affected about what is good, what is bad, and what needs to 
be fixed about our healthcare system.
    I would like to make sure everybody knows what you do. You 
are expert witnesses. You are in the box and you are giving us 
some recommendations, and there is some significant consistency 
between you, whether you work for democratic or republican 
administrations.
    I am correct that each of you, Ms. Miller until your recent 
promotion, each of you are the chief insurance regulator of 
your State.
    Is that correct?
    [All nod affirmatively.]
    Senator Kaine. Are all of you active in the National 
Association of Insurance Commissioners?
    [All nod affirmatively.]
    Senator Kaine. And you are the incoming president of that. 
Is that not right?
    Ms. McPeak. That is correct.
    Senator Kaine. The NAIC has a mission statement. Each of 
you, I know, have different State laws, so there is some 
peculiarities about your States.
    But the NAIC says,

          ``The mission of the NAIC is to assist State 
        insurance regulators, individually and collectively, in 
        serving the public interest and achieving the following 
        fundamental insurance regulatory goals in a responsive, 
        efficient, and cost-effective manner consistent with 
        the wishes of its members.''

          ``The five goals of the NAIC: protect the public 
        interest, promote competitive markets, facilitate the 
        fair and equitable treatment of insurance consumers, 
        promote the reliability, solvency, and financial 
        solidity of insurance institutions,'' and five, 
        ``Support and improve State regulation of insurance.''

    Recognizing that each of your States have your own legal 
peculiarities, is that a mission that you generally accept in 
the work that you do as the chief insurance regulator in your 
own States?
    [All nod affirmatively.]
    Senator Kaine. Let me then ask this, and Ms. McPeak, you 
presaged this a little bit in your testimony.
    All of you support--Mr. Doak with a qualification--all of 
you support the CSR payments continuing. You said if we choose 
not to alter the current structure that would be necessary.
    All of you support, to some degree or another, State or 
Federal reinsurance. There are other areas of commonality.
    None of what you are proposing to us today, though, is 
because you are trying to bailout insurance companies. Correct?
    Ms. McPeak. That is correct.
    Senator Kaine. Because I have heard colleagues in this 
body, the other body, and outsiders say things like, ``CSR 
payments that is bailing out insurance companies.'' Or 
reinsurance, ``That is bailing out insurance companies.''
    But as the chief insurance regulator in your State, who has 
pledged to basically follow these goals, you are not here to 
bailout insurance companies. Correct?
    Ms. McPeak. That is correct.
    Senator Kaine. Let me talk about one of these, reinsurance, 
because both the CSR and reinsurance things have been talked 
about as if they are insurance company bailouts. I am going to 
use my PowerPoint to see if I understand what reinsurance does.
    In a health market or any market, because we use 
reinsurance at the Federal level for crop insurance, flood 
insurance, Medicare Part D. We used it for the Affordable Care 
Act.
    But healthcare, families have different costs. Some have 
low medical claims, some have medium medical claims, some have 
really high medical claims.
    If an insurance company has to write a premium to cover all 
that, they are going write a premium up here. If you can 
provide a backstop on the high cost claims, they do not have to 
write the premium here; they can write the premium down here.
    Generally, reinsurance is a tool that you are all familiar 
with that, for the low- or moderate-costs, or the normal 
claimant, can have a significant effect in reducing premiums.
    Is that not correct?
    [All nod affirmatively.]
    Senator Kaine. Then when you get to the high claim side, by 
providing reinsurance, what you are doing is you are providing 
a backstop, Senator Enzi called it a stop loss, a backstop and 
that has the effect of providing people protection. But it 
also, by providing a backstop, keeps insurers in the market 
that might otherwise vacate the market.
    Is not one of the reasons that many insurers are vacating 
the individual market is because they are worried about these 
high cost claims? Is that not one of the main reasons they are 
vacating the market?
    Ms. McPeak. Yes, Senator, if I could respond.
    You are exactly correct. And in addition to that, when you 
have very limited carriers in a market like the majority of my 
State, if you are the one carrier writing in that market and 
you know that you have guaranteed issue, guaranteed 
renewability, and no ability to capitate risk because of no 
lifetime maximums, you have to rate everyone high because you 
are taking all comers and it is guaranteed renewability.
    If you are able to say this is the backstop and this is the 
ultimate level of risk that you would have for writing in this 
market, it does entice additional insurers to write in that 
market because they can better estimate the risk.
    Senator Kaine. And so the backstop ends up having a double 
benefit. It encourages insurers to stay in the market, but it 
also allows them to do a premium that does not have to take 
into account all of the super high cost claims. But that 
premium, then, is more favorable to the average person.
    By reducing premiums on most, because so many folks get the 
advanced premium tax credits, the subsidies, when you bring the 
premiums down on most, you also reduce the Federal premium 
payment, which has a countervailing effect.
    Reinsurance costs something, but it also brings down the 
Federal Government's obligation by reducing the advanced 
premium tax credit.
    Is that not correct?
    [All nod affirmatively.]
    Senator Kaine. That is what you are using in your State to 
try to use that reduced Federal obligation down the road as one 
mechanism for paying for what Alaska is doing with its State 
reinsurance program.
    Correct?
    Ms. Wing-Heier. Yes, sir.
    Senator Kaine. Senator Carper and I have a reinsurance bill 
in that would basically go with what we did with the first 3 
years of the Affordable Care Act and put a reinsurance 
provision back in. That we think would accomplish all of those 
goals.
    It would reduce premiums for the overwhelming majority of 
individuals in the individual market. It would provide a 
backstop that would keep insurers in. And by reducing premiums, 
it would also reduce the Federal obligation to pay the advanced 
premium tax credit, which would have a countervailing effect in 
reducing the cost of a reinsurance program.
    I know that may not be the immediate issue on the table, I 
understand. But I am happy to hear that, to some degree, this 
is a concept that these witnesses support.
    Thank you, Mr. Chair.
    The Chairman. Thank you, Senator Kaine.
    Next we have Senator Young, then Senator Murray, then 
Senator Roberts, then Senator Warren.

                       Statement of Senator Young

    Senator Young. I want to thank our panelists for being here 
today.
    I think each of you recognize that if we do not control the 
cost of healthcare delivery in this country, we are going to 
continue to see an increase in the cost of health insurance, 
whether that is at the consumer level, or among taxpayers, or 
some combination thereof. A number of you spoke to that in your 
testimony, and I thank you for bringing that important topic 
up.
    I would like to focus a couple of questions on that area 
for each of you.
    What do you think the primary drivers of healthcare cost 
increases are based on your professional experience? And, what 
are your ideas for actually bending the cost curve down as we 
head into the future?
    I will start with Ms. McPeak because I know in your 
testimony, you spoke to the importance of incentivizing 
preventative care. Perhaps you could fill in some details on 
that.
    Ms. McPeak. Thank you, Senator.
    Our experience is that our claims costs in Tennessee are 
extremely high. Those are real dollars going out for real 
healthcare services that are being provided.
    The majority of those seem to be going to prescription 
drugs and also to co-morbidities, real claims and issues that 
need to be addressed for our population. Bending the curve down 
is certainly something that can be affected through 
preventative care and wellness initiatives.
    Certainly, an examination of the reimbursement costs to see 
is there a discrepancy that is reasonable from area to area in 
my State and then also from Tennessee to surrounding States.
    Senator Young. What is the best way, to your mind, to 
incentivize preventative care?
    Preventative care can be quite broad. Right? From a gym 
membership, to seeing your primary care physicians, what have 
you. It is a better wellness program for your life.
    Ms. McPeak. We would certainly appreciate the ability to 
manage those outcomes for Tennesseans.
    We have used some of those programs on our TennCare side 
that have been pretty effective for disease management, for 
health coaching, smoking cessation, and then certainly the 
physical movement and wellness attributable to the fitness 
activities.
    Senator Young. Thank you.
    I am going to go down to Mr. Doak because in your 
testimony, you spoke to the importance of price transparency, 
empowering the consumer based on the information of services 
provided and the perceived value of those services.
    Is a lack of transparency to your mind a primary driver of 
healthcare costs and thus health insurance premiums? And if so, 
how do we improve the functioning of the market so that there 
is a more transparent market?
    Mr. Doak. Great question. Thank you, Senator.
    One of the answers is--as I mentioned in my earlier 
discussion that was very near and dear to former Oklahoma 
Senator Coburn--talking about price transparency. We have seen 
that.
    I would ask the committee as we said earlier this morning 
to possibly invite the CEO of the Oklahoma Surgical Center here 
to testify on behalf of what he has been able to do with 
transparency in Oklahoma City and where some of those things 
are going.
    The more transparent we can be with our costs all through 
healthcare is that you are going to provide and empower 
consumers to be able to see the outcomes that Senator Burr was 
talking about relative to the cost expenditures. There are 
various places around the State of Oklahoma that are doing that 
very well.
    That is a true opportunity.
    Senator Young. But you do not have particular 
recommendations here at the Federal level regarding obstacles 
we could remove or regulations we could put in place so that it 
would facilitate more transparency?
    Mr. Doak. I think that is something worthwhile to consider. 
I am a bit hesitant to have anything further done here in 
Washington. I would rather see it done at the local and State 
level, quite frankly.
    Senator Young. Oftentimes a health instinct from my 
perspective.
    I am going to give others an opportunity to speak to this 
issue.
    Mr. Kreidler. Senator, I would certainly put a high 
emphasis on pharmaceutical drugs.
    That is the one area where--if you remove the shackles that 
are on the States right now as to what they wind up doing and 
contracting, either through their Medicaid program or other 
programs that they have at the State level--we can have a very 
strong impact, particularly if we joined together with 
likeminded States to take on that same approach toward 
bargaining when it comes to these drugs.
    That is the No. 1 driver in the individual market and we 
see it with our filings. It is on the cost of pharmaceuticals.
    Senator Young. I am pretty much out of time here. So I will 
give others an opportunity to respond to that question in 
writing.
    I would just say in pharmaceutical costs, we want to make 
sure that we do not absorb an opportunity cost to future 
research and development, lives saved, and approved into the 
future by adopting some of the suggestions you have put 
forward.
    Thank you.
    The Chairman. Thank you, Senator Young.
    Senator Murray.
    Senator Murray. Thank you very much.
    This has been really great. A lot of senators are 
participating and I think they all really appreciate all of 
your testimony. Thank you for being here.
    Commissioner Kreidler, I wanted to ask you. In your 
testimony, you talked about the Cost Sharing Reductions are the 
difference between whether a 40 year old in Tacoma earning 
$23,000 per year has a $2,000 deductible or a $7,000 
deductible.
    Consumers have really come, I think, to rely on these 
measures to lower their own healthcare costs. The same way that 
employer contributions help keep costs down for people who get 
insurance through their jobs.
    Something changed this year. President Trump has made 
patients, and families, and insurance companies, and State 
regulators play this guessing game about whether or not those 
payments are actually going to be made.
    We know that failing to make those payments is going to 
spike premiums for the most popular plans in the marketplace by 
20 percent, leading an increase to the Federal deficit of $200 
billion. So this is really an important issue.
    I wanted to ask you, what did you have to change about the 
way you review and approve insurance premiums this year because 
of that guessing game?
    Mr. Kreidler. Senator, it is one where we have to sit down 
with the health insurers and really press them on it.
    But the point has been made that if you get down to just 
one carrier in a particular county, you do not have a lot of 
bargaining flexibility. They are in the position of saying, 
``Well, if you do not give me the rate increases I want, then 
we are looking toward the highway,'' and then you do not have 
an insurer there. We are under a lot of pressure.
    Stabilizing the market is No. 1. You have to stabilize that 
market. The CSRs are No. 1 from the standpoint of what you can 
do immediately. It can have a direct impact and get away from 
this idea of funding on a month-by-month or even a year-to-year 
basis.
    It really has to be multiyear with some real predictability 
in the market.
    Senator Murray. So my additional question to you is we have 
heard 1 year, 2 years. Tell me what the difference between, if 
we just did a 1-year, what a difference that would make rather 
than a 2-year?
    Mr. Kreidler. Clearly, 1 year is a whole lot better than 
month to month. But even 2 years is very tough because of the 
range of which the insurers are planning right now as to what 
the rate increases are.
    Any degree of increase in predictability that goes beyond 
this situation we have right now of being so tentative right 
now with just month to month is going to help. The longer we 
can give it, the better it will be to help stabilize.
    Senator Murray. The more certainty, the lower the costs of 
the care?
    Mr. Kreidler. Absolutely, absolutely.
    Senator Murray. All right.
    I wanted to ask you, Commissioner Wing-Heier, because I 
noticed when Senator Baldwin asked about the Navigators and the 
money there that I think you testified that it is really needed 
in many remote parts of Alaska, and used across the country in 
really important ways.
    The budget for Navigators has been cut by 40 percent. Tell 
me what impact that is going to have on you in Alaska.
    Ms. Wing-Heier. We are very concerned it will have a major 
impact in our enrollment.
    I know that Commissioner Doak testified that he does have 
insurance brokers and consultants throughout much of his State. 
We do not.
    In most of Alaska, outside of Fairbanks, Anchorage, Juneau, 
and other cities, there is not an insurance broker or 
consultant to be found. We rely on the clinics and the 
Navigator programs to explain benefits and enrollment to the 
people living in rural Alaska.
    This will be devastating to our population to know what 
their options are, to understand basic things from the dates of 
enrollment.
    There is also a part that is very cultural in Alaska in the 
fact that we have a variety of languages. And the Navigators 
cross that bridge in being able to speak the Inupiaq language 
or the Native languages of Alaska and other languages. They 
provide that service.
    We do not have that very readily in the insurance 
community, unfortunately.
    Senator Murray. Right.
    Commissioner Kreidler, quickly, our State is looking at a 
1332 Waiver.
    When applying for that kind of waiver, States have to show 
that they are going to cover the same number of people, the 
same types of services, and the same amount of out of pocket 
costs for consumers. Those are the guardrails in the Waiver.
    Can you talk really quickly about how important those 
guardrails are as you look at the Waiver?
    Mr. Kreidler. Senator, we have changed the environment that 
we have right now with healthcare delivery through insurance 
because of the ACA. We are now competing on quality and service 
because we have the standardize benefits, the Essential Health 
Benefits; limitations on out of pocket expenses. It has changed 
the dynamic of the game tremendously.
    If we want to go forward and have the insurers in there, we 
have to participate. It is absolutely critical that we wind up 
making sure that those guardrails are not eroded away. But to 
focus on what can really make a difference.
    For one, stabilize and then second, be in a position to 
allow the insurance companies to innovate without being 
punished with the reinsurance program to back them up.
    Senator Murray. OK.
    Mr. Chairman, I do want to submit four letters for the 
record. They are actually signed by hundreds of leading 
patients' disease, physician, provider insurance, and business 
organizations. They are requesting multiple years of certainty 
for out of pocket reductions, and Federal investment in risk 
mitigation programs like reinsurance we have heard so much 
about, and preserving the protections for preexisting 
conditions including the Essential Health Benefits.
    I would like to put them in the record for today.
    The Chairman. Thank you. They will be.
    [The information referred to can be found in additional 
material.]
    Thank you, Senator Murray.
    Senator Roberts.

                      Statement of Senator Roberts

    Senator Roberts. Yes, thank you, Mr. Chairman.
    Thank you to all the witnesses for taking time, your very 
valuable time out of your schedule to come and visit with us.
    As rates are filled and not filled by some plans, obviously 
exiting the marketplace like we have seen in Kansas City, an 
action that serves absolutely nobody. So thank you for holding 
this hearing.
    I think it is important we focus on permanent or longer 
term reforms so we can help slow the growth of premiums and 
maintain or increase insurance options for consumers, as 
opposed to simply patching or providing an influx of cash to 
these markets which has been touched on by the witnesses.
    I know many are focused on the uncertainty surrounding the 
Cost Sharing Reduction subsidies, but I think it is important 
to note that, at least in Kansas, we have had insurers leaving 
the exchange market before this Administration, or the court 
ruling on this matter, and with the CSRs in place. Premiums 
still doubled in Kansas since Obamacare has been in place. And 
I think that is only one piece to the puzzle with regards to 
ASR's.
    Tighter age rating bands can be an answer. I know that is 
controversial. The health insurance or HIT tax, that is just a 
tax that is passed onto the consumer or the patient. Other 
mandates that you have talked about all add to the premium 
increases.
    We had 60,000 families paying $13 million in penalties in 
2014. $6 billion, I think, was the figure with regards to the 
Nation as a whole.
    So as premiums continue to increase, we had something in 
the recent reform proposals that did not pass, obviously, 
considered by the House and Senate. They took two different 
approaches to encourage, not mandate, folks to maintain 
continuous coverage.
    From your position as insurance commissioners, which do you 
see as more effective, as well as which would be easier to 
operationalize a penalty on premiums for lack of continuous 
coverage, or a waiting period for enrollees upon returning to 
enroll in coverage, or anything else you might suggest?
    We will start with Ms. McPeak.
    Ms. McPeak. Thank you.
    I have a preference for the waiting period over the premium 
penalty for not maintaining continuous coverage because there 
is an administrative issue for our insurers that have been 
participating in the exchange market with individuals coming in 
and out of coverage, and really trying to catch up with premium 
payments through grace periods.
    From my perspective, a waiting period would be more 
effective to incentivize consumers to maintain continuous 
coverage.
    Senator Roberts. Appreciate it.
     Sir.
    Mr. Kreidler. Thank you, Senator.
    I think one of the things that has really been challenging 
for the States is not all States have truly embraced the 
Affordable Care Act.
    The expansion of the Medicaid program had a very profound, 
positive impact; the creation of our own exchange, so we were 
more in control of our own destiny. Establishing network 
adequacy standards that reflected our values in the State of 
Washington is something that we did.
    Most States did not take those actions and as a 
consequence, they have seen more in the way of rate increases.
    Our rate increases have not gone up until this last year. 
We were under 10 percent per year, and now we have seen a 
marked increase.
    Stabilizing the market is going to be the thing that is 
really going to make a difference from our standpoint.
    Senator Roberts. Right. I appreciate that.
    Next, please.
    Ms. Wing-Heier. It is a tough call because you hate to see 
anyone be without insurance, but we have the special enrollment 
periods for a reason. And that, in itself, brings you into your 
waiting period because you cannot, in all circumstances, just 
go and enroll if you missed open enrollment. There are very few 
criteria that allow you to enroll if you miss open enrollment.
    Alaska would probably be looking more at the penalty.
    Senator Roberts. Yes, ma'am.
    Ms. Miller. I think we all want to do everything we can to 
make sure our risk pools are as robust as possible. I have not 
seen an alternative to the individual mandate that would be as 
good an option to make sure that we have the young and healthy.
    I am not saying that the mandate has been perfect by any 
stretch, but I have not seen an alternative that would do as 
well as that in terms of keeping the young and healthy in.
    Senator Roberts. Oklahoma.
    Mr. Doak. I am not in favor of a mandate, you might be 
surprised, but I think that there are other ways to reach plan 
design, to reach this group that does not have insurance. Avail 
themselves of more creative plan design relative to 
catastrophic plans for the young, invincible, to move them into 
possibly using Health Savings Accounts, as Director Wing-Heier 
mentioned. But I think there are ways.
    I am not sold on this marketing campaign that a few of the 
senators talked about either. Insurance companies have been 
marketing at every football game we watch. Possibly if they 
incentivized agents and brokers to sell this type of product, 
they might have a better result than use Navigators.
    Senator Roberts. Is that football game when Oklahoma comes 
to Kansas State?
    Mr. Doak. Yes, sir.
    Senator Roberts. I appreciate that.
    I have a real quick question and I am out of time. I 
apologize for this.
    How would increasing the age rating curve to 5-to-1 or 
maybe 4-to-1 as opposed to 3-to-1, that would be an 
intermediate change, if you so choose with regards to the 
individual or trying to get more younger people into the plan.
    Are you for it, against, against it, what? Yes or no. We 
can start with Oklahoma and rundown real quick.
    The Chairman. We are out of time, so if you could be quick 
about it and then submit it.
    Senator Roberts. They could submit it for the record, Mr. 
Chairman. I appreciate that. Thank you.
    The Chairman. You can make a short answer. That is OK.
    Mr. Doak. What was the question, sir?
    Senator Roberts. The question is on the rating band, the 
exchange market does not have enough of the young.
    Mr. Doak. Yes, I would be in favor of changes.
    Ms. Miller. I would have some concerns about increasing the 
rating band.
    Ms. Wing-Heier. We have concerns with increasing the rating 
band strictly because our rates for the older population, the 
three, are so high right now. We would price them out of ever 
being able to afford it.
    Senator Roberts. We say ``more mature'' in the senate. But 
go ahead.
    [Laughter.]
    Mr. Kreidler. Washington likes 3-to-1. We have in statute 
3.75-to-1 currently before the ACA. So we were not far off of 
3-to-1 to even begin with.
    Ms. McPeak. I would be in favor of expansion to 5-to-1 to 
bring the younger, healthier into the risk pool with more 
affordable premiums.
    Senator Robert. Thank you.
    The Chairman. Thank you, Senator Roberts.
    Senator Warren.

                      Statement of Senator Warren

    Senator Warren. Thank you, Mr. Chairman.
    And thank you, Mr. Chairman, for holding this hearing. 
Thank you, ranking member. I think it is important that we are 
having a bipartisan conversation about how to improve 
healthcare instead of destroy healthcare in America.
    At the same time that we are having this conversation, 
President Trump is actively working to sabotage our healthcare 
system. He is using a lot of different tactics, but two of them 
include reducing Federal help to keep out of pocket costs low, 
and cutting 90 percent of the advertising efforts so that 
people know about affordable health insurance.
    We have talked some about this, so let me just see if I can 
do this first part quickly. I just want to ask about the first 
one, withholding the Federal dollars that keep costs lower.
    Commissioner McPeak, are American families better off or 
worse off if the President refuses to make cost reduction 
payments?
    Ms. McPeak. If those payments are not funded, the American 
consumer is worse off, certainly. Not only the individuals that 
are eligible for those reduced co-payments and deductible 
amounts, but the individuals that would have to pay the 
increased premium dollars from the carriers associated with 
that lack of funding.
    Senator Warren. OK.
    Commissioner Kreidler, if the Government cuts advertising, 
fewer people will sign up for health insurance. But how does 
that affect the costs for the people who do sign up for health 
insurance?
    Mr. Kreidler. You want to encourage the people that are 
probably the least likely to sign up, to enroll because they 
are more likely to be healthier individuals that are now 
protected. They do not become the free riders in our system 
that relies on uncompensated care to care of them. It adds cost 
to the system.
    The more accountable you make healthcare, the better it is 
for all of us.
    Senator Warren. Very strong points on both of these.
    The President has been perfectly clear about what he is 
doing, sabotaging healthcare and driving up costs for families. 
It is petty and it is going to hurt millions of people. If he 
will not stop on his own, then Congress should stop him.
    But for me, that is just the beginning of what we need to 
do to really improve health insurance in this country.
    Secretary Miller, did the ACA put in place any sort of 
restrictions on how high an insurance company can raise its 
premiums in a given year?
    Ms. Miller. Senator, I think aside from the fact that in 
many States, we approved those rates.
    Senator Warren. I am going to ask you about the States. I 
am asking about the ACA.
    Ms. Miller. There are no restrictions in the ACA.
    Senator Warren. That is right. The ACA makes no 
restrictions at all. Right? But some States impose tough rules 
to protect consumers and they insist that the insurance 
companies have their rates approved by the insurance 
commissioner before those rates can go into effect.
    Let me ask, Secretary Miller, in the past years before all 
the chaos that has come to the markets lately, did you let 
insurers in Pennsylvania charge whatever they wanted for their 
plans?
    Ms. Miller. I did not, Senator.
    Senator Warren. You did not?
    Commissioner Kreidler, I understand that in Washington 
State, like Pennsylvania, insurance companies have to get 
permission ahead of time.
    Do insurers always come up with reasonable premiums the 
first time around?
    Mr. Kreidler. No, they do not.
    Senator Warren. Someone laughed out loud during that. Go 
ahead.
    Mr. Kreidler. We have applied a very vigorous review; in 
fact, we are among those States that are the most vigorous. In 
fact, we are recognized by the Federal Government as being a 
State that can do that hard review. I think several of us are 
in that position.
    Senator Warren. Hard review and I think you have some data 
on how much you pushed down one of the most recent premium 
requests.
    Mr. Kreidler. We do and I cannot remember exactly which one 
that was.
    Senator Warren. Maybe a 30 percent drop in average rates.
    Mr. Kreidler. It was something like that, yes.
    Senator Warren. All right. Good, good.
    I should say it the other way. Yes, a 30 percent drop in 
average rates.
    The reason I raise this is because letting insurance 
companies charge whatever they want opens up price gouging. 
Rate review programs among the various States have saved 
consumers about $1.5 billion in premium costs in just 2015 
alone, in a single year. Unfortunately, not every State is 
stepping up on this and the difference is huge.
    From 2010 to 2013, just that short time period, premium 
increases in States with the weakest review programs were 10 
percent higher than in States with the strongest review 
programs. That is a lot of money that a lot of families paid 
out. For me, it just shows the kind of work that we need to do.
    Right now, Medicare restricts premium increases for most 
beneficiaries, but the ACA does not. Medicare has high 
standards for the Medicare Advantage plans, while the ACA in 
many cases has lower standards. Medicare and Medicaid plans 
cover everybody who qualifies. ACA plans can pick and choose 
who they get in the game with.
    Let us be blunt. We can either make these markets work 
better for consumers or we can let insurance companies hold 
people hostage in order to maximize their own profits.
    In my view, if we were really serious about trying to make 
these markets work, we need to talk about the kind of rules 
that make them work best for consumers.
    Thank you, Mr. Chairman.
    [Applause.]
    The Chairman. Thank you, Senator Warren.
    Senator Whitehouse.

                    Statement of Senator Whitehouse

    Senator Whitehouse. Thank you, Chairman.
    Let me first, as a former Insurance Commissioner in my 
State, welcome our distinguished panel.
    Again, thank the chairman and the ranking member for 
trusting this committee to do a fair and thoughtful bipartisan 
process. We did it in education with great success to a 
unanimous, significant bill out of this committee, and I am 
confident that we can do something very worthwhile here.
    I want to open by pointing out that our health insurance 
commissioner in Rhode Island has written that,

          ``The ACA has worked in Rhode Island and we have a 
        remarkable story to tell.'' I am quoting a letter from 
        this January.
          ``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 premium changes in 2017 
        will range from a decrease of 3.1 percent to an 
        increase of 3.6 percent based on issuer.''

    To my colleagues, please follow the Hippocratic Oath and do 
no harm to those of us who have States where this is all 
working very well.
    The last point I will make before I go to questions is that 
I hope that the bipartisan process that we are embarked on 
here, with respect to shoring up the markets, can continue and 
be extended into other areas. Patient safety and medical errors 
remains a huge issue with tens of thousands of American 
casualties every year.
    There is nothing republican or democrat about ending 
hospital-acquired infections. The wild variations in care and 
outcomes are issues that we can address. It ought to be 
bipartisan to find the best States and the best practices, and 
encourage those.
    There is nothing republican or democrat about high 
administrative overhead and continuing feuding between insurers 
and providers over payment.
    The care that patients want at the end of life ought to be 
something we can make sure that they actually get. There ought 
to be no partisan difference about honoring a patient's and a 
family's wishes as they near the end of life.
    Finally, payment reform so that doctors are compensated for 
keeping people healthy rather than starved on that front and 
compensated only when they do late stage procedures once 
somebody's health is already compromised; another great area 
for bipartisan action.
    I hope that we will continue on those fronts.
    My questions are primarily going to be to Director Wing-
Heier. I appreciate you coming all the way from Alaska. That is 
pretty impressive. I want to ask you about the 1332 Waiver 
process through which you created your reinsurance program.
    You created it, not based on hitting a financial number, a 
dollar number in claims and then having the reinsurance kick 
in. You created it based on the diagnosis, based on conditions.
    Correct?
    Ms. Wing-Heier. Yes, sir. We did.
    Senator Whitehouse. Why did you make that choice and how 
did you choose the conditions?
    Ms. Wing-Heier. We did what we call a ``data call'' and had 
all the insurers that were in the market the first 2 years 
submit their claims.
    We submitted those, that data to an independent actuary, 
who then we had segregate the claims from the highest to the 
lowest based on the condition, so we could see what we were 
dealing with. What was causing the market for our rate 
increases to be roughly 40 percent for 2 years in a row?
    We then made the determination that if we removed the top 
10, the top 20, the top 30, we could put a correlation to how 
that would impact the market as far as how our rates would 
stabilize or, hopefully, decrease.
    Senator Whitehouse. Why pick conditions rather than, say, 
stop loss at $100,000 per claim or some other more numerical 
figure?
    Ms. Wing-Heier. We are looking at the biggest impact we 
could have to stabilize a market that was losing its----
    We were down to one insurer. We needed to stabilize the 
market to the greatest extent we could. Removing the entire 
claim or the entire person from a very small pool had the 
biggest impact or the biggest bang for our buck on our rates.
    Senator Whitehouse. What happens year to year as somebody 
goes into a new enrollment period or perhaps shifts their 
carrier? Does the new carrier know that your reinsurance for 
that individual because they have the requisite diagnosis will 
follow them, or do they have to stay with their--how does it 
work in terms of future enrollments?
    Ms. Wing-Heier. No. If we had a second carrier, based on 
the condition, that person would be seeded the first of every 
year or the first time they treated and continuing the 
diagnosis, be it a chronic condition or a new condition.
    Senator Whitehouse. So the reimbursement, the reinsurance 
for the carrier follows the individual year to year for as long 
as the diagnosis or condition remains in place. Correct?
    Ms. Wing-Heier. As long as they are treating.
    Senator Whitehouse. Did you consider setting up a risk pool 
rather than a reimbursement system for those individuals?
    Ms. Wing-Heier. Yes, we did.
    Senator Whitehouse. Why did you choose the reimbursement 
system rather than the risk pool?
    Ms. Wing-Heier. We chose the reimbursement system, again, 
to have the biggest impact on a very small market: 20,000 
people.
    Senator Whitehouse. So the administrative problem of 
setting up a separate risk pool would have been a problem for a 
small number of patients like that?
    Ms. Wing-Heier. We feel that we had a pool to begin with 
and with the 20,000 that were in it at the time was not 
succeeding. So to create a pool within a pool, we needed to get 
those high cost claimants out of the pool.
    Senator Whitehouse. Right.
    Ms. Wing-Heier. So that the entire individual market, we 
could reduce the rates and people could afford the premiums.
    Senator Whitehouse. Got it.
    My time is running out here, but I would like to ask a 
question to each of you. This will be a question for the record 
given the timing.
    But if an insurance company came to you, to your 
organization, proposing to sell health insurance in your State, 
I would like to know what steps, particularly setting up a 
provider network you would expect or require of that insurer?
    And conversely, to turn the question to the other side, 
what concerns would you have about an insurer showing up in 
your State purporting to offer health insurance who was not 
prepared to create a provider network and go through whatever 
other steps you would require?
    With that, I am out, but I would be really interested in 
your answer to those questions.
    Thank you.
    The Chairman. Very good questions. Thank you, Senator 
Whitehouse.
    This has been a very good discussion, both the hour before 
we started and this.
    I want to ask Senator Murray if she has concluding remarks.
    Senator Franken, do you have some concluding remarks?
    Senator Franken. I was going to ask a question about 
prescription drugs, but I see you want to conclude, and I 
respect that.
    The Chairman. No, go ahead, if you would like.
    Senator Franken. I just want to ask a rhetorical question 
about the cuts by HHS in advertising for the exchanges.
    Mr. Doak said that insurance companies advertise at every 
football game that we watch. Are those insurance companies just 
stupid or maybe insurance advertising works. That is the 
rhetorical question.
    I think there is a reason those insurance companies 
advertise.
    Mr. Doak. I guess the question is, are they funded by the 
Federal Government. Does that make sense or not?
    Senator Franken. I think the issue is, does advertising 
work? If you are cutting it by 90 percent, you are probably 
cutting the effectiveness of the advertising, whoever pays for 
it.
    Mr. Doak. We have thousands and millions of licensed agents 
and brokers all across the United States, Senator, that have 
been doing a great job in the health insurance market before 
Obamacare and could be doing the same after.
    Senator Franken. I really meant it as a rhetorical 
question, which I said.
    The Chairman. Good luck with that.
    Senator Franken. But good luck with that is right.
    The point is that they advertise for a reason whether or 
not they sell it through brokers or not. Advertising does work 
and that is why they advertise.
    I had a question on pharmaceuticals, but I really do not 
want to eat up time. Although, I would like to thank the 
chairman as we had a hearing on pharmaceuticals.
    I think, as you all have said in one way or another, that 
the pharmaceutical spikes in the last 3 years or so has been 
one of the things responsible for the premiums going up.
    I would love to hear your thoughts on how we can get those 
under control, and maybe we can do that in a written answer so 
that the chairman and the ranking member can include it.
    One other thing, my favorite moment in the hearing so far 
was Senator Whitehouse thanking Ms. Wing-Heier for the hardship 
of coming from Alaska.
    My favorite moment was seeing Senator Murkowski's 
expression when he did that.
    [Laughter.]
    The Chairman. Thank you, Senator Franken.
    Senator Murray, do you have any concluding remarks?
    Senator Murray. You are easily entertained, Senator 
Franken.
    I want to thank all of our witnesses today. This has been 
an extremely important first step. I know we have three more 
hearings. We do have a very short timeframe within which to do 
this and we need to seize this opportunity.
    Mr. Chairman, I know my side looks forward to working with 
you and I appreciate the opportunity today.
    The Chairman. Thanks, Senator Murray.
    And I thank the witnesses too. You have been very patient. 
You have given us a lot of time.
    I thank the senators. We have had maybe half the senate 
involved this morning in this discussion. That is pretty 
unusual and mostly on our best behavior. That is pretty unusual 
too. We welcome that.
    I would like to conclude with these remarks; one, just 
these facts from CMS on the Navigator program. I am not sure 
what the right amount of money is for the Navigator program.
    According to CMS, in 2016, Navigators received $62 million 
of Federal money to enroll 81,000 people; less than 1 percent 
of the total enrollees. Seventeen Navigators enrolled less than 
100 people each at an average cost of nearly $5,000 per 
enrollee. The top 10 most costly Navigators spent a total of 
$2.7 million to enroll 314 people in the Affordable Care Act. 
One grantee received $200,000 and enrolled one person. Only 22 
percent of all Navigators achieved their own performance goals.
    Maybe it is an area that needs some oversight.
    Let me go to a point that several senators have made 
including Senator Franken and several others. I have been 
thinking this especially.
    For 7 years, we have been stuck in this partisan stalemate 
on health insurance with most of the argument--not all of it, 
but most of it--about the 6 percent of Americans who buy their 
insurance on the individual market.
    When we really should have been spending more time on the 
fundamental problems with the American healthcare system that 
have caused it to grow from consuming 9 percent of the Gross 
Domestic Product in 1980, about 40 years ago, to nearly 18 
percent in 2015, and a predicted 20 percent in 2025.
    At the same time, as was mentioned, we have the phenomena 
of 5 percent of those who receive healthcare consume 60 percent 
of the costs. So we should be doing more on the larger question 
about addressing healthcare costs. There is no question about 
that.
    Looking at what we pay to visit the doctor or how to get a 
test at the hospital, that is the transparency Mr. Doak talked 
about.
    What we spend on prescription drugs, several of you talked 
about that.
    How much excessive paperwork and administrative burdens 
increase our costs.
    What more can be done to encourage wellness? That is really 
the low hanging fruit in the whole issue of health costs.
    What can be done to prevent more serious illness and 
disease, and the high costs that come from being ill?
    We should be looking at the real ways to bring down the 
cost of healthcare, which is the best way to reduce the cost of 
health insurance.
    What I have heard today, just to summarize, has been very 
helpful. It has been a focused hearing on a narrow part of the 
market where we have most of the problems; the 6 percent, the 
people with insurance.
    What we asked you to do was to focus on what could we do, 
especially this month, that might affect 2018. I heard three 
things mostly: reinsurance, Cost Sharing Reductions, and more 
flexibility from 1332.
    Reinsurance. One way to do reinsurance, of course, is the 
way Minnesota and Alaska did it, which is to use some of the 
Federal money you are already getting to do that. I am not 
suggesting that is the long-term solution. Senator Kaine has 
proposed a long-term solution.
    Reinsurance has broad support among republicans, I know. 
This is not a very complicated idea. It is just take this very 
narrow market, which is an odd market, a small market, and 
recognize that some people are very sick and we need to find, 
create a fund to pay for the costs of some of those people in 
order to lower the premiums for everybody else. That is what we 
are talking about.
    There are a variety of ways to do that, Federal tax 
dollars, State tax dollars. You can do what Maine did and 
charge everybody something on their premium. There are various 
ways to do that.
    But clearly, reinsurance is one part of the solution to a 
long-term fix for the individual market.
    Now, for the short term, for something we might sit down in 
10 days and say, ``OK. We can agree on this much,'' and try to 
ask the House and the Senate, and the President, and all to do 
it in time to have an effect on 2018. Maybe what I have heard 
is, ``Adjust 1332 in any way that makes it easier for you to 
create your own short-term reinsurance next year.'' That may be 
hard.
    Several suggestions for improving 1332 that ought not to be 
too controversial; I mean, the 6-month waiting period.
    No one mentioned the ``me too'' application. That is if 
Washington puts something in that is approved, why can 
Tennessee not come right along behind it and say, ``We want to 
do what Washington did with one change?'' That ought to speed 
things up.
    The idea of letting the process go ahead with just the 
application of the Governor, or as you have suggested the 
insurance commissioner and not wait for the legislature to have 
to pass a law, since some State's legislatures only meet every 
2 years.
    Alaska submitted a list of reforms that we will take a look 
at. I thank you for mentioning those.
    Planning funds, Ms. Miller mentioned that. That would seem 
an odd thing to have to do for a bankrupt Federal Government to 
give money to a balanced budget State Government for planning 
funds, but I understand the problem of quick providing of funds 
so that you can make your application for a longer term plan.
    Then I was intrigued with the suggestion, I have heard it 
often, of what can we do about the budget neutrality 
requirement? And make sure that that does not keep you from 
doing what you would do to make a long-term plan.
    Is there any way to include the savings that you have in 
Medicaid with what you are doing in the individual market; the 
two different Waivers that the Federal Government has?
    I know that New Hampshire has tried to do some things in 
that area. And even though the democratic Governors and the 
republican Governors both support it, they are not able to do 
it, according to both the Obama and Trump administrations.
    That is a short list of some things that might make some 
real difference in the 23 States that have actually started the 
process of applying for a 1332 Waiver.
    I am hopeful that maybe some combination of continuing cost 
sharing for a period of time--and we can discuss what that time 
is--and significant changes in flexibility for States, probably 
mostly through amendments to Section 1332 since it is already 
in the Act, might provide a basis for action we could take this 
month.
    Then if we act, we will count on the House of 
Representatives and the President to take advantage of that and 
my hope is that they would.
    That would not end the process. That would only be step 
one, then we would go pretty quickly to step two on a long-
term, strong, vibrant individual market and other changes that 
need to be made in the Affordable Care Act.
    I hope we can begin to spend most of our time on the larger 
issue of healthcare costs.
    If you have other comments that you would like to give to 
us, we would like to have them in writing pretty quickly 
because we are moving pretty quickly.
    The record will be open for 10 days for comments and 
questions.
    The Chairman. Tomorrow, our committee will meet again to 
hear from five Governors to further discuss marketplace 
stability and how to advance many of the topics mentioned 
today.
    We have two more hearings next week. Then we will see where 
we are and see what we think we can accomplish.
    Thank you for being here.
    The committee will stand adjourned.
    [Additional Material follows.]

                          ADDITIONAL MATERIAL

                                         September 5, 2017.
Hon. Lamar Alexander, Chairman,
Hon. Patty Murray, Ranking Member,
Senate HELP Committee,
U.S. Senate,
Washington, DC 20510.

    Dear Chairman Alexander and Ranking Member Murray: As providers of 
healthcare and coverage to hundreds of millions of Americans, we 
commend the HELP Committee's leadership in efforts to develop policy 
solutions to stabilize and strengthen the individual health insurance 
marketplace. These bipartisan discussions come at a pivotal time for 
the marketplace given the timing of final participation decisions by 
health plans for 2018.
    As the Senate HELP Committee considers legislation to stabilize the 
health care coverage and choices for the 20 million Americans who rely 
on the individual market, we urge the committee to ensure that cost-
sharing reduction (CSR) benefits are continuously funded for at least 2 
years (2018-19).
    CSR benefits help those who need it most: low-and moderate-income 
Americans with incomes under 250 percent of the Federal poverty level. 
Nearly 60 percent of exchange-plan enrollees rely on CSR benefits, 
which translates into comprehensive coverage and access for nearly 6 
million individuals and families. The CSR program makes it more 
affordable for patients to receive needed medical care and services by 
reducing deductibles, copayments, and out-of-pocket maximums. As a 
result, providers can better serve the needs of their communities and 
employers do not needlessly face higher costs to provide coverage to 
their employees.
    Persistent uncertainty about CSR funding is a significant driver of 
current market instability--pushing premiums higher and resulting in 
fewer choices for individual market consumers. According to the most 
recent analysis by the Congressional Budget Office, eliminating CSR 
benefits would--

     Increase average premiums for benchmark silver plans by 20 
percent in 2018 and by 25 percent in 2020.
     Increase the Federal budget deficit by $194 billion over 
the next 10 years (2017-26).
     Lead to fewer plan choices for consumers and greatly 
increase the risk that some consumers would be left with no insurance 
options in certain States and geographic areas.

    We urge the committee to include continuous funding for CSR 
benefits for at least the next 2 years (2018-19) as part of bipartisan 
legislation to stabilize the individual market. Without 2 years of CSR 
funding, uncertainty will persist and the Congress will need to address 
these same issues early next year. In addition, without a break in 
funding for the CSRs, we expect that this provision would not 
contribute to the Federal deficit. By committing to CSR funding for 2 
years, it would go a long way to bring much needed stability to the 
individual market and promote access to more affordable coverage and 
choices for millions of Americans.
            Sincerely,

    America's Health Insurance Plans; American Academy of Family 
Physicians; American Benefits Council; American Hospital Association; 
American Medical Association; Blue Cross Blue Shield Association; 
Federation of American Hospitals; U.S. Chamber of Commerce.

                                 ______
                                 

                                         September 5, 2017.
Hon. Mitch McConnell, Majority Leader,
Hon. Chuck Schumer, Democratic Leader,
U.S. Senate,
Washington, DC 20510.

Hon. Paul Ryan, Speaker of the House,
Hon. Nancy Pelosi, Democratic Leader,
U.S. House of Representatives,
Washington, DC 20515.

    Dear Leader McConnell, Speaker Ryan, Leader Schumer, and Leader 
Pelosi: The undersigned organizations representing consumers, patients, 
and health care providers share the strong belief that everyone in this 
Nation deserves high-quality, affordable health coverage and care. We 
stand committed to building on the historic progress of the Affordable 
Care Act (ACA) and working with you to secure meaningful and affordable 
health coverage for all.
    Continued uncertainty about funding for cost-sharing-reduction 
payments, evidence of administrative attempts to undermine the law, and 
concerns about future congressional attempts to repeal the ACA pose a 
significant threat to the stability of marketplaces and the broader 
individual market. It is now time for Congress to move past attempts to 
repeal the ACA and cut the Medicaid program and turn its attention 
toward bipartisan policies that would safeguard the stability of health 
insurance markets for 2018 and beyond. Specifically, we urge Congress 
to take swift action in three main areas:
    (1) Guarantee funding for cost-sharing reductions (CSRs). We urge 
Congress to immediately enact legislation that clarifies there is a 
permanent, mandatory appropriation that ensures full funding of CSRs, 
eliminating all questions raised by pending litigation. CSRs provide 
critical financial protection for nearly 6 million people who obtain 
private coverage on health insurance marketplaces.\1\ If CSRs end, 
premiums would rise by an estimated 19 percent, and reduced plan 
participation could leave many consumers without any coverage 
options.\2\ Quick action that guarantees ongoing CSR funding is 
critical to ensuring a stable individual market.
---------------------------------------------------------------------------
    \1\ Centers for Medicare and Medicaid Services, 2017 Effectuated 
Enrollment Snapshot, (Washington, DC: Department of Health and Human 
Services, Centers for Medicare and Medicaid Services, June 6, 2017), 
available online at https://downloads.cms.gov/files/effectuated-
enrollment-snapshot-report-06-12-17.pdf.
    \2\ Larry Levitt, Cynthia Cox, and Gary Claxton, The Effects of 
Ending the Affordable Care Act's Cost-Sharing Reduction Payments, 
(Washington, DC: Kaiser Family Foundation, April 25, 2017), available 
online at http://www.kff.org/health-reform/issue-brief/the-effects-of-
ending-the-affordable-care-acts-cost-sharing-reduction-payments/.
---------------------------------------------------------------------------
    (2) Restore premium stabilization programs. We urge Congress to 
immediately appropriate ongoing funding for a premium stabilization 
program that shields individual insurance markets from the volatility 
of high-cost claims. The potential impact of such a program is 
illustrated by the 10 to 14 percent drop in premiums that resulted from 
transitional reinsurance under the Affordable Care Act.\3\ An ongoing, 
fully funded premium stabilization program would also encourage 
insurers to offer marketplace coverage.
---------------------------------------------------------------------------
    \3\ Letter to Senate Majority Leader Mitch McConnell and Senate 
Minority Leader Chuck Schumer Re: The Better Care Reconciliation Act of 
2017 (BCRA), from Karen Bender, Chairperson of Individual and Small 
Group Market Committee, and Michael Nordstrom, Chairperson of Medicaid, 
American Academy of Actuaries, June 30, 2017 http://actuary.org/files/
publications/BCRA_Comment_Letter_063017.pdf.
---------------------------------------------------------------------------
    (3) Ensure continued funding for outreach and enrollment 
assistance. We urge Congress to continue to appropriate adequate 
funding for Federal Navigators and outreach, culturally and 
linguistically appropriate education, and marketing activities through 
the Department of Health and Human Services. This funding helps 
consumers--particularly young and healthy people who will help balance 
the risk pool--learn about and enroll into available coverage.
    Thank you for considering our requests. We urge you to protect the 
Medicaid program and preserve the coverage gains made under the ACA as 
you turn your attention to market stabilization efforts. We stand ready 
to work with you to address these urgent concerns in the short term 
and, in the long term, to enact policies ensuring that everyone in our 
Nation has high-quality, affordable health coverage and care.
            Sincerely,

    Families USA; Academy of Nutrition and Dietetics; ADAP Advocacy 
Association (aaa+); The AIDS Institute; AIDS United; Alliance for 
Retired Americans; American Academy of Pediatrics; American Association 
on Health & Disability; American Federation of State, County and 
Municipal Employees; American Federation of Teachers; American Muslim 
Health Professionals; American Nurses Association; American Public 
Health Association; The Arc of the United States; Asian & Pacific 
Islander American Health Forum; Association of University Centers for 
Disabilities; Autistic Self Advocacy Network; Bazelon Center for Mental 
Health Law; Black Women's Health Imperative; Cancer Support Community; 
Center for American Progress; Center for Law and Social Policy; Center 
for Medicare Advocacy, Inc.; Center for Popular Democracy; Center for 
Public Representation; ChangeLab Solutions; Children's Defense Fund; 
Coalition on Human Needs; Community Access National Network (CANN); 
Community Catalyst; Congregation of Our Lady of Charity of the Good 
Shepherd, US Provinces; Consortium for Citizens with Disabilities; 
Consumers Union; CPD Action; Disability Rights Education and Defense 
Fund; Doctors for America; Easterseals; Epilepsy Foundation Family 
Voices; Farmworker Justice; Foundation for Healthy Generations; Friends 
Committee on National Legislation; The Greenlining Institute; Health 
Care for America Now (HCAN); Hepatitis B Foundation; Hep B United; HIV 
Medicine Association; Hogg Foundation for Mental Health; International 
Union, United Automobile, Aerospace & Agricultural Implement Workers of 
America, UAW; Justice in Aging; Lakeshore Foundation; Leadership 
Conference on Civil and Human Rights; League of Women Voters of the 
United States; Medicare Rights Center; The Michael J. Fox Foundation 
for Parkinson's Research; NAACP; NASTAD; National Advocacy Center of 
the Sisters of the Good Shepherd; National Alliance on Mental Illness; 
National Association for Health and Fitness; National Association of 
Area Agencies on Aging (n4a); National Association of Perinatal Social 
Workers (NAPSW); National Association of Social Workers; National 
Center for Lesbian Rights; National Center for Transgender Equality; 
National Consumers League; National Council of Jewish Women; National 
Council for Behavioral Health; National Disability Institute; National 
Disability Rights Network; National Family Planning & Reproductive 
Health Association; National Health Law Program; National Latina 
Institute for Reproductive Health; National LGBTQ Task Force; National 
Partnership for Women & Families; National Patient Advocate Foundation; 
National Respite Coalition; National Viral Hepatitis Roundtable; 
National Women's Health Network; NETWORK Lobby for Catholic Social 
Justice; Organizing for America; Out2Enroll; Planned Parenthood 
Federation of America; Public Citizen; Raising Women's Voices for the 
Health Care We Need; Religious Institute; RESULTS; Sargent Shriver 
National Center for Poverty Law; Service Employees International Union 
(SEIU); Society for Public Health Education; TASH; Third Way; Trust for 
America's Health; UnidosUS; Union for Reform Judaism; United Church of 
Christ, Justice & Witness Ministries; United Methodist Church--General 
Board of Church and Society URGE: Unite for Reproductive & Gender 
Equity; YWCA ZERO TO THREE.
                                 ______
                                 
                    Mental Health Liaison Group \1\
---------------------------------------------------------------------------
    \1\ National Organizations Representing Consumers, Family Members, 
Advocates, Professionals, and Providers c/o Laurel Stine, JD, American 
Psychological Association at [email protected]. Angela Kimball, National 
Alliance on Mental Illness at [email protected]., and Debbie Plotnick, 
MSS, MLSP, Mental Health America at [email protected].

                                         September 1, 2017.
Hon. Lamar Alexander, Chairman,
Senate Health, Education, Labor, and Pensions Committee,
455 Dirksen Senate Office Bldg.,
Washington, DC 20510.

Hon. Patty Murray, Ranking Member,
Senate Health, Education, Labor, and Pensions Committee,
154 Russell Senate Office Bldg.,
Washington, DC 20510.

Re: Stabilizing the Individual Health Insurance Marketplace

    Dear Chairman Alexander and Ranking Member Murray: Thank you for 
leading a bipartisan effort to reform our health care system. With the 
HELP Committee's hearings on stabilizing the individual health 
insurance marketplace under the Affordable Care Act (ACA) scheduled for 
September, the Mental Health Liaison Group (MHLG) writes to offer our 
thoughts on issues associated with market stabilization that would 
likely have an impact on coverage of mental health and substance use 
disorder prevention and treatment services through marketplace plans. 
The MHLG is a coalition of more than 60 national organizations 
representing consumers, family members, mental health and substance use 
treatment providers, State behavioral health agencies, advocates, 
payers, and other stakeholders committed to strengthening Americans' 
access to mental health and substance use services and programs.
    Particularly in light of the ongoing national opioid addiction 
epidemic, MHLG believes that ensuring the whole health of all Americans 
requires maintenance of coverage for mental health and substance use 
disorder benefits at parity with existing medical/surgical benefits in 
all marketplace plans. Maintenance of those benefits has little meaning 
without affordable and ready access to the plans providing that 
coverage. Ensuring affordable and ready access requires retention of 
the ACA's prohibition against denying coverage based on a pre-existing 
condition, as well as the ACA's prohibitions against annual and life-
time limits on coverage.
    We oppose eliminating or reducing the cost-sharing reduction 
payments (CSRs) made to insurers to keep co-payments and co-insurance 
requirements low for plan members. Congress should fund the CSRs on a 
permanent basis to ensure insurers do not withdraw from markets, 
leaving low-income enrollees who are sicker or older--particularly 
those with mental illness and/or substance use disorders--without 
affordable coverage. So many individuals with serious mental illness 
and substance use disorders have limited-incomes that eliminating 
premium assistance and cost-sharing subsidies, thereby rendering 
coverage largely unaffordable, would--in essence--eliminate coverage 
for these essential services for many.
    We also strongly believe, as we know you do, that Congress must act 
immediately to ensure that plans are available in each State-designated 
marketplace for the 2018 benefit year. Furthermore, mental health and 
substance use disorder benefit coverage must be preserved in 
marketplace plans, and should not be subject to State waivers of 
coverage or other existing ACA limitations under an expanded  1332 
waiver authority. We do not believe that individuals with a serious 
mental illness or substance use disorders should be denied coverage 
based on the State in which they reside, as would be the case should 
coverage vary from State-to-State under the proposed expanded waiver 
authority.
    As a threshold matter, MHLG believes that mental health and 
substance use disorder benefit coverage must be preserved in all 
marketplace plans, and should not be subject to State waivers of ACA 
regulations or other existing ACA limitations under an expanded  1332 
waiver authority. We do not believe that individuals with a serious 
mental illness or substance use disorders should be denied coverage 
based on the State in which they reside.
    In addition, the permitted range of premiums and deductibles--
including the limits on age-banding of premiums--must remain as they 
currently exist so that plans cannot impose premiums so high for the 
provision of mental health and substance use disorder services that 
they become unaffordable to the individuals who most need them. We 
oppose reducing the Federal premium tax credits which lower income, 
non-Medicaid enrolled insureds have received from the Federal 
Government to maintain insurance coverage and which have, until now, 
averaged 72 percent of the cost of premiums.
    We do not believe the answer to keeping coverage costs low is the 
short-term funding of a temporary Federal fund for State grants 
targeted toward subsidizing plan coverage for individuals with serious 
mental illness and/or a substance use disorder, as was contained in 
H.R. 1628. Such a fund would, within only a few years, be totally 
inadequate in meeting need for the populations that Congress worked to 
serve with the passage of the 21st Century Cures Act and the 
Comprehensive Addiction and Recovery Act (CARA) of 2016.
    Moreover, it is important to remember that untreated serious mental 
illness and substance use disorders intensify and increase the number 
of comorbid medical conditions in individuals with those conditions, 
increasing total individual insurance coverage costs in the long-run. 
Those proliferating comorbid conditions and costs also have the 
potential to increase costs in the Medicaid program for individuals 
whose catastrophic health events leave them at income levels making 
them eligible for Medicaid.
    MHLG recognizes that the individual personal responsibility 
coverage mandate is unpopular among some. However, the 30 percent 
premium surcharge that would have replaced the individual mandate under 
H.R. 1628 for failure to maintain continuous coverage is not an 
appropriate solution, as it would have a disproportionate impact on the 
lowest income enrollees who would have been struggling to maintain 
premium payments for coverage. It would be particularly destructive for 
those enrollees whose serious mental illness or substance use disorders 
often render them cognitively impaired and thus less capable of 
maintaining premium payment schedules until they recover, when the 
sizable surcharge would leave them unable to pick up coverage. 
Similarly, the waiting period for coverage after a failure to maintain 
continuous coverage included within the Senate amendments to H.R. 1628 
would be particularly harmful for individuals struggling with addiction 
or serious mental illness who are left with no way to address those 
issues in the absence of access to insurance coverage.
    We urge you to continue to protect these vulnerable Americans' 
access to and coverage of vital mental health and substance use 
disorder treatment and prevention services, and to not reverse the 
recent progress made with the enactment of key mental health and 
substance use disorder prevention and treatment reforms under the 21st 
Century Cures Act and CARA.
            Sincerely,

    American Art Therapy Association; American Association of Child & 
Adolescent Psychiatry; American Association for Marriage and Family 
Therapy; American Association for Geriatric Psychiatry; American 
Association for Psychoanalysis in Clinical Social Work; American 
Association on Health and Disability; American Dance Therapy 
Association; American Foundation for Suicide Prevention; American Group 
Psychotherapy Association; American Mental Health Counselors 
Association; American Nurses Association; American Psychiatric 
Association; American Psychoanalytic Association (APsaA); American 
Psychological Association; American Society of Addiction Medicine; 
Anxiety and Depression Association of America; Association for 
Ambulatory Behavioral Healthcare; Bazelon Center for Mental Health Law; 
Campaign for Trauma-Informed Policy and Practice; Children and Adults 
with Attention-Deficit Hyperactivity Disorder (CHADD); Clinical Social 
Work Association; Clinical Social Work Guild 49-OPEIU; Depression and 
Bipolar Support Alliance; Eating Disorders Coalition; EMDR 
International Association; Global Alliance for Behavioral Health and 
Social Justice; International Certification & Reciprocity Consortium 
(IC&RC); Mental Health America; National Association for Children's 
Behavioral Health; The National Association of County Behavioral Health 
and Developmental Disability Directors (NACBHDD); The National 
Association for Rural Mental Health (NARMH); National Association of 
Social Workers; National Association of State Mental Health Program 
Directors (NASMHPD); National Alliance on the Mental Illness (NAMI); 
National Council for Behavioral Health; National Disability Rights 
Network; National Federation of Families for Children's Mental Health; 
National Health Care for the Homeless Council; National League for 
Nursing; National MS Society; National Register of Health Service 
Psychologists; No Health Without Mental Health (NHMH); Psychiatric 
Rehabilitation Association and Foundation; Residential Eating Disorders 
Consortium (REDC); School Social Work Association of America; Treatment 
Communities of America; Trinity Health of Livonia, Michigan; Young 
Invincibles.
                                 ______
                                 
                                   August 10, 2017.
Hon. Patty Murray, Ranking Member,
Senate HELP Committee,
154 Russell Senate Office Building,
Washington, DC 20510.

    Dear Ranking Member Murray: In March, our organizations, 
representing some of the Nation's leading patient and provider advocacy 
groups, joined together to define a set of principles representing the 
essential components of any patient-focused health care reform plan.\1\ 
These principles are specifically designed to protect the health and 
well-being of the millions of individuals we represent and their unique 
health care needs. The bills recently considered by the House and 
Senate contained provisions that would have had substantial and 
irreversible negative impacts on patients and their families, 
providers, communities, and economies. As Congress continues its 
efforts to reform the health care system, we urge policymakers to 
consider these principles and work in a bipartisan manner to craft 
proposals that improve access to care for our patients and strengthen 
the Nation's health system in the near and long term.
---------------------------------------------------------------------------
    \1\ Health Care Reform Principles: http://www.heart.org/idc/groups/
heart-public/@wcm/@adv/documents/downloadable/ucm_495416.pdf.
---------------------------------------------------------------------------
    Today, millions of Americans, including many who are low-income or 
live with pre-existing health conditions, rely on health care coverage 
received through the Affordable Care Act (ACA). Our organizations have 
long said the ACA is by no means perfect, but it made important gains 
in access to coverage. It is clear that steps must be taken to both 
stabilize the individual health insurance marketplace and bring down 
premiums and other out-of-pocket costs. These changes are critical to 
maintain and expand access to quality and affordable insurance for low- 
and middle-income families across the Nation.
    To this end, we believe that the current law can be strengthened by 
focusing on the following critical issues:
Cost-Sharing Reductions (CSR)
    A top priority that must be addressed immediately is ensuring 
continued funding for the ACA cost-sharing reductions. In the absence 
of expedited Congressional action, additional insurers could exit 
markets very soon, leaving patients without coverage options while 
forcing premium increases of at least 19 percent both on and off the 
marketplace exchanges.\2\
---------------------------------------------------------------------------
    \2\ C. Cox., What's the near-Term Outlook for the Affordable Care 
Act? (Kaiser Family Foundation, Aug. 2017). http://www.kff.org/health-
reform/issue-brief/whats-the-near-term-outlook-for-the-affordable-care-
act/.
---------------------------------------------------------------------------
Supporting Coverage in Counties Without Insurers
    Congress should identify ways to ensure insurer participation on 
the exchanges in bare counties. For instance, leveraging the Federal 
Employee Health Benefits Program (FEHBP), which offers private 
insurance coverage to Federal employees in every county in the country, 
could help with this issue. Requiring private insurers who participate 
in FEHBP to issue insurance on the exchanges could be required as a 
condition for continued participation at the national level. 
Alternatively, waiving the insurer tax for issuers in counties without 
options could also be an appropriate stopgap measure.
Risk Reinsurance
    Other key stabilization concepts Congress might consider include 
development of risk reinsurance proposals, akin to the program 
implemented in Alaska. Reinsurance reduces the risk to insurers of 
covering high-cost patients thus creating stability in the markets. 
This protects Americans from significant premium increases by 
offsetting the costs of sicker and more costly enrollees. We would also 
urge Congress to consider other innovative and financially sustainable 
risk mitigation proposals at either the State or Federal level.
Outreach
    It remains imperative that the administration and Congress devote 
adequate resources to State health insurance marketplace outreach and 
enrollment to ensure all eligible Americans have the opportunity to 
sign up for health insurance coverage. We know States that devote 
robust resources to marketing, outreach, and enrollment assistance 
programs experience higher rates of enrollment than those that do 
not.\3\ A focus on enrollment also helps ensure that more low-cost 
individuals obtain insurance on the State health insurance exchanges to 
help offset the costs of older, sicker patients. We would urge these 
activities also be coupled with actions to streamline the application 
and enrollment process.
---------------------------------------------------------------------------
    \3\ J. Wishner, I. Hill, S. Benatar et al., Factors that 
Contributed to High Marketplace Enrollment Rates in Five States in 2015 
(Urban Institute, Oct. 2015). See also S.R. Collins, M. Gunja, M.
---------------------------------------------------------------------------
Tax Credits
    As members of both parties have noted, affordability remains a 
barrier for many Americans to purchase adequate insurance. While we 
recognize the challenge of increasing program costs, we would support 
increasing financial support for individuals and families by expanding 
income eligibility for health insurance tax credits. Many middle-income 
families struggle to afford coverage with increasing premiums, 
deductibles, and copays.
Long-Term Costs
    While we agree that affordability at the individual and family 
levels is a serious hurdle to securing coverage, we would also 
encourage Congress to examine other major factors that contribute to 
the rising cost of health care, including the rising costs of many 
treatments. Much but not all of our Nation's health care spending is on 
the treatment of chronic disease, much of which can be prevented 
through evidence-based efforts. We urge you and your colleagues to work 
together to evaluate the root causes of these growing costs and address 
them directly.
    Finally, while we remain ready to work on efforts to reduce 
unnecessary health care spending and costs and to improve the health 
insurance marketplace, this should not be done at the expense of 
ensuring access to quality care for all patients, including those who 
rely on the Medicaid program. Our organizations remain committed to 
retaining important patient protections including the ban on pre-
existing conditions exclusions and premium rating, guaranteed issue, 
the prohibition on annual and lifetime benefit caps and continued 
coverage of critical essential health benefits. Essential health 
benefits must also continue as a Federal benefit and must include 
preventive benefits that help maintain and improve the health and 
wellness of millions of Americans. Finally, we urge Congress to 
maintain and support important health care safety net programs, such as 
Medicaid and the related Medicaid expansion.
    We look forward to working with Congress to ensure all Americans 
have access to affordable and adequate health care coverage.
            Sincerely,

    ALS Association; American Diabetes Association; American Heart 
Association; American Lung Association; Arthritis Foundation; Cystic 
Fibrosis Foundation; Family Voices; March of Dimes; Muscular Dystrophy 
Association; National Health Council; National MS Society; National 
Organization for Rare Diseases; United Way Worldwide; Women Heart: The 
National Coalition for Women with Heart Disease.
                                 ______
                                 
  Response by Mike Kreidler O.D., to Questions of Senator Alexander, 
 Senator Burr, Senator Young, Senator Roberts, Senator Whitehouse and 
                            Senator Franken
                               State of Washington,
                  Office of Insurance Commissioner,
                                         Olympia, WA 98501,
                                                September 15, 2017.
Hon. Lamar Alexander, Chairman,
530 Hart Senate Office Building,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510.

    Dear Chairman Alexander: Thank you for the opportunity to testify 
before the U.S. Senate Health, Education, Labor, and Pensions (HELP) 
Committee last week. It was an honor to participate in the first of 
your bipartisan hearings on health care reform. I appreciate the 
Senator's efforts to understand the priorities of State insurance 
regulators and to learn from our experience on the front line of the 
individual insurance market.
    During the hearing, several members of the HELP Committee posed 
important questions to me from the dais. Please consider this letter, 
containing those questions and my answers, as a supplement to the 
hearing record.
    I believe we can turn this market around and continue the successes 
we have enjoyed in Washington State. I have real hope that your 
committed efforts will result in bringing about the immediate relief 
all five insurance commissioners were unified in requesting: funding of 
the cost-sharing reduction payments through 2018, at the very least.
    I'm happy to offer you any assistance that I can to develop long-
lasting solutions for a stable insurance market this year, and beyond.
            Sincerely,
                                             Mike Kreidler,
                                            Insurance Commissioner.
                                 ______
                                 
                           senator alexander
    Question. How can we use the 1332 waiver to allow States to benefit 
from reinsurance?
    Answer. The benefit of a reinsurance program can be a solid 
reduction in premiums paid by the consumer. For example, in Washington 
State, the Federal transitional reinsurance program resulted in an 8-10 
percent drop in average premiums (from 2014 through 2016, the years the 
program existed). A State reinsurance program should have the same 
effect, but the cost of funding it is prohibitive for many States. The 
1332 waiver is a good mechanism to assist with the necessary funding, 
diverting realized Federal savings from advanced premium tax credits 
(APTC's) into dollars to support a State reinsurance program.
    There are some challenges in pursuing a 1332 waiver. One is the 
length of time and the cost associated with the application process. 
And State legislators must make a commitment to fund the State 
reinsurance program without a specific Federal dollar commitment; this 
can be a political challenge, and a timing challenge for States with 
part-time legislatures.
    The success of a State reinsurance program funded by a 1332 waiver 
is based upon predicted APTC savings. Alaska's 1332 waiver was very 
successful, in part because their premiums were very high, and they had 
only one insurer participating in the market. Here in Washington, we 
have an efficient health system with seven insurers in our State-based 
Exchange, and our premiums are significantly lower. We are actively 
working with a contractor now to analyze insurer data to predict the 
potential premium impact of a reinsurance program. But without 
significant premium savings resulting in significant Federal funds, it 
is unlikely our State can independently implement the program.
                              senator burr
    Question. What opportunity is there to stabilize the market with 
the purchase of multi-year plans?
    Answer. Multi-year health insurance contracts are not currently 
permitted in any State, and there are significant obstacles to this 
option. Consumers would have to be willing to give up an annual choice 
of plan, and would likely require portability across State lines. 
Insurers might object to the possibility of decreased competition, if 
the cost of switching plans is too high, and could find it difficult to 
reliably predict future costs within the contract time period. Plans 
would have to be built with incentives for healthy consumers to stick 
to them.
    Because of these obstacles, I would not consider multi-year health 
insurance contracts to be a meaningful stabilization strategy for the 
2018, 2019 or 2020 plan year.
                             senator young
    Question. How can States increase transparency?
    Answer. This year, Washington State will bring online an All-Payer 
Healthcare Claims database that will systematically collect all 
medical, pharmacy and dental claims from private and public payers, 
with data from all settings of care that permit the systematic analysis 
of health care delivery. This system will help patients, providers and 
hospitals make informed choices about care, and it will promote 
competition based on quality and cost.
    However, a recent U.S. Supreme Court decision, Gobeille v. Liberty 
Mutual Insurance Company, found that ERISA preempts State attempts to 
require self-funded plans to submit data to a State's database. 
Congress could address that issue in Federal law; the result would be a 
significant increase in the data Washington could collect, to the 
benefit of consumers, providers and hospitals.
                            senator roberts
    Question. Do you support increasing the 1:3 age band and why?
    Answer. In 1995, our State set the mandated age ratio at 3.75:1. 
This level reflects what we believe was a fair balance of affordability 
for young and older enrollees. Upon passage of the Federal Affordable 
Care Act (ACA), we adopted the mandated average of 3:1. I would support 
a return to our State band of 3.75:1, but would not advocate for 
adoption of a broader band at this time.
    Prior to the ACA, most States has a 5:1 age band ratio. A major 
concern with narrowing the band to 3:1 was the impact on younger 
purchasers--if the cost rises too high, young healthy people are more 
likely to stay out of the market. In our State, the impact on premiums 
for young people younger people was less evident (shifting only .75 
percent). And the impact of the rise in premium was cushioned by the 
temporary Federal reinsurance program that dropped Washington State 
rates by 8 to 10 percent. Younger enrollees, many of whom have lower 
incomes, also received significant support in the form of APTCs and 
cost-sharing subsidies. But even under these favorable conditions, the 
enrollment of younger people was less than we had hoped.
    Widening the age band might lead to incremental differences in 
premiums for younger enrollees, but I'm not convinced it will make the 
difference in bringing them into the insurance market Congress should 
focus on keeping and enforcing the individual mandate, and increasing 
penalties as contemplated by the ACA for those who stay out of the 
market, until the decision to enroll becomes the clearly better 
financial choice.
                           senator whitehouse
    Question. What standards would a new insurer need to meet to do 
business in Washington State? How would you feel about an insurer who 
wanted to do business but couldn't meet those standards?
    Answer. Washington has a business-friendly climate with a Top-10 
ranking among States in a recent Forbes magazine survey of ``The Best 
States for Business.'' Our regulatory environment is fair and 
reasonable, and we use the National Association of Insurance 
Commissioners (NAIC) Uniform Certificate of Authority Application 
(UCAA) forms to review and process applications from insurance 
companies quickly.
    We are committed to a thorough review of potential health insurers 
to ensure that companies can provide the level of quality and 
commitment we want for our residents. In addition to the UCAA 
requirements, Washington State law requires that we request 
documentation of net worth, geographic areas and population groups to 
be served, schedules of proposed rates and charges, and detailed 
descriptions of almost every business process--from the enrollee 
complaint system to the health care delivery system--to ensure that 
services will meet State law requirements and will be of professional 
quality.
    Washington is an active rate review State; once a health insurer is 
admitted in our State to sell to Washington consumers, we review all 
filed plans and rates to be sure they are actuarially justified and 
meet our State requirements.
    Washington has a long history of strong consumer protections, and 
many of our requirements are not found in the laws of other States. I 
would not allow an insurer to do business here that did not meet our 
requirements, and the prospect of lowering the high standards for 
quality and service we receive from our currently admitted insurers 
would be a big concern.
                            senator franken
    Question. What can we do to bring prescription drug costs under 
control?
    Answer. The skyrocketing cost of prescription drugs directly 
impacts people who purchase insurance, by driving up premiums and 
hitting their out-of-pocket expenses in co-insurance.
    One of the most important things we could do is prohibit ``pay for 
delay'' deals between dealers of name brand and generic drugs. Generics 
are important to cut costs, and consumers want them. We should not 
permit drug companies to keep them off the market.
    We should also demand increased transparency from drug companies. 
Purchasers should be able to understand the true cost of drug research 
and development. Consumers should be able to see prices, including 
those charged to Medicare and other countries. The current pharmacy 
supply chain, from manufacturer to pharmacist, should be clearly 
documented, so we can find potential savings from transactional costs.
                                 ______
                                 
   Response by Mike Kreidler, O.D. to Questions of Senator Whitehouse
                               State of Washington,
                  Office of Insurance Commissioner,
                                        Tumwater, WA 98501,
                                                  October 11, 2017.
Hon. Sheldon Whitehouse,
530 Hart Senate Office Building,
U.S. Senate,
Washington, DC 20510.

Re: U.S. Senate Health, Education, Labor, and Pensions Committee 
        Hearing--Stabilizing Premiums and Helping Individuals in the 
        Individual Insurance Market for 2018: State Insurance 
        Commissioners

    Dear Senator Whitehouse: Thank you for the opportunity to respond 
to questions you posed during the U.S. Senate Health, Education, Labor, 
and Pensions Committee hearing on September 6, 2017.
    I am pleased and heartened by the bipartisan efforts to improve 
health care delivery and insurance market stability in our States. 
Washington, in particular, has long embraced efforts to find innovative 
ways to deliver quality health care through stable insurance markets.
    I appreciated the opportunity to share our State's history 
regarding the individual insurance market; your questions raise other 
areas where I hope Washington's experience can be of assistance.
    Attached are your questions with my responses. I hope these prove 
to be helpful to you. I would be happy to provide additional 
information, should you need it.
            Sincerely,
                                             Mike Kreidler,
                                            Insurance Commissioner.
                                 ______
                                 
    Question 1. Following the HELP Committee's work to stabilize the 
individual market, I hope the committee will move on to other efforts 
to address cost and improve quality in our health care system. I 
believe the following areas are ripe for bipartisan collaboration:

    a. Improving patient safety by preventing medical errors and 
healthcare-acquired infections;
    b. Addressing the dramatic variations in care quality and outcomes 
across States;
    c. Identifying ways to reduce administrative overhead and dispute, 
specifically the bureaucratic warfare between insurance companies and 
providers over reimbursement;
    d. Ensuring that a patient's wishes are honored at the end of his 
or her life; and
    e. Advancing payment reform to encourage prevention and primary 
care.

    Which of these areas should be a priority for the HELP Committee 
going forward? What strategies would you suggest to lower costs and 
improve quality in these areas? Is there innovative work in your States 
and communities that you would like to highlight?
    Answer 1. Each of the areas you have identified have the potential 
to lower costs and improve quality. We have done significant work in 
Washington State to improve patient safety and the payment system, and 
to reduce administrative overhead and reimbursement disputes. Below are 
illustrations of some programs that have provided good results for our 
State.
                         improve patient safety
    Washington has adopted several programs into law that require 
reporting of incidents to allow State oversight and intervention.
    Adverse Health Events and Incident Reporting System. Washington 
State law (Chapter 70.56 RCW) requires healthcare facilities to report 
to the Washington State Department of Health whenever they confirm an 
adverse event, as defined by the National Quality Forum. Facilities 
required to report include psychiatric hospitals, State correctional 
medical facilities, ambulatory surgical facilities, and child birthing 
centers. Facilities that report an adverse event are required to 
conduct a root cause analysis and identify corrective actions. This 
requirement is intended to address prevention of such events in the 
future.
    Healthcare Associated Infections Program. This program requires 
hospitals to report infection information to the Washington State 
Department of Health, which annually produces an interactive map and 
reports comparing hospital infection rates for central line-associated 
bloodstream infections, surgical site infections and ventilator-
associated pneumonia. (See www.doh.wa.gov, Healthcare Association 
Infections).
                             payment reform
    We recognize the need for an objective comparative standard for 
medical service pricing. In January 2018, Washington State will 
implement an All Payer Claims database. (See Health Care--Price 
Transparency Health Care). The database will assist consumers in making 
informed choices about health care, promote improvements in health care 
performance, and enable purchasers to increase their value-based 
purchasing activities. Reports will include claims data from Medicaid, 
Medicare, State employee health benefits, our State's workers' 
compensation medical program, and commercial health insurers regulated 
by my office.
    At this point, submission of claims data from self-funded employer-
sponsored group health plans and Taft-Hartley plans is voluntary, based 
on the U.S. Supreme Court's ruling that ERISA's preemption clause 
prevents States from requiring self-funded group health plans to submit 
claims data to State all-payer claims databases. (See Gobeille v. 
Liberty Mutual). In the interests of transparency and payment reform, a 
bipartisan discussion on the possibility of mandating self-funded group 
health plans participation in State databases would be very welcome.
    We also recognize that, as a major purchaser, the State can be a 
positive force for system change. Currently, our State Medicaid program 
and our State employee health benefit program are integrating 
strategies to implement value-based purchasing and behavioral health 
integration goals. Our ``Healthier Washington Initiative'' has goals of 
building healthier communities through a collaborative regional 
approach, integrating physical and behavioral health services and 
financing to focus on the whole person, and improving how we pay for 
services by rewarding quality over quantity. (See Healthier 
Washington--Washington State Health Care Authority).
    The initiative is taking a multi-payer approach. We have developed 
a common performance measure set and are working to implement value-
based payment reforms. Washington State participates in the CMS 
Medicare/Medicaid dual-eligible demonstration and has implemented a 
Medicaid State plan health home program as a key component of our duals 
demonstration participation. (Washington--Centers for Medicare & 
Medicaid Services). Evaluation results for the first 2 years of the 
demonstration show Medicare savings of $67 million.
    Last, as you know, Washington is a full rate review State, meaning 
that we closely review proposed health insurance premium rates to 
ensure that the premiums charged reflect the benefits that are provided 
under a health plan. We have seen continued increases in underlying 
health care costs, particularly with respect to prescription drug 
expenditures. Any bipartisan discussions related to prescription drug 
pricing would be a high priority.

       reduce administrative overhead and reimbursement disputes
    We have also focused on establishing uniform and streamlined 
administrative processes for the health care and insurance community, 
aimed at reducing the potential for error, and improving care quality 
and outcomes. My office partners in this effort with an organization 
called OneHealthPort, a Washington cooperative owned by health plans 
and health care providers. The goal of OneHealthPort is to reduce 
administrative burdens by making information exchange more efficient, 
with fewer errors, and to develop and recommend best practices for 
providers and health plans. This year, my office adopted rules, for 
example, to standardize processes across insurers for prior 
authorization.
    This year, I am re-introducing a bill designed to protect consumers 
from payment disputes between insurers and providers who are out of 
network. When consumers receive care from an out-of-network provider in 
an emergency or in an in-network facility, they can receive a bill from 
the provider for any balance due over what the insurer has paid. This 
``surprise bill'' happens frequently, and the average bill is under 
$1,000.00. The solution is passing a law to take the consumer out of 
the middle, and establishing a predictable payment rate for the 
provider along with a fair and objective resolution process.

    Question 2. If an insurance company came to you proposing to sell 
health insurance in your State, what steps, such as setting up a 
provider network, would you expect or require that insurer to take 
before you authorize the insurer to sell health insurance policies in 
your State?
    Answer 2. We would expect all insurance companies to meet our 
stringent requirements. Washington State has a strong history of 
consumer protection reflected in the requirements that insurers must 
meet to be admitted to sell health insurance in our State. We have 
adopted the National Association of Insurance Commissioners' (NAIC) 
Uniform Certificate of Authority Application. We go beyond the NAIC's 
requirements in two critical ways central to consumer protection: 
requirements for financial solvency and provider network adequacy.
    Washington State's financial solvency requirements set minimum net 
worth requirements for health insurers that must be met in order to 
sell insurance in our State. For example, health care service 
contractors (e.g. our Blue Cross and Blue Shield insurers) must have a 
minimum net worth equal to the greater of 3 million dollars, or 2 
percent of the annual premium earned on the first $150 million of 
premium earned and 1 percent of premiums earned in excess of $150 
million (RCW 48.44.037). The insurer must maintain this minimum 
solvency standard (RCW 48.44.039). A similar requirement applies to 
health maintenance organizations (RCW 48.46.235-.247).
    Equally important, Washington State has strong provider network 
adequacy standards. As I am sure you are aware, in the face of rising 
underlying health care costs, especially for prescription drugs, and 
the uncertainty facing the individual health insurance market overall, 
we have seen a trend of insurers moving away from preferred provider 
organization health plans with broad provider networks to exclusive 
provider organization or HMO plans. By design, these health plans offer 
a somewhat narrower network of providers in an effort to offer more 
affordable premiums and cost-sharing. A consequence of that movement is 
that our network adequacy rules have become even more critical.
    My agency has promulgated regulations that address both qualitative 
and quantitative standards for provider network adequacy. The 
qualitative standard is as follows:

    1. An insurer must maintain each provider network for each health 
plan in a manner that is sufficient in numbers and types of providers 
and facilities to assure that, to the extent feasible based on the 
number and type of providers and facilities in the service area, all 
health plan services provided to enrollees will be accessible in a 
timely manner appropriate for the enrollee's condition. An insurer must 
demonstrate that, for each health plan's defined service area, a 
comprehensive range of primary, specialty, institutional, and ancillary 
services are readily available without unreasonable delay to all 
enrollees, and that emergency services are accessible 24 hours per day, 
7 days per week without unreasonable delay.
    2. Each enrollee must have adequate choice among health care 
providers, including those providers which must be included in the 
network under Washington Administrative Code (WAC) 284-170-270, and for 
qualified health plans and qualified stand-alone dental plans, under 
WAC 284-170-310.

    Our quantitative standards include minimum distance and appointment 
time standards for primary care providers, as well as appointment time 
standards for urgent appointments and specialty services (WAC 284-170-
200(13)). Washington State also has a strong mental health parity 
statute. To ensure its robust implementation, we have adopted clear 
standards regarding the types of behavioral health services that must 
be included in provider networks (WAC 284-170-200(11)).

    Question 3. What concerns would you have about an insurance company 
coming to your State that was not prepared to create a provider network 
or complete any other steps you may require?
    Answer 3. I would have extremely strong concerns regarding an 
insurance company coming to Washington State that was not prepared to 
create a provider network or complete other steps required for an 
insurance company to do business in our State. As described above, the 
Washington State Legislature and my office have defined minimum 
standards beyond those included in the NAIC uniform application. Those 
requirements were established to protect consumers in our State. While 
I respect the right of other States to set their own standards for 
insurers that do business in their States, our ability to maintain 
strong consumer protection standards is critical.
                                 ______
                                 
    Response by Lori K. Wing-Heier to Questions of Senator Alexander
                           Department of Commerce, 
              Community, and Economic Development, 
                             Division Of Insurance,
                                     Juneau, AK 99811-0805,
                                                  October 10, 2017.
Hon. Lamar Alexander, Chairman,
Senate Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510-4704.

Re: U.S. Senate, Committee on Health, Education, Labor, and Pensions 
        ``Stabilizing Premiums and Helping Individuals in the 
        Individual Insurance Market for 2018: State Insurance 
        Commissioners''

    Dear Senator Alexander: Following my testimony on September 6, 
2017, in the referenced committee hearing, Senator Sheldon Whitehouse 
posed several questions for the record to me. The questions and my 
responses for the record are listed below:
                                 ______
                                 
    Question 1. Following the HELP Committee's work to stabilize the 
individual market, I hope the committee will move on to other efforts 
to address cost and improve quality in our health care system.
    I believe the following areas are ripe for bipartisan 
collaboration:

    a. Improving patient safety by preventing medical errors and 
healthcare-acquired infections;
    b. Addressing the dramatic variations in care quality and outcomes 
across States;
    c. Identifying ways to reduce administrative overhead and dispute, 
specifically the bureaucratic warfare between insurance companies and 
providers over reimbursement;
    d. Ensuring that a patient's wishes are honored at the end of his 
or her life; and
    e. Advancing payment reform to encourage prevention and primary 
care.

    Which of these areas should be a priority for the HELP Committee 
going forward? What strategies would you suggest to lower costs and 
improve quality in these areas? Is there innovative work in your States 
and communities that you would like to highlight?
    Answer 1. Improving patient safety and quality care are important 
health care priorities, but the Alaska Division of Insurance's 
regulatory authority does not generally encompass items a, b or d.
    Addressing the underlying cost of health care insurance coverage is 
key to meaningful reform. Alaska experiences a lack of provider 
competition in many regions; therefore, insurance companies have little 
to no leverage when negotiating contracts. The goal of insurance 
companies in connection with these pricing contracts is to keep the 
premium levels in check so that coverage is more affordable and 
competitive. Through medical loss ratio standards, health care insurers 
are closely monitored to ensure that pricing for services is based on 
the actual cost of care and that profit margins are maintained at 
reasonable levels. However, health care medical service providers and 
health care providers engaged in manufacturing and distribution of 
pharmaceutical and other health care equipment do not have a similar 
form of cost control oversight in private markets. Establishing 
standards to streamline reimbursement between insurance companies and 
providers through more transparent pricing structures coupled with 
limitations to curb price gouging and excessive profits could help to 
control costs and greatly improve the affordability of health care 
insurance coverage.
    Regarding patient's wishes at the end of life, we would refer you 
to La Crosse Wisconsin for their efforts. \1\
---------------------------------------------------------------------------
    \1\ http://www.npr.org/sections/money/2014/03/0S/286126451/living-
wills-are-the-talk of-the-town-in-la-crosse-wis.
---------------------------------------------------------------------------
    The common theme for preventive care is that reimbursements are not 
focused on the dialog between a primary care provider and their 
patient. Other items that are not health related but can later produce 
costly medical expenses, especially behavioral health, include social 
determinants.

    Question 2. If an insurance company came to you proposing to sell 
health insurance in your State, what steps, such as setting up a 
provider network, would you expect or require that insurer to take 
before you authorize the insurer to sell health insurance policies in 
your State?
    Answer 2. The first step would require the health care insurer to 
apply for a certificate of authority under AS 21.09.110. In addition to 
financial statements necessary to evaluate the company's solvency and 
financial history, the company would be required to file policy forms 
and rate approval request and receive prior approval from the Alaska 
Division of Insurance before selling health insurance policies in 
Alaska.

    Question 3. What concerns would you have about an insurance company 
coming to your State that was not prepared to create a provider network 
or complete any other steps you may require?
    Answer 3. The division's primary concern is to protect consumers by 
ensuring an insurance company's financial solvency to pay claims.

    Question 4. As you know, Alaska chose to base the eligibility 
criteria for its reinsurance program on a list of 33 specific medical 
conditions rather than a dollar amount based on claims. You stated 
during the hearing that using conditions to determine eligibility for 
the reinsurance program would make the ``biggest impact'' to stabilize 
the market. Why did eligibility based on conditions lead to a ``bigger 
impact'' than setting up a reinsurance program based on by a dollar 
amount?
    Answer 4. By establishing qualification based on 33 known 
significant medical conditions, Alaska was able to define an objective 
measure based upon market experience and projected risk. The focus has 
centered upon chronic conditions since they are costs that are expected 
to continue year after year. Random accidents that result in 
significant medical costs do not necessarily belong in a separate risk 
pool.

    Question 5. You stated that setting up a reinsurance program was 
better suited for stabilizing Alaska's individual market than a high-
risk pool. What aspects of a reinsurance program make it more effective 
than a high-risk pool in Alaska's case?
    Answer 5. Alaska's high risk pool administrator, Alaska 
Comprehensive Health Insurance Association, previously handled 
condition-based eligibility, so this was an easier transition than a 
dollar-level based reinsurance program.

    Question 6. How, if at all, does Alaska plan to reevaluate 
eligibility for its reinsurance program? Will the State review the 
effectiveness of its conditions list at insulating individual market 
from the highest cost patients? Is there a mechanism by which the 
conditions list can be modified in the future?
    Answer 6. Yes, the Division plans on reviewing the conditions as 
experience develops. The modifications would be made through State 
regulation.

    Question 7. Does Alaska's reinsurance program absorb 100 percent of 
the claims cost for an eligible individual-market enrollee once that 
enrollee has been ceded to the reinsurance program? Is there a cap on 
the reimbursement provided to insurers for the claims of eligible 
enrollees?
    Answer 7. Yes, that's correct, the Alaska reinsurance program (ARP) 
will receive 100 percent of the claims for an individual who has one of 
the eligible medical conditions. There is no cap on individual 
reimbursement. The total reimbursement to insurers is based on the 
trended contribution from 2017 per actuarial modeling. SSSM trended 
approximately 10 percent per year is the expected allocation for the 
reinsurance program.

    Question 8. From a patient's perspective, are there any differences 
in benefits and/or cost-sharing for those in the reinsurance program 
and those who are not?
    Answer 8. No, the ARP consumers will not have any difference from 
non-ARP individuals.
    I am grateful for the bipartisan efforts of the Senate Committee on 
Health, Education, Labor, and Pensions to establish solutions to help 
stabilize individual health care insurance markets and ensure access to 
quality, affordable health care. Thank you for the opportunity to 
contribute ideas for consideration as you work to find solutions for so 
many Americans.
    Response by Julie Mix McPeak to Questions of Senator Whitehouse
    Question 1. Following the HELP Committee's work to stabilize the 
individual market, I hope the committee will move on to other efforts 
to address cost and improve quality in our health care system.
    I believe the following areas are ripe for bipartisan 
collaboration:

    a. Improving patient safety by preventing medical errors and 
healthcare-acquired infections;
    b. Addressing the dramatic variations in care quality and outcomes 
across States;
    c. Identifying ways to reduce administrative overhead and dispute, 
specifically the bureaucratic warfare between insurance companies and 
providers over reimbursement;
    d. Ensuring that a patient's wishes are honored at the end of his 
or her life; and
    e. Advancing payment reform to encourage prevention and primary 
care.

    Which of these areas should be a priority for the HELP Committee 
going forward? What strategies would you suggest to lower costs and 
improve quality in these areas? Is there innovative work in your States 
and communities that you would like to highlight?
    Answer 1. As I mentioned in my written testimony, a direct causal 
relationship exists between the costs of health care services and the 
costs of health insurance. After, hopefully, approving Cost Sharing 
Reduction (CSR) funding to stabilize individual markets, the HELP 
Committee should address both the short-term as well as long-term 
factors contributing to our current health care landscape. As my 
Governor stated in his testimony before the HELP Committee on September 
7,

          ``ultimately making health care more affordable involves 
        looking at a variety of factors which contribute to the high 
        cost of health care, including exploring incentive programs 
        which focus on the quality of patient care.''

Additionally, the committee could explore strategies to contain rising 
pharmaceutical costs as well as review ways in which transparency of 
costs could contribute to reductions in health care costs. The HELP 
Committee could look at ways to incent wellness and prevention 
initiatives or transparency measures surrounding health care costs.
    Addressing items b and e above, Tennessee has been among the 
Nation's chief innovators in establishing an episode-based payment 
structure in our Medicaid program that is expanding into the commercial 
market. The episodes of care model rewards high-quality care and 
reduces ineffective and/or inappropriate care by aligning provider 
payment incentives with successful patient outcomes. Payment 
methodologies which aim to group health care services into episodes, if 
implemented appropriately with timely and adequate disclosures of 
metrics to physicians, have the potential to reduce costs and improve 
patient outcomes. Of course, as mentioned earlier, incenting consumers 
to make healthier choices could also have a positive impact on the 
health of our constituencies.

    Question 2. If an insurance company came to you proposing to sell 
health insurance in your State, what steps, such as setting up a 
provider network, would you expect or require that insurer to take 
before you authorize the insurer to sell health insurance policies in 
your State?
    Answer 2. The most important factor that we, as insurance 
regulators, review when considering company applications is the 
solvency of the company; i.e. whether the company has sufficient 
resources to pay claims. Upon receipt of an application for licensure, 
the Department reviews the suitability and experience of company 
management, company risk controls, and the information technology 
capabilities of the company to ensure that the internal operations can 
support the complexity of its business. This process, which would lead 
to the issuance of a license, is distinct from the review of policy 
forms and rates but can be performed simultaneously. It is important to 
note, however, that a company may not write any health insurance 
business until its plans and rates have been approved by the 
Department.
    The Department reviews proposed policies for compliance with State 
and Federal law during the rate review process. The review of forms 
also confirms that a carrier has adequate provider networks; typically, 
that those networks have gone through the adequacy review process of a 
national accrediting body. At the same time, we work with actuaries to 
review rates to ensure that they are not excessive, insufficient, or 
unfairly discriminatory.
    Fortunately, Tennessee has experience this year with a company that 
came to the Department proposing to sell health insurance on the 
federally facilitated marketplace. While their coverage area is limited 
to one service area, this still was a bit of welcome news, as our 
consumers had previously witnessed carriers withdraw from offering 
health insurance policies throughout our State.
    Question 3 What concerns would you have about an insurance company 
coming to your State that was not prepared to create a provider network 
or complete any other steps you may require?
    Answer 3. The Department would not license a company that we did 
not believe would have sufficient resources to pay claims. Further, we 
do not approve policy forms or rates until filings satisfactorily meet 
State and Federal requirements, including network adequacy provisions. 
In theory, a company could be licensed by the Department but not 
authorized to write insurance. The company must meet both financial 
standards and regulatory requirements before it can offer health 
policies to consumers. This Department is dedicated to the protection 
of Tennessee's insurance consumers, and we expect and require insurance 
carriers to be able to meet their promises to policyholders.
  Response by Teresa Miller, J.D., to Questions of Senator Whitehouse
    Question 1. Following the HELP Committee's work to stabilize the 
individual market, I hope the committee will move on to other efforts 
to address cost and improve quality in our health care system.
    I believe the following areas are ripe for bipartisan 
collaboration:

    a. Improving patient safety by preventing medical errors and 
healthcare-acquired infections;
    b. Addressing the dramatic variations in care quality and outcomes 
across States;
    c. Identifying ways to reduce administrative overhead and dispute, 
specifically the bureaucratic warfare between insurance companies and 
providers over reimbursement;
    d. Ensuring that a patient's wishes are honored at the end of his 
or her life; and
    e. Advancing payment reform to encourage prevention and primary 
care.

    Which of these areas should be a priority for the HELP Committee 
going forward? What strategies would you suggest to lower costs and 
improve quality in these areas? Is there innovative work in your States 
and communities that you would like to highlight?
    Answer 1. I wholeheartedly agree with you that we need to have a 
true national dialog about health care costs, and how we can rein in 
the unsustainable growth of those costs without sacrificing quality and 
innovation. While some of the solutions may be national and others may 
be better implemented by States themselves, this is certainly an area 
where I believe we can work across the aisle and seek bipartisan 
solutions. With that in mind, I want to highlight some of the steps 
already being taken by States, and particularly by Pennsylvania with 
these critical goals in mind:
    Several states have enacted and operationalized all-payer claims 
database (APCD) laws. These databases are designed to inform cost 
containment and quality improvement efforts by providing service-level 
information such as charges and payments, the provider(s) receiving 
payment, clinical diagnosis and procedure codes, and patient 
demographics.
    Governor Wolf included an APCD as part of his fiscal year 2017-18 
proposed budget, and Pennsylvania's General Assembly is currently 
considering APCD legislation, which has achieved support from 
republicans and democrats alike. Policymakers, payers, providers, and 
patients could all use APCD data to better drive, deliver, and seek out 
value in the healthcare system. The committee could consider supporting 
the States in this effort to increase cost and quality data 
transparency through support of funding for States to establish APCDs 
and by addressing Federal impediments to cost transparency, in 
particular by working with the Department of Labor to ensure that 
States have access to data from self-insured plans, which cover 
approximately a third Pennsylvanians.
    Reimbursement and provider contracting remains a critical part of 
building an adequate network. One area of interest for many States, 
including Pennsylvania, is reimbursement for services received by an 
out-of-network provider, particularly in cases of ``surprise billing.'' 
A handful of States have enacted legislation related to out-of-network 
reimbursement, and, in Pennsylvania, we have been working with 
interested parties to determine how best to address the issue. In fact, 
a proposal to resolve surprise billing has now been introduced in both 
chambers of the Pennsylvania legislature with bipartisan sponsorship.
    Pennsylvania's Department of Human Services is also working to move 
our healthcare system away from predominantly focused fee-for-service 
payment arrangements and more toward alternative payment arrangements 
that are focused on value and outcomes. These are arrangements that 
incentivize the healthcare system and our providers to deliver on the 
triple aim: better care, better health, and lower costs. As just one 
example, we have established targets for our Medicaid managed care 
organizations to increase their use of value-based payments, and are 
working to establish similar targets in our other program areas.
    Pennsylvania's Department of Health is also leading an innovative 
initiative in collaboration with Medicare, Medicaid, and private 
insurers to transform the way that rural hospitals are paid for care. 
Participating hospitals will be paid using all-payer global budgets, 
which are set annually, rather than on a fee-for-service basis. This 
will provide stable financing for rural hospitals, a critical community 
asset, while allowing them to transform care delivery to increase their 
focus on prevention and care management.
    Support from the Centers for Medicare and Medicaid Innovation 
(CMMI) has been vital in this initiative, and Pennsylvania looks 
forward to continuing the partnership with CMMI.

    Question 2. If an insurance company came to you proposing to sell 
health insurance in your State, what steps, such as setting up a 
provider network, would you expect or require that insurer to take 
before you authorize the insurer to sell health insurance policies in 
your State?
    Answer 2. Companies must obtain a license from the Insurance 
Department to do business in the State and have their provider networks 
certified by the Department of Health as adequate. The licensure 
process is critical in protecting consumers and serving the greater 
public interest. Health insurance companies, along with other regulated 
entities, must provide information such as biographical data, a 
business plan, capital and surplus requirements, and proof of adequate 
networks to be licensed to sell insurance in Pennsylvania. We also 
review certain policy forms and rates prior to the sale of the policy. 
While we recognize that these requirements represent an administrative 
burden, we endeavor to streamline the process for insurers by 
coordinating our regulatory oversight with those of other States 
through use of NAIC models, best practices, and established national 
standards. To that end, the requirements of a health insurance company 
seeking to sell insurance in Pennsylvania will experience, and be able 
to leverage, processes that are similar to the States in which they 
already sell insurance.

     Question 3. What concerns would you have about an insurance 
company coming to your State that was not prepared to create a provider 
network or complete any other steps you may require?
    Answer 3. The steps we require for companies to sell health 
insurance are important to ensure consumers are protected and will 
ultimately have their claims paid. It's not easy to be a health 
insurer, particularly balancing solvency (and profits) with consumer 
service and affordability. Establishing provider networks is, without 
question, the biggest obstacle for insurers who want to do business in 
a new State. It's not easy working with all the hospitals, doctors, 
clinics and other health care providers to ensure consumers will have 
access to quality care and the doctors they want. But, it's critically 
important for consumers who will be purchasing insurance that they have 
access to services they need. Access to these networks, however, comes 
at a price, and better negotiated rates in provider contracts means 
better premium rates for consumers. This requires that companies strike 
a balance with providers such that providers are given adequate and 
fair reimbursement (including acknowledgement of volume discounts, 
actual cost of care, etc.), and that consumers have access to 
affordable care from a network that is able to meet their needs.
    We have heard a lot about a proposal that would allow insurers to 
sell health insurance ``across State lines.'' Proponents claim such a 
proposal would increase competition and reduce costs for consumers. 
While these are laudable goals, this proposal simply ignores the 
fundamental nature of how health insurance works. It assumes the 
barrier to entry for companies wanting to expand their footprint into 
new States is the license they need to obtain from the insurance 
department. As noted above, through established national standards and 
shared best practices, many State insurance regulators have streamlined 
the process to be licensed. However, if you ask health insurance 
companies why they don't expand their footprints (including companies 
who only do business in limited areas within a State), they will tell 
you how difficult it is to establish the provider networks needed to 
offer quality coverage.

    [Whereupon, at 12:55 p.m., the hearing was adjourned.]

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