[Senate Hearing 115-550]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-550

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

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

                                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 IN THE 
  INDIVIDUAL INSURANCE MARKET FOR 2018, FOCUSING ON STATE FLEXIBILITY

                               __________

                           SEPTEMBER 12, 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		MAGGIE 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

                      TUESDAY, SEPTEMBER 12, 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
Franken, Hon. Al, a U.S. Senator from the State of Minnesota.....     7
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming..    35
Collins, Hon. Susan M., a U.S. Senator from the State of Maine...    39
Young, Hon. Todd, a U.S. Senator from the State of Indiana.......    43
Bennet, Hon. Michael F., a U.S. Senator from the State of 
  Colorado.......................................................    45
Murkowski, Hon. Lisa, a U.S. Senator from the State of Alaska....    47
Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode 
  Island.........................................................    49
Cassidy, Hon. Bill, M.D., a U.S. Senator from the State of 
  Louisiana......................................................    51
Baldwin, Hon. Tammy, a U.S. Senator from the State of Wisconsin..    53
Murphy, Hon. Christopher S., a U.S. Senator from the State of 
  Connecticut....................................................    55
Warren, Hon. Elizabeth, a U.S. Senator from the State of 
  Massachusetts..................................................    56
Kaine, Hon. Tim, a U.S. Senator from the State of Virginia.......    59
Hassan, Hon. Margaret Wood, a U.S. Senator from the State of New 
  Hampshire......................................................    58

                               Witnesses

Leavitt, Michael O., Former Secretary of Health and Human 
  Services, Salt Lake City, UT...................................     7
    Prepared statement...........................................     9
O'Toole, Allison Leigh , Chief Executive Officer, MNsure, St. 
  Paul, MN.......................................................    12
    Prepared statement...........................................    13
Bragdon, Tarren, Chief Executive Officer, Foundation for 
  Government Accountability, Naples, FL..........................    16
    Prepared statement...........................................    17
Tyson, Bernard J., Chairman and Chief Executive Officer, Kaiser 
  Foundation, Hospitals and Health Plan, Inc., Pleasanton, CA....    22
    Prepared statement...........................................    24
Tomczyk, Tammy , FSA, FCA, MAAA, Senior Principal and Consulting 
  Actuary, Oliver Wyman, Milwaukee, WI...........................    29
    Prepared statement...........................................    30

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.
    Response by Allison Leigh O'Toole to questions of Senator 
      Whitehouse.................................................    65

                                 (iii)

 

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

                              ----------                              


                      TUESDAY, SEPTEMBER 12, 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 SD-430, Dirksen Senate Office Building, Hon. Lamar 
Alexander, chairman of the committee, presiding.
    Present: Senators Alexander, Murray, Enzi, Collins, 
Cassidy, Young, Murkowski, 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 third of four hearings on 
stabilizing the cost of premiums and ensuring that Americans 
are able to purchase insurance in the individual health 
insurance market in 2018.
    This is the market where 6 percent of insured Americans, 
that is 18 million people, buy their insurance; those who do 
not get insurance from the Government through Medicare, or 
Medicaid, or on the job.
    For the past few years, the cost of premiums in the 
individual market, co-pays and deductibles, have been 
skyrocketing in many States. Half of these 18 million Americans 
have Government subsidies to help cushion the blow of the 
rising prices. Many of those who find themselves in the other 
half are being priced out of the insurance market; they simply 
cannot afford it.
    That is why these hearings have a narrow objective. What 
can Congress and the President do between now and the end of 
the month to help limit premium increases in 2018 and begin to 
lower premiums after that?
    We heard in our hearings last week that there also is a 
danger, if we do not act, Americans in some counties, 
literally, will have no insurance to buy because insurance 
companies will pull out of collapsing markets.
    The other reason we have a limited objective is while this 
committee has been able to resolve contentious differences on a 
great many issues, we have been stuck in a partisan political 
stalemate for 7 years on health insurance. A small bipartisan 
step would break this stalemate and, hopefully, lead to some 
other steps.
    This morning, we will hear from experts, who work in or 
with States, as they develop plans to stabilize their 
individual market or implement other, broader health care 
reforms.
    Senator Murray and I will each have an opening statement, 
and then we will introduce our five witnesses. After their 
testimony, senators will each have an opportunity to ask the 
witnesses 5 minutes of questions.
    I want to thank Senator Murray for, as she always does, 
working so well with the committee to agree on the witnesses, 
to make these hearings bipartisan, and aim toward a result 
rather than just an opportunity for us to make speeches about 
our various points of view.
    The focus of today's hearing is this, as I said, how can we 
give States more flexibility in approving health insurance 
policies as one way of creating better coverage, more choices, 
and lower prices?
    Despite our partisan differences, our two hearings last 
week demonstrated a real hunger by many senators on both sides 
of the aisle to come to a result.
    Between the meetings held before last week's two hearings, 
and the hearings themselves, for two consecutive days half of 
the members of the U.S. Senate attended. We had a good number 
of senators who came by to meet the witnesses today before this 
hearing who are not members of our committee.
    I had expected there would be two themes in our work, but 
during those hearings, three themes emerged that, I would 
suggest, represent a working consensus for stabilizing premiums 
in the individual market in 2018.
    The first theme is congressional approval of continued 
funding of the cost sharing payments that reduce co-pays and 
deductibles for many low-income Americans on the exchanges. I 
have recommended that we continue those payments through 2018.
    That theme is promising because Cost Sharing Reductions 
were created by the Affordable Care Act, and because temporary 
cost sharing payments were a part of both the Senate and the 
House republican bills to repeal and replace the Affordable 
Care Act.
    The second theme, senators from both sides of the aisle 
suggested expanding the so-called ``Copper Plan'' already in 
the law so anyone, not just those 29 or under, could purchase a 
lower premium, higher deductible plan that keeps a medical 
catastrophe from turning into a financial catastrophe.
    By providing a choice for lower cost plans to everyone, the 
State insurance commissioners suggested that we would give 
young and healthy people more options to buy insurance.
    The third theme--advocated by State insurance 
commissioners, Governors, and senators from both sides of the 
aisle--is to give States more flexibility in the approval of 
coverage, choices, and prices for health insurance. That third 
piece is what we are discussing today.
    Most of the discussion about flexibility is centered on 
giving States greater flexibility by amending Section 1332, the 
State Innovation Waiver, that is already in the Affordable Care 
Act.
    We heard from virtually every witness last week that an 
application for a Section 1332 is too cumbersome, inflexible, 
and expensive. Some 23 States have taken steps to start the 
process. So far, two have succeeded.
    There was no shortage of suggestions about how to make 
Section 1332 work better, but they basically come down to this. 
Let us ease the process of applying so that more States can do 
what Alaska has done, but faster; and let us give States actual 
flexibility in their approaches, like Massachusetts requested.
    What Alaska has done, and what Minnesota, Iowa, and Maine 
are considering doing, is to use the Section 1332 Waiver as a 
way to take care of higher cost individuals and lower premiums 
without using additional Federal funds. This might include 
reinsurance, stability funds, or invisible high risk pools to 
help individuals with complex and chronic conditions.
    To help States do this, the recommendations from witnesses 
last week included, reduce the 6-month application review 
period. Allow a copycat application. If Senator Murray's State 
gets something approved, why can't Tennessee not come along and 
say, ``We want to do what Washington State did with one 
change?''
    Allow the Governor to apply for a waiver and not wait for 
the legislature to have to pass a law, since some State 
legislatures only meet every 2 years.
    Extend the waiver length; fast track process for emergency 
waivers; define budget neutrality as over the entire term of 
the waiver rather than a single year; eliminate the so-called 
``firewall'' between the Section 1115 Waivers and the Section 
1332 Waiver; eliminate the 2012 regulation and 2015 guidance, 
which will make these process suggestions work better.
    We also heard from several witnesses, including the 
Governor of Massachusetts, that the current rules on what types 
of health insurance can be offered under Section 1332 Waivers 
are so rigid that a State essentially cannot offer anything but 
an existing Affordable Care Act exchange plan.
    Real State flexibility means giving States more authority 
to offer a larger variety of health insurance plans with a 
larger variety of benefits and payment rules.
    This type of approach to insurance allows individuals the 
opportunity to have a more personalized health insurance plan. 
It is an approach that can benefit healthy individuals, as well 
as with complex and chronic medical conditions.
    For example, as Governor Baker of Massachusetts testified, 
``Greater flexibility is also needed around benefit design. 
Value-Based Insurance Design approaches to benefit design seek 
to align patients' out-of-pocket costs, such as copayments and 
deductibles, with the value of services.''
    ``Massachusetts is committed,'' he said, ``To providing 
access to quality, affordable health insurance for our 
residents. Rather than walking away from that commitment, we 
believe increased flexibility would allow us to meet that 
commitment in more effective ways.''
    While there was much consensus last week, I would caution 
members that there still are significant differences to deal 
with. A true compromise requires democrats to accept something 
republicans want: more flexibility for States; and republicans 
to accept something democrats want: continued funding for cost 
sharing payments in the Affordable Care Act. Both sides have 
been supportive of the so-called ``Copper Plan.''
    As an example, the chairman of the Finance Committee, 
Senator Hatch, a former chairman of this committee, on Friday 
questioned continuing cost sharing without significant 
structural reforms in the Affordable Care Act.
    On the other hand, several democratic members have insisted 
that what they call guardrails in the law not be changed.
    As for guardrails, I want to be clear that I am not in any 
way proposing that we change the patient protection guardrails 
already written into Section 1332, including that nobody can be 
charged more if they have a preexisting condition; the 
requirement that everyone is guaranteed to be sold insurance; 
the requirement that your insurance policy cannot be rescinded; 
that those under 26 may remain on their parents' insurance; and 
that there may be no annual or lifetime limits on your health 
benefits.
    As for the Essential Health Benefits, States already may 
waive those under the express provisions of Section 1332 in the 
Affordable Care Act.
    The guardrails that need examinations are the severe 
restrictions on benefit design that Governor Baker was talking 
about that affect the result that would be achieved when the 
U.S. Department of Health and Human Services approves a State 
waiver application under Section 1332. That is where we need to 
have further discussion.
    We had a good deal of discussion among senators. Senator 
Franken and others discussed that with our witnesses earlier 
today and I hope we will hear more about that. You could help 
us a great deal if you can help us resolve this part of the 
problem.
    Under the Section 1332 Waiver rules, the result achieved 
under a waiver has to be a plan that is ``as comprehensive'' in 
benefits, actuarial value, and out-of-pocket cost as an 
Affordable Care Act exchange plan, cover a comparable number of 
individuals, at roughly the same cost to individuals, and at no 
increased cost to the Federal Government.
    This essentially means that no other type of benefit design 
for health insurance plans is allowed.
    That would be like a restaurant menu with only one item, or 
a travel agency with only one destination, or if Dr. Seuss had 
written a book entitled, ``Oh, The Place You Can Go.''
    Today's witnesses have extensive experience in helping 
States design policies of approving insurance and we look 
forward to your advice of how to give States real flexibility 
in ways that increase coverage, choices, and lower prices.
    Senator Murray.

                  Opening Statement of Senator Murray

    Senator Murray. Thank you, Chairman Alexander.
    Thank you to our witnesses for being here as well today.
    Before I begin, I want to say a few words on the ongoing 
situation in the Gulf and Atlantic Coasts, and in the wildfires 
in the West.
    As a Nation, our hearts continue to be with the families 
who have lost loved ones and all those whose lives have been 
upended by Irma and Harvey.
    On behalf of many of us, I just want to say we extend our 
deepest appreciation to the countless first responders, and 
public servants, and neighbors, and volunteers who have 
inspired us all through their bravery and self-sacrifice.
    I, like everyone, commit to working with all of us in the 
coming weeks and months to make sure these people have the 
Federal resources and partners they need. I am sure all of our 
committee joins me in saying that.
    I am eager today to continue our conversation on bipartisan 
steps we can take to restore certainty to the individual 
insurance market for patients and families across the country 
who are worried about being able to afford the care they need 
next year and beyond.
    So far, we have had focused, substantive discussions in our 
first two hearings--and in our many conversations off the 
committee--on areas of significant common ground around those 
goals.
    That is due, in large part, to the members of this 
committee. I want to thank all our colleagues, on both sides, 
for their efforts.
    I would also note, as Chairman Alexander has mentioned, our 
steps to open up this process to members off the committee. We 
committed to opening up this process at the very beginning of 
our talks, and I know I speak for many of us when I say, Mr. 
Chairman, those morning coffees have been extremely helpful.
    As I said last week, and I will repeat today, even if we do 
not agree exactly on the cause, we do agree on the challenge 
facing this committee: families will see higher premiums and 
fewer options as a result of uncertainty in our health care 
system.
    We also agree that we need to act very quickly, and 
everyone here understands we have a very narrow window to do 
so.
    Last week we heard some valuable recommendations in our 
conversations. First of all, Governors and State insurance 
commissioners, from all corners of our country, republicans and 
democrats, agreed that we need multi-year certainty for out-of-
pocket cost reductions.
    As discussed, many insurers are already making their plans 
and setting premiums well beyond 2018.
    If we want to provide the kind of certainty actually needed 
to lower costs for patients and families, doing the bare 
minimum here is simply unacceptable.
    Second, there is consensus that, along with guaranteeing 
out-of-pocket cost reductions, we should consider additional 
ideas to make health care work better for patients and 
families.
    One idea is establishing a reinsurance program to help 
offset costs associated with covering the sickest enrollees. 
That is something that has come up consistently throughout our 
hearings, as have other options.
    Third--and democrats have been very focused on this from 
the start--there is agreement the damage being done by this 
Administration on open enrollment and consumer outreach is 
having a real impact and could potentially undermine our 
efforts to restore stability to the markets. Like my 
colleagues, I strongly believe we need to address that issue.
    Of course, those are just a few examples, and there are 
many more areas where we have seen agreement.
    Today's hearing, on specific steps we can take to provide 
some flexibility to States and communities, is an important 
discussion.
    I have to say, among the many measures cited as pressing 
priorities by our witnesses so far, State flexibility is not 
something they said they absolutely need to stabilize the 
market in the short term.
    We have heard a lot of interesting proposals, I do worry 
that many suggestions could wind up increasing out of pocket 
costs for patients and families when our principle goal in 
these hearings, and in our bipartisan negotiations, is making 
care more affordable, not less.
    I commit on my end--and I know my democratic colleagues do 
as well--to seriously listening and considering the ideas 
presented here today. I hope we can stay focused on the common 
goal of lowering costs for patients by stabilizing our markets 
as soon as possible.
    Let me underscore what I have said many times. This has to 
be a conversation about moving forward, not backward, when it 
comes to affordability, coverage, and quality of care.
    I want to emphasize that because democrats will reject any 
effort to this discussion if it erodes the guardrails and 
protections that so many patients and families rely on. This is 
going to be a difficult needle to thread, I admit, but it is 
clearly possible.
    As we know, Governors Kasich and Hickenlooper, in 
consultation with nearly 20 other Governors nationwide, put 
forth a market stabilization plan, which maintain protections 
in current law for patients like those with preexisting 
conditions and women seeking maternity care.
    Let me be clear. Like any worthwhile compromise, I know we 
will not agree on everything at the outset. If we can keep 
today's discussion focused, work through these issues in a 
specific and balanced manner, while keeping our larger goals in 
mind, I do believe we can get a result, as Chairman Alexander 
would say.
    Last, I have to admit, I do just want to say publicly, I am 
disappointed there are still some senators trying to push us 
down a partisan path on health care.
    Again, republicans and democrats are finally working 
together here, and it is refreshing and needed, and we have 
made critical progress. It would be deeply disappointing if 
another partisan debate over Trumpcare erupted and derailed our 
efforts here.
    I hope those senators will join these bipartisan 
conversations, instead of doubling down on harmful repeal 
efforts again that people across the country have rejected.
    With that, I want to say, Mr. Chairman, again how much I 
appreciate all your work on this, everybody participating, and 
I look forward to today's discussion.
    The Chairman. Thank you, Senator Murray.
    We will now ask each of our witnesses, if they will, to 
summarize their statements in 5 minutes. We have a lot of 
senators who would like to ask questions and I will briefly 
introduce them.
    Governor Mike Leavitt is the former Governor of Utah, the 
former chairman of the National Governors Association, and the 
Republican Governors Association, and the head of the 
Department of Health and Human Services. He brings lots of 
experience to this. He is now in the private sector.
    Allison Leigh O'Toole. Senator Franken, would you like to 
introduce her?

                      Statement of Senator Franken

    Senator Franken. Absolutely.
    It is a pleasure to introduce Allison O'Toole today.
    As perhaps some of you know, when it came to insurance 
exchange rollouts, MNsure, the Minnesota Health Exchange, like 
many other exchanges, had a pretty rocky one. After that, what 
I would like to call the ``Minnesota Effect,'' kicked in. 
MNsure got better and is now one of the highest performing 
exchanges in the Nation.
    Minnesota now has a 96 percent insurance rate. That is a 
State record and it is the second highest in the United States. 
Of course, the Minnesota Effect does not happen by itself. 
Leadership matters and under Allison O'Toole's leadership, 
MNsure has experienced 2 years of record breaking enrollment, 
increase system stability, and better customer service. It has 
led the Nation in the last 2 years in a row in the percentage 
of new enrollees.
    Ms. O'Toole, thank you for your work helping Minnesotans 
find health coverage. I am happy to see you here and welcome 
today to the committee.
    The Chairman. Thank you, Senator Franken.
    Our third witness is Tarren Bragdon. He is the CEO of the 
Foundation for Government Accountability. He has testified 
several times before committees in Congress. He has worked with 
several States on innovative models to stabilize and reform 
insurance markets.
    Bernard Tyson is here. Thank you, Mr. Tyson, for coming. He 
is the CEO of Kaiser Foundation Health Plan, one of America's 
leading integrated health care providers and not for profit 
health plan that serves nearly 12 million members.
    Tammy Tomczyk, is a Principal at Oliver Wyman Actuarial 
Consulting specializing in health insurance.
    I cannot tell you how many times the senators have been 
sitting around coming up with ideas that somebody would say, 
``Where is an actuary so we can find out what this will 
actually do?'' We are glad you are here today.
    Governor Leavitt.

   STATEMENT OF HON. MICHAEL O. LEAVITT, FORMER SECRETARY OF 
         HEALTH AND HUMAN SERVICES, SALT LAKE CITY, UT

    Mr. Leavitt. Good morning to Senator Alexander, Senator 
Murray, and all the rest of the committee.
    This committee hearing appears very much to me to be about 
the age-old dilemma of how to divide the responsibility for 
governing between State governments and the Federal Government.
    Having served as Governor, and also as a member of a 
cabinet, I have come to understand that there is a role for 
both, but States and the Federal Government see the word 
``flexibility'' with some difference.
    I have often joked to Governors that flexibility means just 
leave the money on a stump in the woods at night and we will 
take care of everything else. I have come to understand as a 
cabinet member that this partnership does require some degree 
of flexibility.
    In my cabinet roles at EPA and at HHS, I dealt with these 
issues over and over because both of those departments or 
agencies were dependent on a partnership with the States.
    I developed in my own mind a basic strategy and I would 
commend that to you as you wrestle with this dilemma, and it 
can be expressed in four words, National Standards, State 
Solutions.
    I found over and over again if the Federal Government would 
focus on developing what you have referred to as guardrails or 
standards, and then allow States the flexibility to operate 
within their own circumstances, that better outcomes result.
    It is not unique just to health care. Senator Murray's 
poignant remarks on the hurricane victims, I recall very 
clearly during Katrina that as we deployed into the area 
affected, HHS had a substantial amount of responsibility after 
people had been rescued or had escaped.
    Our assets actually were not Federal assets. Our assets 
were State assets that had been aggregated.
    I saw that again when we were dealing with pandemic 
influenza. The assets were not Federal assets; they were State 
assets. The Federal responsibility was to coordinate, to 
establish national standards, but allow the States to perform 
solutions.
    In 2007, when we rolled out the Medicare Part D to 43 
million people, that was a national program, but it was a 
requirement that we have the flexibility inside States to be 
able to deploy according to their own set of values and 
circumstances. Again, National Standards, State Solutions. I 
saw that at EPA as well.
    There is a very real reason for that and it is that 
logistically, it is just not possible for a national government 
to respond in just the innumerable ways in which that 
flexibility has to be applied.
    I would also like to make clear that while I was not a 
profound supporter of ACA, I have seen insurance exchanges as a 
very important part of the solution. Despite my skepticism on 
certain parts of ACA, I have been a booster, a supporter, and 
an advocate.
    I suggested that States needed to be the place that these 
were administered for the reasons that I have suggested. For 
certain reasons, many of them political, some States chose not 
to do that.
    I would like to be clearly on record that I believe 
insurance exchanges and marketplaces are about the only real 
solution to the individual marketplace in a way that we can 
aggregate capital and create risk pools that work. It is very 
important we get this right.
    I do have a series of suggestions that I would like to make 
that will be part of our discussion. You have mentioned the 
1332 Waiver.
    My first suggestion; earlier, we talked about Katrina, was 
that during the Katrina period, HHS and specifically CMS, was 
required to make a lot of decisions quickly and to grant 
authority to States.
    Rather than have waivers worked through one at a time, we 
created standard waivers that States could call upon, similar 
to what Senator Alexander suggested, that if one State has been 
approved that other States could count on having it approved. 
That is a solution that would work here too.
    In fact, I believe that HHS could create a menu of waivers 
that States could call upon and rely upon, particularly when we 
get into the area of reinsurance, which we will speak of later.
    My second suggestion is to clarify the interdependence of 
waivers. This is not independent of this. We are not dealing 
today in this hearing with Medicaid. Medicaid waivers fall 
under Section 1115, but they often have a bearing on the way 
1332 Waivers are to be dealt with because they are 
interdependent.
    Right now, they cannot be dealt with together. With a tweak 
of the law, you could make that possible.
    My third suggestion is that it is important that you 
reevaluate the current budget neutrality requirements under the 
1332 Waiver. Currently, they have to show neutrality in every 
year.
    Members of this committee know full well in the Federal 
budget process, it is a virtual impossibility to show budget 
neutrality in every State when you are dealing with a long-term 
investment. You should fix that and allow States to achieve 
overall budget neutrality, but to do it in the context of the 
overall waiver period not simply every year as they stand.
    Mr. Chairman and Madam Vice Chair, I look forward to, or 
ranking member, I look forward to this conversation and 
participating.
    [The prepared statement of Mr. Leavitt follows:]
             Prepared Statement of Hon. Michael O. Leavitt
                                summary
    We are here today to consider the best way to divide responsibility 
between State governments and the Federal Government for stabilizing 
the individual insurance market to ensure citizens in every State have 
access to health insurance. The question that always seems to create 
tension is, ``how much flexibility should the States have.''
    Having served as a Governor and a Cabinet Officer I have come to 
understand that both the State and Federal Government view flexibility 
differently.
    The overarching strategy can be stated in four words: ``National 
Standards, State Solutions.''
    On matters related to health, the Federal Government excels at two 
things: Setting expectations and the collection and distribution of 
money. As a practical matter, the Federal Government is challenged to 
execute uniformly across the entirety of this large diverse Nation, and 
thus roles should be assigned with care. With those limitations, the 
Federal Government is highly dependent on States for execution of 
expectations.
    I am a republican. Long before the ACA, I was a strong and vocal 
advocate of insurance exchanges in the individual insurance market. I 
did so because they represent a market solution. I think exchange 
marketplaces are a fundamental tool to facilitate increased competition 
and consumer choice in a private insurance market. The failure of 
insurance marketplaces will inevitably generate momentum toward the 
expansion of Federal Government coverage for this population.
    Though I was not a supporter of the ACA, after it passed, I 
advocated forcefully for States to take responsibility to operate the 
exchanges. Why? Because of my belief in the notion of ``National 
Standards, State Solutions.'' I know in the long run States execute 
better than the Federal Government. States can find solutions that deal 
with the diverse culture, values and circumstances of their 
communities. Time has and will prove that to be correct.

    The ACA provides a vehicle to adopt a National Standard, State 
Solutions strategy. The 1332 waiver process is part of the law already 
and provides a framework of national standards and a vehicle to give 
States the flexibility required to allow State solutions.
     I recommend that CMS work with States to create a series 
of model 1332 waivers that States can choose from to accelerate 
solutions.
     My second suggestion is for the Federal Government to 
clarify that interdependent waivers (for instance, 1115 waivers and 
1332 waivers) can be evaluated based on the merit of their singular 
proposal.
     Finally, may I suggest a re-evaluation of the current 
budget neutrality requirements of the 1332 waiver that would permit 
States to show budget neutrality over a longer timeframe.
      Likewise, certainty is required on CSR payments. 
Congressional appropriations need to signal that the market can count 
on these at least until 2018 or 2019.
                                 ______
                                 
    Good Morning Senators Alexander and Murray. Thank you for holding 
this hearing--and the hearings you convened last week on this important 
topic. Stabilizing the Individual Insurance Market is the first step we 
can take to ensure citizens in every State have access to health 
insurance.
    It is my perception that members of this committee, in general 
terms, share an aspiration for citizens of the United States to have 
access to affordable and high-quality health insurance. I sense there 
is agreement that both the States and the Federal Government have a 
role in that effort. The age-old dilemma of how to divide 
responsibility between State government and the Federal Government 
seems to be very much at play here. The question that always seems to 
create tension is, ``how much flexibility should the States have.''
    Having served as a Governor and a Cabinet Officer I have come to 
understand that both the State and Federal Government view flexibility 
differently. For a Governor, flexibility means a preference for the 
Federal Government leaving money on a stump in the woods at night. 
However, as a Federal official, I came to clearly understand that State 
partnerships require accountability. I dealt with this dilemma 
constantly because both the Department of Health and Human Services and 
the EPA were heavily dependent on State partnerships to carry out their 
mission.
    Based on that experience, I want to recommend an overarching 
strategy and three specific policy suggestions.
    The overarching strategy can be stated in four words: ``National 
Standards, State Solutions.''
    On matters related to health, the Federal Government excels at two 
things: Setting expectations and the collection and distribution of 
money. As a practical matter, the Federal Government is challenged to 
execute uniformly across the entirety of this large diverse Nation, and 
thus roles should be assigned with care. With those limitations, the 
Federal Government is highly dependent on States for execution of 
expectations.
    Twelve years and 19 days ago, Hurricane Katrina struck, creating a 
devastation similar to what is faced this morning by communities caught 
in the paths of Hurricanes Harvey and Irma. I was U.S. Secretary of 
Health and Human Services at the time. Our Department's role was to aid 
victims after their evacuation or rescue. I quickly came to understand 
that the emergency response system of the Federal Government is in 
large measure an aggregation of the State emergency response capacity 
operating under Federal coordination. Emergency response was done 
differently in Arkansas than in Texas, or Florida. In their own way, 
the States got it done. If we had insisted on absolute uniformity, the 
effort would have failed. National Standards, State Solutions.
    Shortly after Katrina, we were required to prepare the Nation for a 
potential pandemic influenza. Once again, it became evident that the 
Nation's public health capacity was the aggregation of State and local 
public health organizations, acting with Federal coordination. Each 
State aligned their assets. Were some better than others? Yes. The 
Federal Government simply does not and should not have sufficient 
capacity to deploy everywhere. National Standards, State Solutions.
    On January 1, 2007 HHS rolled out Medicare Part D, the prescription 
drug benefit to 43 million people. Even though it was a Federal 
program, our only way to execute on the mission was to harness the 
collective capacity of States, and the community assets they engaged. 
There were significant differences in the ways States and their local 
communities approached this. There had to be. They had different 
assets, cultures and traditions. There was flexibility built into the 
program to allow for those variations. It has been a profound success. 
National Standards, State Solutions.
    I came to understand that the Environmental Protection Agency is at 
heart, a health organization. Once again, the Federal Government 
establishes expectations that span the United States, and help with 
funding. When it comes to executing those priorities, the EPA is highly 
dependent on States. The standards with the most compliance are those 
where flexibility is provided to accommodate differences in approach. 
National Standards, State Solutions.
    The purpose of this hearing is to discuss how to assure Americans 
under age 65 have access to affordable insurance policies in situations 
where coverage is not available through an employer. I am a republican. 
Long before the ACA, I was a strong and vocal advocate of insurance 
exchanges in the individual insurance market. I did so because they 
represent a market solution. I think exchange marketplaces are a 
fundamental tool to facilitate increased competition and consumer 
choice in a private insurance market. The failure of insurance 
marketplaces will inevitably generate momentum toward the expansion of 
Federal Government coverage for this population.
    Though I was not a supporter of the ACA, after it passed, I 
advocated forcefully for States to take responsibility to operate the 
exchanges. Why? Because of my belief in the notion of ``National 
Standards, State Solutions.'' I know in the long run States execute 
better than the Federal Government. States can find solutions that deal 
with the diverse culture, values and circumstances of their 
communities. Time has and will prove that to be correct.
    Many States choose to let the Federal Government operate the 
exchanges. In large part, those decisions were affected by political 
controversy and uncertainty. The execution in rolling them out was 
predictably flawed. While the mechanisms are still clunky and unstable, 
it has improved with time.
    Insurance marketplaces are very fragile right now, and the window 
for fixing them is closing. At this point, no one is well served by 
their collapse.
    The ACA provides a vehicle to adopt a National Standard, State 
Solutions strategy. The 1332 waiver process is part of the law already 
and provides a framework of national standards and a vehicle to give 
States the flexibility required to allow State solutions.
    Alaska's 1332 waiver is a great example of this principle in 
action--Alaska's State-established reinsurance program is a success 
story in reducing costs and increasing access to insurance for Alaska's 
resident. It is an approach other States could and should copy and 
improve.
    My first specific suggestion is consistent with what you have heard 
in last week's hearings with Governors. Earlier I mentioned Hurricane 
Katrina. While I was Secretary of HHS, we recognized a need for 
consistency and speed in permitting States that adopted displaced 
residents to apply for Medicaid coverage for those residents. To meet 
this need, the Agency issued model waivers that consisted of a series 
of Medicaid templates to ease the burden of the application process for 
the affected States and to provide them with greater certainty of the 
expectations and outcome for approval. I recommend that CMS work with 
States to create a series of model 1332 waivers that States can choose 
from to accelerate solutions. By doing so, the Federal Government 
creates national standards, but allows States to develop State 
solutions. There could be a set of standard waivers related to risk 
stabilization programs, re-defining marketplace products or benefits, 
or alternative private exchange portals. This fosters collaboration and 
investment in the waiver process--as well as to expedite the 
application process.
    My second suggestion is for the Federal Government to clarify that 
interdependent waivers (for instance, 1115 waivers and 1332 waivers) 
can be evaluated based on the merit of their singular proposal. The 
need for transformative changes in insurance marketplaces in 
coordination with other Federal programs, like Medicaid is undeniably 
logical. What isn't defendable is forcing separate processes that 
consume time and money, and which foreclose the opportunity of States 
to accrue joint savings from a flexible arrangement in both programs. 
Often the authorities sought under these programs are interdependent. A 
lag on one defers critical progress on both.
    Finally, may I suggest a re-evaluation of the current budget 
neutrality requirements of the 1332 waiver that would permit States to 
show budget neutrality over a longer timeframe. The current requirement 
for budget neutrality in each year of the waiver demonstration 
restricts up-front investment and State flexibility. From the budget 
process in Congress, it is not always realistic to recapture value from 
an investment in 1 year. Moving to a budget neutrality requirement over 
a longer time horizon will support innovation and State control--under 
a reasonable national standard.
    Likewise, certainty is required on CSR payments. Congressional 
appropriations need to signal that the market can count on these at 
least until 2018 or 2019. Given the business cycle requirements under 
which plans operate, this is a requirement, in my judgment. States are 
offering differing guidance to plans for how to account for the 
availability of CSR funding in rate setting. This unpredictability 
causes insurers to be unable to accurately predict the regulatory 
environment. It has been noted, but bears repeating, that in fact 
funding CSRs will prevent premium rates from rising even higher, 
creating an increase in Federal spending through the increase in the 
amounts of the Advanced Premium Tax Credits (APTCs).
    I will conclude as I began. The key principle is ``National 
Standards, State Solutions.''
    Thank you for the opportunity to testify today.

    The Chairman. Thank you, Governor Leavitt.
    Ms. O'Toole, welcome.

 STATEMENT OF ALLISON LEIGH O'TOOLE, CHIEF EXECUTIVE OFFICER, 
                      MNsure, ST. PAUL, MN

    Ms. O'Toole. Thank you.
    Good morning, Chairman Alexander, and Ranking Member 
Murray, and committee members.
    I would like to thank you, Senator Franken, for that kind 
introduction. As you know, I work with a great team and I am 
really proud of the progress we have made.
    As CEO of Minnesota's State based exchange, MNsure, it is 
my job to work with the on the ground realities of getting 
Minnesotans enrolled into coverage.
    I have seen firsthand the value of State flexibility in 
responding to turbulent market conditions, and the 
effectiveness of State level policy initiatives that have 
improved conditions over the years.
    Like many States, Minnesota has seen a great deal of 
volatility in its individual market, and while that market has 
shrunk in the last few years, MNsure's enrollment has continued 
to increase. This past open enrollment season, we had a record 
number of Minnesotans enrolling through the exchange.
    As Senator Franken mentioned, we now have 96 percent of 
Minnesotans covered. That is the highest rate in State history 
and the second highest in the country, and we are really proud 
of that.
    The flexibility of a State-based exchange is a large part 
of our success. We have full control over our outreach programs 
and we are able to tailor activities to meet the needs of 
Minnesotans.
    We partner with trusted, local organizations and brokers 
with strong ties to communities to help consumers. Over the 
past year, these partners enrolled more than 125,000 
Minnesotans into coverage. Our locally organized Assister 
Network is a big reason MNsure has led the Nation 2 years in 
the highest percentage of new enrollees.
    Being a State-based exchange also gives us flexibility to 
call special enrollment periods when Minnesota-specific 
situations call for them.
    For example, in February of this year, we were able to give 
Minnesotans an extra week to enroll because our legislature 
passed a premium relief bill late in the open enrollment 
period.
    While MNsure performed well this past year, the individual 
market as a whole saw significant challenges. State action on 
premium relief and a reinsurance program have mitigated some of 
those increases for consumers, but premiums remain too high and 
provider networks too narrow for many Minnesota families.
    These State actions are short-term fixes and we share the 
widespread recognition that action at the Federal level is 
needed to add certainty, stability, and strength to individual 
markets across the country.
    Among our top priorities that we believe would help 
stabilize and strengthen markets are the following, and there 
are four of them.
    First, permanent funding of Cost Sharing Reduction 
payments; States and issuers require certainty on future 
funding of those payments.
    Second, a long-term Federal reinsurance program; a long-
term, comprehensive, federally funded reinsurance program is 
necessary to ensure consumers have access to affordable 
coverage as the individual market is inherently less stable 
than group coverage.
    Minnesota has seen that reinsurance can work, reducing 
premiums by as much as 20 percent. A State-only funded program 
is unsustainable in the long run.
    Let me add an important caveat here. The lower prices I 
mentioned are dependent on the Administration granting 
Minnesota a budget neutral Federal waiver to implement our 
reinsurance law.
    If our waiver is not granted in the next few days, 
Minnesotans will be paying substantially higher premiums next 
year. That is not speculation. That is fact. We are hopeful 
that the waiver is forthcoming, but I want you to know that 
that waiver has not yet been granted.
    Third, continue flexibility over the use of 1332 Waivers. 
State innovation and experimentation will be key to identifying 
creative solutions that can maximize affordable coverage and 
manage health costs and quality. We encourage additional 
flexibility for States while also maintaining important 
consumer protections.
    Last, continued enrollment outreach and marketing efforts. 
In Minnesota, we found that the older and sicker folks sign up 
first. If we are to have a robust and diverse risk pool, we 
must put in the extra effort to bring younger and healthier 
Minnesotans into the pool.
    Defunding or eliminating enrollment outreach efforts 
undermines the goal of creating strong risk pools across the 
country that leads to more affordable prices. I would like to 
underscore that point because it is critical for stability.
    Thank you, again, Chairman Alexander and Ranking Member 
Murray for your time today and for holding these hearings. I am 
really happy to be part of this important conversation.
    [The prepared statement of Ms. O'Toole follows:]
              Prepared Statement of Allison Leigh O'Toole
                                summary
    As the CEO of Minnesota's State-based exchange, MNsure, it's my job 
to work with the on-the-ground realities of getting Minnesotans 
enrolled in health coverage. I have seen first-hand the value of State 
flexibility in responding to turbulent market conditions and the 
effectiveness of State-level policy initiatives that have improved 
conditions over the last year.
    Like many States, Minnesota has seen a great deal of volatility in 
its individual market. Over the last few years Minnesota's individual 
market has shrunk. Last year premiums in Minnesota rose by an average 
of more than 50 percent and one of the State's major carriers pulled 
out of market.
    Despite that challenging environment MNsure's enrollment has 
continued to increase year over year. This past open enrollment season, 
a record number of Minnesotans purchased coverage through the exchange.
    Ninety-six percent of Minnesotans are covered. That's the highest 
rate in State history and the second highest in the country.
    The flexibility of a State-based exchange is a large part of our 
success. This year marked the second year in a row MNsure beat its 
enrollment and revenue projections, and our budget is self-sustaining, 
balanced and conservative.
    While MNsure performed well this past year, the individual market 
as a whole saw significant challenges. State action on premium relief 
and a reinsurance program have mitigated some of the premium increases 
for Minnesotans, but premiums and out-of-pocket costs remain too high 
and provider networks too narrow for many Minnesota families.
    These State actions are short-term fixes, and we share the 
widespread recognition that action at the Federal level is needed to 
add certainty, stability and strength to individual markets across the 
country.
    Among our top priorities that we believe would stabilize and 
strengthen markets are:

     One: Permanent funding of cost-sharing reduction (CSR) 
payments
     Two: A long-term, Federal reinsurance program
     Third: Continued flexibility over the use of 1332 waivers
     Fourth: Maintain flexibility for State-based exchanges
     Lastly: Continued enrollment outreach and marketing 
efforts
    Thank you, Chairman Alexander and Ranking Member Murray for holding 
these hearings. I'm honored to be part of this important conversation.
                                 ______
                                 
    Good morning Chairman Alexander, Ranking Member Murray and 
committee members.
    As the CEO of Minnesota's State-based exchange, MNsure, it's my job 
to work with the on-the-ground realities of getting Minnesotans 
enrolled in health coverage. I have seen first-hand the value of State 
flexibility in responding to turbulent market conditions and the 
effectiveness of State-level policy initiatives that have improved 
conditions over the last year.
    Like many States, Minnesota has seen a great deal of volatility in 
its individual market. For example, last year one of the State's major 
carriers pulled out of market, and premiums for those insurers that 
remained increased more than 50 percent. Because of these changes and 
others, Minnesota's individual market shrunk.
    Despite that challenging environment, MNsure's enrollment has 
continued to increase year over year. This past open enrollment season, 
a record number of Minnesotans purchased coverage through the exchange, 
with 33 percent more Minnesotans purchasing private health insurance 
through the exchange than the previous year.
    Ninety-six percent of Minnesotans are covered. That's the highest 
rate in State history and the second highest in the country.
    The flexibility of a State-based exchange is a large part of our 
success. This year marked the second year in a row MNsure beat its 
enrollment and revenue projections, and our budget is self-sustaining, 
balanced and conservative.
    MNsure has full control over our outreach programs, which means we 
are able to tailor activities to meet the needs of Minnesotans. We 
partner with trusted local organizations and brokers with strong ties 
to the communities that they serve to help consumers. Over the past 
year, these partners enrolled more than 125,000 Minnesotans into health 
coverage. Our locally organized assister network is a big reason MNsure 
has led the Nation 2 years in a row in the percentage of new enrollees.
    Being a State-based exchange also gives us the flexibility to call 
special enrollment periods when Minnesota-specific situations call for 
them. For example, in February we were able to give Minnesotans an 
extra week to purchase coverage after our legislature passed a premium 
relief bill late in the open enrollment period. This extra week enabled 
4,000 more Minnesotans to enroll in coverage.
    The premium relief bill, which was proposed by our Democratic 
Governor and passed by our Republican legislature, provides a 25 
percent automatic discount on premiums to consumers on the individual 
market who do not receive tax credits in 2017. It is a 1-year program 
that will be effectively replaced by a State reinsurance program for 
2018 and 2019, if Minnesota receives approval for our 1332 waiver 
application that is currently under review by CMS. Without quick 
Federal approval, Minnesota will not be able to implement the 
reinsurance program, which will have a devastating impact on our 
overall market, and more importantly Minnesotans.
    While MNsure performed well this past year, the individual market 
as a whole saw significant challenges. Bipartisan action by the State 
on premium relief and a reinsurance program have mitigated some of the 
premium increases for Minnesotans, but premiums and out-of-pocket costs 
remain too high and provider networks too narrow for many Minnesota 
families.
    These State actions are short-term fixes, and we share the 
widespread recognition that action at the Federal level is needed to 
add certainty, stability, and strength to individual markets across the 
country.
    Among our top priorities that we believe would stabilize and 
strengthen markets are:

 One: Permanent funding of cost-sharing reduction (CSR) 
payments.
    States and issuers require certainty over the future of CSR 
payments. Elimination of this program will compromise the affordability 
of coverage and services for millions of Americans and further 
destabilize these markets, driving up premium prices for consumers. In 
Minnesota the vast majority of our CSR dollars go to fund our Basic 
Health Plan, MinnesotaCare. These funds are worth over $100 million 
dollars a year to our State budget.

 Two: A long-term, Federal reinsurance program.
    A long-term, comprehensive, federally funded reinsurance program is 
necessary to ensure consumers have access to affordable coverage as the 
individual market is inherently less stable than group coverage. In our 
proposed rates for 2018, Minnesota has seen that reinsurance can work, 
reducing premiums by as much as 20 percent. In order to finance the 
reinsurance program the State proposed under the 1332 waiver, Minnesota 
was forced to tap State funds and cost shift from other health care 
programs. This is not something the State can sustain for a longer 
period of time.

 Third: Continued flexibility over the use of 1332 waivers.
    State innovation and experimentation will be key to identifying 
creative solutions that can maximize affordable coverage and manage 
health costs and quality. We encourage additional flexibility for 
States, while also ensuring that all consumers can continue to receive 
comprehensive and affordable coverage and protection for pre-existing 
conditions. Some specific areas where the waiver process could be 
improved are:

         Expedite review: the current waiver process can take 
        up to seven and a half months. That is too long for States 
        needing to take rapid action. Minnesota's experience here is 
        apropos, given that our Department of Commerce needs to 
        finalize our rates and we are still waiting for approval from 
        CMS.
         Allow States to submit waivers prior to receiving 
        final legislative approval.
         Provide model waivers from CMS for States to follow.
         Allow States to concurrently complete multiple steps 
        in the approval process; for example, allow the completeness 
        review and Federal public comment periods to run 
        simultaneously.
         Allow deficit neutrality across the life of the 
        waiver, rather than year by year.

 Fourth: Maintain flexibility for State-based exchanges.
    Maintaining flexibility for State-based exchanges to tailor certain 
Federal rules to the unique conditions of its State will help them 
better manage the dynamic and volatile conditions of the individual 
market. Minnesota greatly appreciated the flexibility offered by CMS in 
its final rule on market stabilization issued in March. This 
flexibility allowed MNsure to respond to concerns from stakeholders and 
supplement the upcoming open enrollment with a special enrollment 
period giving Minnesotans more time to shop for coverage. This 
flexibility also allows States to:

         React to State specific situations and demands; for 
        example, providing necessary Special Enrollment Periods in 
        response to local legislation.
         Control their own marketing and enrollment outreach.
         Collaborate with other public health agencies to 
        increase efficiency gains.
         Have additional oversight and accountability at the 
        State level.
         Provide customer service to better address local 
        needs.

    There may be opportunities to extend some of these advantages to 
States on the Federal exchange as well, such as controlling their 
marketing and outreach efforts.

 Last: Continued enrollment outreach and marketing efforts.
    In Minnesota, we've found that older and sicker individuals are the 
first to sign up, and if we are to have a robust and diverse risk pool 
to ensure affordable prices, we must put in the extra effort to bring 
in younger and healthier Minnesotans. Defunding or eliminating 
enrollment outreach efforts undermines the goal of creating strong risk 
pools across the country that lead to more affordable prices.

    Thank you, Chairman Alexander and Ranking Member Murray for holding 
these bipartisan hearings. I'm honored to be part of this important 
conversation.
    In Minnesota, we are fortunate to have a long history of bipartisan 
cooperation and innovation on health care. While our debates can 
certainly be as messy as anywhere else, our results over the last 25 
years show what can be accomplished when both parties work together.
    Whether it was the founding of the Nation-leading MinnesotaCare 
program 25 years ago that provides health coverage to low-income 
working Minnesotans, or leveraging Federal programs to develop smarter 
payment models for lower cost and better care, Minnesota has benefited 
from a recognition on both sides of the aisle that when more people 
have health care coverage our economy is stronger and our State 
healthier. Thank you again for this opportunity.

    The Chairman. Thank you, Ms. O'Toole.
    Mr. Bragdon, welcome.

     STATEMENT OF TARREN BRAGDON, CHIEF EXECUTIVE OFFICER, 
      FOUNDATION FOR GOVERNMENT ACCOUNTABILITY, NAPLES, FL

    Mr. Bragdon. Thank you, Chairman Alexander, Ranking Member 
Murray, and members of the committee.
    Thank you for the privilege of testifying.
    I am Tarren Bragdon, CEO of the Foundation for Government 
Accountability.
    We work at the State and Federal level to advance policy 
reforms to free more Americans to experience the power of work 
and to reduce the biggest payroll deduction for most Americans, 
the cost of health coverage. Our model reforms were introduced 
in 41 States this year and have passed in 29 States over the 
last 3 years.
    As this committee leads with bipartisan ways to improve 
costs and coverage, I offer three recommendations.
    First, Americans with preexisting conditions need premium 
relief, as well as access to insurance, without being 
segregated to plans with fewer benefits or higher premiums than 
those available to everyone else.
    This can be achieved with invisible risk sharing, an 
approach that is invisible to those who are sick, but that 
successfully reduces premiums for everyone, as well as reduces 
the number of uninsured.
    In 2012, with invisible risk sharing, Maine offered new 
plans in the individual market with much lower premiums, up to 
70 percent lower with similar deductibles, and increased 
enrollment with the sole active carrier in that market, up 13 
percent in 18 months.
    When combined with expanded age rating, this approach 
lowered annual premium costs by up to $5,000 for someone in 
their twenties, and up to $7,000 for an individual in their 
sixties. Maine at the time was more restrictive with its age 
rating of 1.5:1, moving to 3:1.
    Individuals could keep their current plans and only 
transition to new plans if they chose to do so. My written 
testimony highlights a chart that shows the premium impact of 
Maine's invisible risk sharing meant that premiums in Maine, 
going from red to green, were the same or lower as premiums for 
a healthy, nonsmoker in neighboring New Hampshire where they 
had a traditional high risk pool at the time.
    Actuarial firm Milliman estimated the impact of Maine's 
model nationally, and they found that invisible risk sharing 
would lower individual premiums by up to 31 percent in the 
individual market for those buying outside the exchange without 
any reduction in benefits or any increases in cost sharing.
    These lower premiums would mean up to 2 million more 
Americans would voluntarily buy coverage. Milliman estimated 
that the cost of this approach nationally, this targeted 
reinsurance, would be between $3 and $5 billion excluding 
premium contributions from insurers.
    We would recommend that the Federal Government jumpstart 
the invisible risk sharing program initially and then 
transition after two or 3 years to the States.
    Second, States need real policy flexibility allowing a 
greater continuum of health coverage, particularly for those 
buying insurance on their own with a clearly defined, and 
reasonable process, and timeline for 1332 Waivers.
    Section 1332 could be of more interest to States and more 
benefit to consumers if there was a clearer guide path toward 
timely approval and more policy flexibility. Practical and 
process concerns demand a simplified set of statutory 
guardrails, a clearer and fixed timeline for approval, and more 
policy flexibility for States.
    Evidence both from actuaries, as well as from families, 
show that if more lower cost plans are allowed then more 
individuals will buy one that has the protection they want at a 
price that they are able or willing to pay.
    Only one in three of those with individual insurance today 
are eligible for both CSR's and tax credits. That means two out 
of three in the individual market face the full brunt of higher 
deductibles and some, if not all, of the premium increases 
under the ACA.
    Third, bipartisan reforms that reduce the cost of health 
care should carefully be considered under any bipartisan reform 
effort as ultimately the cost of coverage is reflective of the 
cost of care.
    This year, a divided legislature in Maine passed into law 
with unanimous, bipartisan support a reform that lowers the 
cost of care by expanding transparency as well as access.
    This reform grants patients the right to shop for the best 
value care regardless of the network status of a provider. This 
is not any willing provider, as the patient can only leave the 
insurer network if the actual cost out-of-network is below the 
average in-network. It is like in any competitive provider 
patient right.
    It is time for Congress to send a lifeboat to patients and 
lower health care costs with the right to shop, which combines 
true price transparency with access to all high value 
providers.
    Thank you. I encourage the committee to consider these 
three recommendations.
    [The prepared statement of Mr. Bragdon follows:]
                  Prepared Statement of Tarren Bragdon
                                summary
    Chairman Alexander, Ranking Member Murray, and members of the 
committee, thank you for the privilege of testifying. I am Tarren 
Bragdon, the Founder and CEO of the Foundation for Government 
Accountability (FGA). FGA works at the State and Federal level to 
advance policy reforms to free more Americans to experience the power 
of work and reduce the biggest payroll deduction for most Americans, 
the cost of health coverage. Our model reforms were introduced in 41 
States this year and have passed in 29 States over the past 3 years.
    As this committee leads with bipartisan ways to improve cost and 
coverage, I offer three recommendations:

    First, Americans with pre-existing conditions need premium relief 
as well as access to insurance, without being segregated to plans with 
fewer benefits or higher premiums than those available to everyone 
else. This can be achieved with invisible risk sharing, a proven 
strategy that successfully reduces premiums and reduces the number of 
uninsured.
    In 2012, with invisible risk sharing, Maine dramatically lowered 
premiums in the individual market (by up to 70 percent) and increased 
voluntary enrollment with the sole active carrier (up 13 percent in 18 
months). When combined with expanded age rating, this approach lowered 
annual premium costs by up to $5,000 for someone in their twenties and 
up to $7,000 for someone in their sixties (Maine was more restrictive 
than the ACA with 1.5:1 age bands and moved to 3:1.) Individuals could 
keep their current plans and only transitioned to new plans if they 
chose to do so.
    Actuarial firm Milliman estimated the impact of the Maine model 
nationally. They found invisible risk sharing would lower individual 
premiums by up to 31 percent in the individual market for those buying 
outside of the exchange, without any reduction in benefits or increases 
in cost-sharing. These lower premiums would mean up to 2 million more 
Americans would voluntarily buy individual insurance on their own, 
without subsidies. Milliman estimated that the cost of this approach 
nationally would be between $3-5 billion annually, excluding premium 
contributions from insurers.
    Second, States need real policy flexibility allowing a greater 
continuum of health coverage, particularly for those buying insurance 
on their own, with a clearly defined and reasonable process and 
timeline for 1332 waivers.
    Section 1332 could be of more interest to States and benefits to 
consumers if there was a clearer glide path toward timely approval of 
waiver applications and more policy flexibility. Practical and process 
concerns demand a simplified set of statutory guardrails, a clearer and 
fixed timeline path for approval, and more policy flexibility for 
States. Evidence from actuaries and families shows that if more 
affordable range of plans are allowed, then more individuals will buy 
one that gives them the protection they want at a price they can and 
will pay.
    Third, bipartisan reforms that reduce the cost of health care 
should be carefully considered under any bipartisan reform effort, as 
ultimately the cost of coverage reflects the cost of care.

    This year, the divided legislature in Maine passed into law--with 
unanimous bipartisan support--PL 232, ``An Act to Encourage Maine 
Consumers to Comparison-shop for Certain Health Care Procedures and to 
Lower Health Care Costs.'' This reform grants patients the right to 
shop for the best value care regardless of the network status of a 
provider. This is not ``any willing provider,'' as the patient can only 
leave an insurer network if the actual cost out of network is below the 
average in-network price. This is like an ``any competitive provider'' 
patient right. It is time Congress sends a life boat to patients and 
lower health costs with the right to shop--true price transparency and 
access to all high-value providers.
    With bipartisan leadership and the three recommendations outlined 
above, this committee and this Congress can lower premiums for those 
with pre-existing conditions and everyone else, create a more 
affordable continuum of health coverage, and actually lower the cost of 
health care.
                                 ______
                                 
    Chairman Alexander, Ranking Member Murray, and members of the 
committee, thank you for the privilege of testifying. I am Tarren 
Bragdon, the Founder and CEO of the Foundation for Government 
Accountability (FGA). FGA works at the State and Federal level to 
advance policy reforms to free more Americans to experience the power 
of work and reduce the biggest payroll deduction for most Americans, 
the cost of health coverage. Our model reforms were introduced in 41 
States this year and have passed in 29 States over the past 3 years.
    As this committee leads with bipartisan ways to improve cost and 
coverage, I offer three recommendations for your consideration:

    First, Americans with pre-existing conditions need premium relief 
as well as access to individual insurance, without being segregated to 
plans with fewer benefits or higher premiums than those available to 
everyone else. This can be achieved by employing proven strategies that 
have successfully brought down premiums and reduced the number of 
uninsured.
    Second, States need real policy flexibility to allow a greater 
continuum of health coverage, particularly for those buying their own 
insurance on the individual market, with a clearly defined and 
reasonable process and timeline.
    Third, bipartisan reforms that reduce the cost of health care 
should be carefully considered under any bipartisan reform effort, as 
ultimately the cost of coverage reflects the cost of care.
1. lowering the cost of coverage for those with pre-existing conditions 
             and everyone else with invisible risk sharing
    As my fellow panelist from Oliver Wyman and, separately, actuarial 
firm Milliman \1\ have noted, the guaranteed issue mandate is the main 
driver of individual insurance premium increases under the ACA (up to 
45 percent premium increase on average, according to Milliman). 
Congress must embrace a reform with a record of success to both lower 
premiums and maintain access for everyone buying insurance on their 
own.
---------------------------------------------------------------------------
    \1\ James O'Conner, ``Comprehensive Assessment of ACA Factors that 
will Affect Individual Market Premiums in 2014,'' Milliman, prepared 
for America's Health Insurance Plans (April 2013), http://
www.iss4all.com/MillimanACAPremiumReport4252013.pdf.
---------------------------------------------------------------------------
    Prior to the ACA, most States segregated those with pre-existing 
conditions to high risk pools, which sometimes meant higher premiums or 
fewer benefits for enrollees. However, both Idaho (first) and Maine 
(later) pioneered a better and more sophisticated approach that lowered 
premiums without forcing those with pre-existing conditions to buy 
different plans. It is far more effective than an open-ended 
reinsurance program that costs more and is not as effective at reducing 
premiums.
    Guarantee issue is a driver of higher premiums because of the open-
ended risk and the higher costs it creates for insurers and, 
ultimately, policyholders by requiring insurers to accept all 
applicants.
    Maine used an invisible risk sharing approach to both limit the 
risk and cap the cost for those individuals with pre-existing 
conditions, but did so with no negative impact on those same 
individuals. With this approach, those with pre-existing conditions are 
treated the same as everyone else while still having access to the same 
plans and benefits and most importantly, lower premiums.
    In 2012 with invisible risk sharing, Maine dramatically lowered 
premiums in the individual market (by up to 70 percent) and increased 
voluntary enrollment with the active carrier (up 13 percent in 18 
months). When combined with expanded age rating, this approach lowered 
annual premium costs by up to $5,000 for someone in their twenties and 
up to $7,000 for someone in their sixties (Maine was more restrictive 
than the ACA with 1.5:1 age bands and moved to 3:1.) Individuals could 
keep their current plans, and only transitioned to new plans if they 
chose to do so.\2\
---------------------------------------------------------------------------
    \2\ Joel Allumbaugh, Tarren Bragdon, and Josh Archambault, 
``Invisible High-Risk Pools: How Congress Can Lower Premiums And Deal 
With Pre-Existing Conditions,'' Health Affairs (April 2017), http://
healthaffairs.org/blog/2017/03/02/invisible-high-risk-pools-how-
congress-can-lower-premiums-and-deal-with-pre-existing-conditions/
---------------------------------------------------------------------------
    As the chart below shows, the premium impact of Maine's invisible 
risk sharing meant that those who were healthy or had pre-existing 
conditions in Maine had the same or lower premiums as healthy, non-
smokers in neighboring New Hampshire (which had a traditional high-risk 
pool at the time).
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Source: Anthem rate filings in Maine and New Hampshire (Maine 
Bureau of Insurance, New Hampshire Insurance Department).

    We contracted with Milliman to produce an independent actuarial 
study to show the impact nationally of using invisible risk sharing 
under a similar structure. That independent study in its entirety is 
attached to my testimony. Under this model, insurers paid claims for 
only those individuals with pre-existing conditions which are 
identified upon application, and insurers cover the first $10,000 of 
claims per person per year. Insurers contribute 90 percent of premiums 
collected for those eligible for this risk sharing arrangement, which 
dramatically lowers the cost of the program (covering 40 percent of 
costs) and prevents gaming by insurers (dumping more individuals into 
risk sharing).
    Combined with expansion of age brackets, invisible risk sharing 
would lower individual premiums by up to 31 percent in the individual 
market for those buying outside of the exchange, without any reduction 
in benefits or increases in cost-sharing. In addition, these lower 
premiums would mean up to 2 million more Americans would voluntarily 
buy individual insurance on their own, without any increase in 
subsidies. Milliman estimated that the cost of this approach nationally 
would be 
between $3-5 billion annually, excluding premium contributions from 
insurers.\3\
---------------------------------------------------------------------------
    \3\ Kathleen Ely, Thomas Murawski and William Thompson, ``The 
Federal Invisible Risk Pool,'' Milliman, prepared for the Foundation 
for Government Accountability (April 2017), https://thefga.org/wp-
content/uploads/2017/04/The-Federal-Invisible-High-Risk-Pool.pdf with 
summary available at: https://thefga.org/wp-content/uploads/2017/04/
FIRSP-One-Pager-2.pdf.
---------------------------------------------------------------------------
    Furthermore, invisible risk sharing money is only spent to 
reimburse the actual claims of those with pre-existing conditions or 
those in the risk sharing program. It is not a general reinsurance 
subsidy with an unspecific impact on premiums. A good contrast is how 
Alaska's 1332 reinsurance program reduced a projected premium increase 
from 42 percent to just a 7 percent increase \4\ whereas the Maine 
invisible risk sharing alone reduced premiums from the baseline by 20 
percent or more. In other words, invisible risk sharing gets us a far 
better bang for our buck, because far fewer resources are needed to 
reduce premiums even more than under traditional reinsurance or a 
traditional high-risk pool.
---------------------------------------------------------------------------
    \4\ Virgil Dickson, ``CMS Approves Alaska Waiver Aimed at 
Stabilizing Individual Market,'' Modern Healthcare (July 2017), http://
www.modernhealthcare.com/article/20170711/NEWS/170719975.
---------------------------------------------------------------------------
    Invisible risk sharing works because, at time of application, it 
caps the claim costs for insurers to cover those individuals with known 
pre-existing conditions, removing both the open-ended risk as well as 
limiting the high claims costs of these individuals. Premiums spike 
with guarantee issue because of this risk and the high claims costs it 
creates. Invisible risk sharing mitigates both, with a targeted 
approach. Effectively, one can receive the benefit of guarantee issue 
without experiencing the premium increases guarantee issue would 
normally create.
    We would recommend that the Federal Government jumpstart the 
invisible risk sharing program initially and then, after 2 to 3 years, 
transition to the States. This would allow for the fastest and greatest 
amount of premium relief, while allowing States to customize their 
approaches over time. Maine started its program just 13 months after 
the legislation was passed and signed into law. A Federal program could 
begin during 2018, say next fall, and create a special enrollment 
period for new applicants so that they could immediately reap the 
benefits of lower premiums, should they choose to do so.
 2. real policy flexibility for states and patients with expanded 1332 
                                waivers
    FGA's work in numerous States has revealed bipartisan hesitations 
about Section 1332 of the Affordable Care Act. As evidence of this, 
only 8 States even introduced 1332 authorizing legislation this year. 
There is hesitation due to the cost of the planning process, the higher 
barriers States must clear before an application will be considered, 
and the unclear timeframe of waiver approvals as well as the unclear 
coverage and premium benefits to individuals and families.
    Put another way, with the current entry barriers and the structure 
of 1332s, the legislative ``squeeze'' necessary to get it done in a 
State is not worth the policy ``juice'' produced.
    But the individual market is in crisis. There has been a 20 percent 
drop in those with unsubsidized ACA individual insurance this year, as 
healthy people drop high cost coverage they determine is not worth 
it.\5\ That unsubsidized individual market is now at least 2 million 
people smaller than it was pre-ACA.\6\ To put this in perspective, only 
4 million IRS returns this year paid the individual mandate penalty.\7\ 
In addition, since 2013, the number of individuals covered through 
small businesses has dropped 24 percent, showing that individuals are 
not simply migrating to group coverage as the economy improves.\8\
---------------------------------------------------------------------------
    \5\ Associated Press, ``Frustration Mounts Over Premiums for 
Individual Health Plans,'' New York Times (Sept 2017), https://
www.nytimes.com/aponline/2017/09/03/us/politics/ap-us-health-overhaul-
paying-full-freight.html.
    \6\ Kurt Giesa and Peter Kaczmarek, ``Stabilizing the Individual 
Health Insurance Market,'' Oliver Wyman (August 2017), http://
www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2017/aug/
Market%20Stabilization_Final%20Version.pdf.
    \7\ ``While the IRS Continues to Do a Reasonable Job in 
Administering the Affordable Care Act (ACA), Taxpayers Still Encounter 
Difficulties Attempting to Comply With the Complex Provisions,'' IRS 
Taxpayer Advocate (2017), https://taxpayeradvocate.irs.gov/Media/
Default/Documents/2018-JRC/JRC18_Volume1_AOF_11.pdf.
    \8\ ``An Analysis of Individual and Small Group Health Insurance 
Trends,'' Mark Farrah Associates (June 2017), http://
www.markfarrah.com/healthcare-business-strategy/An-Analysis-of-
Individual-and-Small-Group-Health-Insurance-Trends.aspx.
---------------------------------------------------------------------------
    Only 1 in 3 of those with individual insurance are eligible for 
both Cost Sharing Reductions (CSR) and tax credits. That means 2 in 3 
in the individual market face the full brunt of higher deductibles and 
some, if not all, of the premium increases under the ACA. For the 
majority of people in the individual market, the battle over CSRs is of 
little consequence. This does not minimize the CSR impact on those with 
low incomes, but simply shows that premium relief and flexibility 
through expanded 1332 waivers would impact vastly more Americans.
    To be clear, I do not believe that changes to the current Federal 
guidance is sufficient. Legislative changes are needed in both the 
entry barriers for States and what policy flexibility States can 
achieve with a 1332 waiver. The four current statutory entry barriers 
are too high, and almost mutually exclusive, to allow a State to even 
apply without that State committing millions or billions of additional 
taxpayer dollars. Keeping the guardrail of Federal budget neutrality 
makes sense, but reforming the other three is vital.
    Section 1332 could also be of more interest to States if there was 
a clearer glide path toward timely approval of waiver applications and 
more policy flexibility. As FGA has noted in Health Affairs, the likely 
process is cumbersome as Section 1115 waivers, with decades of 
precedent, take an average of 323 days to win approval. Section 1332 
waivers require bilateral approval by Treasury and the Department of 
Health and Human Services. If States are to change the ACA subsidy 
structure, the IRS has advised that States may need to waive certain 
tax provisions altogether and replace them with State-administered tax 
programs, something almost impossible for the seven States with no 
State income tax and extremely costly for all other States to do.\9\
---------------------------------------------------------------------------
    \9\ Jonathan Ingram, Nic Horton, and Josh Archambault, ``The ACA's 
Section 1332: Escape Hatch Or Straightjacket For Reform?,'' Health 
Affairs (May 2016), http://healthaffairs.org/blog/2016/05/26/the-acas-
section-1332-escape-hatch-or-straightjacket-for-reform/.
---------------------------------------------------------------------------
    These practical and process concerns demand a simplified set of 
statutory guardrails, a clearer and fixed timeline path for approval, 
and more policy flexibility for States.
    For those concerned about the types of coverage offered at the 
State level under a revised 1332 waiver, it is important to remember 
that States have more than 2,200 mandated provider and coverage 
benefits on the books.\10\
---------------------------------------------------------------------------
    \10\ ``State Insurance Mandates and the ACA Essential Benefits 
Provisions,'' National Conference of State Legislatures (March 2017), 
http://www.ncsl.org/research/health/state-ins-mandates-and-aca-
essential-benefits.aspx.
---------------------------------------------------------------------------
    In short, State policymakers need a greater continuum of individual 
insurance plans to be allowed if premium relief is going to flow to the 
vast majority of the individual market and if more individuals and 
families are going to voluntarily buy insurance outside their employer 
without new or increased subsidies. The way to empower States to create 
this more affordable continuum is to give them more policy flexibility 
in how individual insurance plans are regulated under a revised and 
expanded 1332 framework. No one should be shut out of the individual 
market due to health. But evidence from actuaries and families shows 
that if more affordable range of plans are allowed, then more 
individuals will buy one that gives them the protection they want at a 
price they can pay. Policy flexibility for States through a revised 
1332 structure is needed to accomplish this.
3. reducing the cost of health care through transparency and empowering 
                                patients
    To finish, I want to focus on the root cause of so much of the 
heart burn and controversy about costly efforts to increase coverage--
the underlying cost of health care. There is bipartisan support for 
greater transparency and consumer protection in health care. This year, 
the divided legislature in Maine passed into law--with unanimous 
bipartisan support--PL 232, ``An Act to Encourage Maine Consumers to 
Comparison-shop for Certain Health Care Procedures and to Lower Health 
Care Costs.'' \11\
---------------------------------------------------------------------------
    \11\ http://www.mainelegislature.org/legis/bills/bills_128th/
chapters/PUBLIC232.asp.
---------------------------------------------------------------------------
    PL 232 is a first-of-its kind reform. It builds on transparency 
efforts passed into law in Massachusetts in 2012, and a successful 
incentive program for State employees in Kentucky and New Hampshire, 
but also includes an additional key consumer protection for patients 
facing higher deductibles, narrower insurer networks, and the insurers' 
typical black box of provider prices.
    The reform grants patients the right to shop for the best value 
care regardless of the network status of a provider. To be clear, this 
is not ``any willing provider,'' as the patient can only leave an 
insurer network if the actual cost out of network is below the average 
in-network price (think of it as a ``any competitive provider'' patient 
right).
    Let me give you a real-life example of why this matters:

    Jennifer is a single-mother working hard to provide for her two 
girls and has health insurance from her small employer with a $2,000 
deductible. She was recently referred for physical therapy. She had 
used a physical therapist 2 years ago that she loved, but when she 
tried to return to that provider she was told they were now out-of-
network and she would need to pay the full cost of any service and none 
of that cost would apply to her in-network deductible or annual out-of-
pocket threshold.
    The in-network physical therapist cost $225 an hour, three times 
more than her previous one at $75 an hour. But Jennifer is stuck paying 
more and having to go to someone new and unproven. That's not fair and 
drives up the cost of health care and health insurance for Jennifer and 
everyone else.
    This is not an isolated incident. The number of consumers facing 
increased cost sharing has spiked. Small business employees who faced 
$1,000 single-deductibles was just 16 percent in 2006. By 2016, the 
percentage spiked to 65 percent.\12\
---------------------------------------------------------------------------
    \12\ ``2016 Employer Health Benefits Survey,'' Kaiser Family 
Foundation (Sept 2016), http://kff.org/report-section/ehbs-2016-
summary-of-findings/.
---------------------------------------------------------------------------
    Increasing health care costs are harming patients, driving up 
insurance premiums, putting independent providers out-of-business, 
setting up massive health systems that will be too big to fail, and too 
often preventing doctors from making the best care decisions with their 
patients. It is time we sent a life boat to patients and give them the 
right to shop, with the true price transparency and access that allows 
them to do so. If we want to truly lower health care costs, we must 
take these steps forward.
    With bipartisan leadership, this committee and this Congress can 
lower premiums for those with pre-existing conditions and everyone 
else, create a more affordable continuum of health coverage, and 
actually lower the cost of health care with the three recommendations 
outlined above.

    The Chairman. Thank you, Mr. Bragdon.
    Mr. Tyson, welcome.

  STATEMENT OF BERNARD J. TYSON, CHAIRMAN AND CHIEF EXECUTIVE 
  OFFICER, KAISER FOUNDATION HOSPITALS AND HEALTH PLAN, INC., 
                         PLEASANTON, CA

    Mr. Tyson. Thank you very much. To Chairman Alexander and 
Ranking Member Murray, to the members of the committee.
    It is an honor to be here this morning to speak to you 
about this important issue.
    There are two important laws for the health and well-being 
of the American people, who are not covered by an employer and/
or have the personal wealth, to buy their own coverage. I think 
about this very often. They are, of course, the Social Security 
Act that brought us Medicare and Medicaid in 1965 and the 
Affordable Care Act of 2010.
    Because of these two laws and because of us, I actually 
remain optimistic that eventually in my lifetime, we will 
succeed in making sure that every American has access to the 
front door of the American health care system. That front door 
has a key and that key is called coverage.
    With the ACA that was enacted in 2010 and the Medicaid 
exchange, we now have given that key to almost 20 million 
people, if not more than 20 more million people who did not 
have it before. There are 30 million to go.
    I am trying hard to do whatever it takes to make health 
care affordable and accessible for the 20 million that we have 
gained from the progress we have made with a law in 2010 and to 
figure out, how do we make sure that the other 30 million has a 
key to the front door to the American health care system.
    I have had the privilege of working for Kaiser Permanente 
for 33 years. I started in the medical records department after 
finishing my graduate degree in health care administration. 
Today, I sit as the chairman and CEO of an organization that 
takes care of nearly 12 million. I have over 200,000 employees 
and in our Permanente Medical Groups, over 22,000 physicians 
who come to work every day trying to make high quality care 
affordable, and accessible, and available to everyone.
    Not only do we take care of almost 12 million people, we 
take care of also the 60-plus million people who exist in the 
communities in which Kaiser Permanente provide care and 
coverage.
    Of the 12 million members, almost 1.5 million are in the 
ACA, and they wonder every day, ``Kaiser Permanente, will I 
have you again next year?'' They call. They come in. They ask 
questions trying to figure out how they can continue to get 
care and coverage from organizations like Kaiser Permanente.
    I want to impress upon you three facts. One, real solutions 
exist that this is not a situation where we have to throw out 
the baby with the bathwater. I can show you markets where 
Kaiser Permanente exist and the Affordable Care Act is working 
fairly well with some additional changes that need to be made, 
and then in other markets, we have more work to do.
    No. 2, we own the success or the failure of the American 
health care system together. It is not about the Government or 
the marketplace. It is about both of us working together.
    No. 3, is that the real focus of the narrative, I hope in 
the future, will shift to the actual cost of the delivery 
system, which is where all the cost is. To figure out, how do 
we continue to reform the delivery system to provide even 
higher quality and more accessibility?
    As I said in my paper that I submitted to you, I 
respectfully offer a six point plan to repair the ACA 
immediately and in the long term.
    No. 1 is obviously the funding of the CSR, and I would 
recommend that that is a multi-year funding, and I understand 
the dilemma of the debates that has been going on here.
    What could work with a multi-year funding agreement with 
the CSR is how to get more of the insurers back in the market. 
How to create market stability, and allow the marketplace to 
begin to act like a marketplace in which me and my competitors 
will start to figure out, how do we compete in a market to 
attract and retain these wonderful people like we do in every 
other line of business.
    No. 2, promote consumer protections while enhancing State 
flexibility.
    No. 3, provide Federal support for reinsurance programs.
    No. 4, to enforce the individual mandate.
    No. 5, to reinstate full support and funding for enrollment 
outreach activities.
    No. 6, to consider repealing the health insurer tax.
    In return, I would recommend that you demand me and my 
colleagues to step up to the plate. I can tell you with 
certainty that many will get back into the market. You do not 
have to take my word alone. Call them directly. I did.
    I recommend, for example, that you call my friend and 
colleague, Joe Swedish, CEO of Anthem and Mark Bertolini, CEO 
of Aetna.
    Thank you for the honor of sharing these thoughts with you 
and I look forward to our question and answers.
    [The prepared statement of Mr. Tyson follows:]
                 Prepared statement of Bernard J. Tyson
                                summary
     We need targeted refinements to the ACA that are multi-
year and sustainable, to encourage insurers to return to markets across 
the country. Insurers returning to the markets will increase 
competition and improve access and affordability for Americans 
currently without adequate coverage options.
     These changes need to be in place by September 27 to make 
a positive difference for the 2018 plan year, so the solutions need to 
be practical and focused.
     To encourage issuers to return to markets, I recommend a 
six-point blueprint:

        1. Fund cost-sharing reductions (CSRs) on a permanent or multi-
        year basis.
        2. Provide adequate Federal support for reinsurance programs 
        that encourage broader market participation.
        3. Protect consumers while enhancing State flexibility.
        4. Repeal the health insurer tax to reduce costs in the system.
        5. Enforce the individual mandate.
        6. Fully support outreach and enrollment assistance efforts.

     The government needs to be a better business partner, and 
insurers, in turn, need to return to individual markets they have left.
     We need to remember that this is only one small segment of 
rising costs in care. We need to reform our delivery system to 
encourage integration and efficiency, and reduce costs. Pharmaceutical 
costs are a significant part of the problem.
                                 ______
                                 
    Chairman Alexander, Ranking Member Murray, members of the 
committee, thank you for inviting me to discuss the need for important 
and immediate refinements to our health care system. I am honored to 
speak before you today.
    Kaiser Permanente is an integrated health system that provides care 
and coverage for nearly 12 million members in eight States and the 
District of Columbia. Each day, more than 200,000 dedicated employees 
and 22,000 Permanente Medical Group physicians come to work at Kaiser 
Permanente to care for our members and deliver on our commitment to 
improving the health of the 65 million people living in the communities 
we serve. Kaiser Permanente participated in the individual market 
before the current law took effect--and we continue to participate in 
the markets we serve. Of our nearly 12 million members, 1.5 million 
receive coverage and care from Kaiser Permanente through the Affordable 
Care Act (``ACA'')'s health insurance exchanges.
    It's important to remember the full context of the American health 
care system when considering what needs to be done to refine the ACA to 
stabilize the individual insurance market. Since the end of the Second 
World War, a foundational element of the American system of health 
coverage has been employer-based coverage. That approach, however, left 
gaps. In 1965, our country agreed to take care of the poor and the 
elderly through Medicaid and Medicare. Since then, our system of health 
coverage has continued to evolve, and the ACA presents itself as an 
important next step in that evolution. Today, we have about 155 million 
Americans covered by their employer, 40 million by Medicare and 70 
million by Medicaid.\1\ About 20 million people gained coverage through 
the ACA \2\ and almost 30 million remain uninsured.\3\ Our work is not 
done. We have too many Americans who are poor and considered the 
``working poor'' locked out of the front door to the health care 
system. For many, the process of obtaining and maintaining coverage is 
still too difficult. Lack of health care impacts their ability to 
contribute as much as they could to their communities, and to America.
---------------------------------------------------------------------------
    \1\ See Health Insurance Coverage of the Total Population, Kaiser 
Family Foundation, http://www.kff.org/other/state-indicator/total-
population/?dataView=1&currentTimeframe=0&sort
Model=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D.
    \2\ Nicholas Bakalar, Nearly 20 Million Have Gained Health 
Insurance since 2010, New York Times, May 22, 2017, https://
www.nytimes.com/2017/05/22/health/obamacare-health-insurance-numbers-
nchs.html?mcubz=3&_r=0.
    \3\ Kaiser Family Foundation, supra note 1.
---------------------------------------------------------------------------
    My message to you today is simple: We must work together to find 
real solutions to make high-quality, affordable health care accessible 
to all Americans. These solutions also must be sustainable over 
multiple years and not just a patchwork fix for 2018.
    However, I am also here today to deliver a message to my colleagues 
in health plans across the country: Our cooperation and participation 
remain essential. While Congress can lay the groundwork, we must reset, 
step up to the plate and participate in places where consumers 
currently lack choices and access to affordable coverage. The next step 
is on all of us together.
    The need for immediate action is clear. Chairman Alexander, the 
Insurance Commissioner from your home State of Tennessee stated the 
problem clearly in May. ``It's that instability, that uncertainty, the 
insurers hate the most. They are going to price for that,'' she told 
the Nashville Tennessean.\4\ Ranking Member Murray, Insurance 
Commissioner Kreidler from Washington State, expressed similar concerns 
in April when he wrote to Department of Health & Human Services 
Secretary Price: ``My office strongly believe[s] that market stability 
is achieved when issuers can engage in long-range planning in a stable 
financial and regulatory context.'' \5\ Deadlines loom in the coming 
weeks. The Federal marketplace requires signed agreements in place by 
September 27, and 2018 open enrollment begins on November 1. If we are 
going to provide meaningful relief to consumers for 2018, we need to do 
it very quickly--within a timeframe better measured in days, than 
weeks. We also need to be very focused on making refinements that can 
realistically help in the short time we have left before the 2018 plan 
year begins. As Chairman Alexander noted at the outset of these 
hearings last week, if we try to bite off too much, and add complexity, 
we will end up adding to the disruption.
---------------------------------------------------------------------------
    \4\ Holly Fletcher, Tennessee's Insurance Chief Seeks Elusive 
Answers in Washington, Nashville Tennessean, May 12, 2017, http://
www.tennessean.com/story/money/industries/health-care
/2017/05/12/tennessees-insurance-chief-seeks-elusive-answers-
washington/315186001/.
    \5\ Letter from Mike Kreidler, Washington State Insurance 
Commissioner, to Thomas E. Price, M.D., Secretary, U.S. Dep't of Health 
& Human Services (April 8, 2017), https://www.insurance.wa.gov/sites/
default/files/documents/Kreidler-AWHP-letter-HHSSec-TomPrice.pdf.
---------------------------------------------------------------------------
    The effect, physically and mentally, on ordinary Americans of 
instability in the markets is real, clear, and present. People on both 
sides of the aisle--whether families faced with rising premiums and 
out-of-pocket costs, physicians trying to provide the best possible 
care to patients, or insurers trying to balance risk in a tumultuous 
political environment--all recognize that action needs to be taken, and 
that Congress, the Administration, States and the private sector have 
to work together to do it.
    The ACA remains the law. It also remains controversial. It is 
important to remember that before the ACA, many millions of Americans 
were unable to buy coverage or were priced out of coverage because of 
pre-existing medical conditions. Virtually no one wants to go back to 
the way it worked before; we certainly don't. However, we've found 
ourselves in a situation where political, regulatory and financial 
uncertainty has driven higher premiums and fewer choices for consumers. 
Insurers have left markets across the country, and we need to work 
together to get them to return to more markets, in more places, serving 
more Americans. We also have an obligation to address these challenges 
for not only 2018, but on a sustainable basis so that we are not back 
in the same place at this time next year, having the same discussion 
and hoping for a different result.
    All of us have different ideas about how to make universal coverage 
a reality, but today, I'm focused on two goals, both of which put the 
consumer in the forefront. First, we have to reduce costs and modernize 
our Nation's care delivery system, and, second, we have to stabilize 
the individual market for 2018 and beyond. Systemic affordability 
solutions are critical, and I am going to provide the committee with 
six critical points to stabilize the individual market that will 
encourage insurers to return to markets across the country, and provide 
more--and better--options for all Americans in the individual market.
                       a. delivery system reform
    We share an obligation across the health care delivery system to 
improve quality, innovate and reduce costs for the American people. 
This is an obligation that extends to the entire delivery system and to 
our partners in Federal and State government, as well.
    As we move forward from here, we need to be honest about the fact 
that, for whatever the reasons, the government has not been an ideal 
business partner to date when it comes to the individual market. This 
extends beyond reduced consumer outreach or failing to make risk 
corridor payments over time. We need much more from the government to 
make this critical part of the market work. Many of the points I make 
today go directly to addressing this need.
    Let us not forget that, important as these issues are, we've mostly 
just been talking about an individual market that is a relatively small 
portion of the overall health care market in the country. Health care 
and coverage is not affordable in America, and not just for individuals 
and families: Businesses large and small are struggling to pay for 
health care for their employees. State and Federal Governments are 
being stretched to the limits to find funding for the growing costs of 
Medicare, Medicaid, and other public care programs. We need to work 
together to lower the systemic costs of health insurance and care 
delivery in this country, across the entire delivery system.
    The law requires insurers to spend 85 cents of every dollar on 
care. Let's focus not just on the 15 cents, but also begin to act on 
the 85.
    Rising deductibles and premiums are not just about insurance 
coverage rules or short-term changes in the characteristics of the risk 
pool--they continue to rise because care delivery continues to cost 
more. At Kaiser Permanente, we are showing that it's possible to 
organize health services in a more efficient way. Systemic challenges 
remain, however. While drug and device pricing present problems,\6\ we 
need to modernize how we approach care delivery in the United States 
from a broader perspective. We need many more primary care, mental 
health and community health practitioners. Our market incentives and 
medical education system need to reflect that. While the ACA tried to 
catalyze those market incentives, it did not do enough, and more work 
needs to be done at all levels--by policymakers in Congress, regulators 
and in the private sector. I think we can all do this together if we 
commit to moving from sick-care, fee-for-service models of care to a 
system that emphasizes well-care, with incentives for value and keeping 
people healthy. However, we also need to think of our delivery system 
as offering a continuum of coverage and care.
---------------------------------------------------------------------------
    \6\See, e.g., Rabah Kamal and Cynthia Cox, What are the recent and 
forecasted trends in prescription drug spending? Kaiser Family 
Foundation, May 22, 2017, https://www.healthsystem
tracker.org/chart-collection/recent-forecasted-trends-prescription-
drug-spending/?_sft_
category=spending#item-start.
---------------------------------------------------------------------------
        b. stabilizing the individual market for 2018 and beyond
    At Kaiser Permanente, we participated in the individual market 
before the current law took effect--and we're still participating 
today. Along the way, we've learned some lessons from our experiences 
that inform what I'm proposing today. I recommend the committee focus 
on building out from a six-point blueprint for stabilizing the 
individual exchange markets. These are areas that are critical in 
encouraging insurers to return to more markets across the country, 
therefore enhancing competition and consumer choice. If Congress and 
the Administration can agree on these points, insurers will return to 
the exchange markets. Here's what's needed to get there:

    1. Fund Cost-Sharing Reduction (``CSR'') Subsidies on a Permanent 
or Multi-Year Basis. The ACA provides important subsidies that help low 
income and working people manage deductibles and out-of-pocket costs, 
known as CSR payments. That program has become tenuous because of legal 
uncertainty, policy disagreements and a bit of politics. Thus, we've 
seen insurers raise rates--or withdraw from markets entirely--to 
account for the uncertainty.
    Funding the CSR payments on a permanent, or at least multi-year 
basis, is probably the single most important thing Congress can do to 
quickly stabilize the individual market. Washington State Insurance 
Commissioner Kreidler noted in his letter to Secretary Price,

          ``Failure to secure ongoing funding of CSRs . . . results in 
        uncertainty year after year regarding funding, compounded by 
        the timing of appropriations decisions made long after issuers 
        are required to file their rates for the upcoming year. Fully 
        funding CSRs will continue to ensure affordable health coverage 
        options for lower income enrollees and a stable marketplace for 
        issuers.'' \7\
---------------------------------------------------------------------------
    \7\ Kreidler, supra note 5, at 2.

The Congressional Budget Office (CBO) estimates that terminating CSR 
funding after December 2017 would cause premiums for silver plans to be 
20 percent higher in 2018 and 25 percent higher by 2020.\8\
---------------------------------------------------------------------------
    \8\ Congressional Budget Office, The Effects of Terminating 
Payments for Cost-Sharing Reductions (August 2017), at 2, https://
www.cbo.gov/system/files/115th-congress-2017-2018/reports/53009-
costsharingreductions.pdf.
---------------------------------------------------------------------------
    Nor would addressing this problem on a single year, or year-by-year 
basis, bring the stability and robust participation by insurers that 
many of us would like to see. To be clear, if we are going to bring 
insurers back into the individual exchange market in a substantial way, 
CSR funding needs to be guaranteed by Congress on a permanent or multi-
year basis. If we are back here at the same time next year working 
through another year's worth of CSR funding, we will not have 
accomplished the larger goal of stabilizing the individual exchange 
markets.
    2. Provide adequate Federal support for reinsurance programs that 
encourage broader market participation. The Federal reinsurance 
program, designed to ensure that costs for covering claims over a 
certain point are paid by a fund that all insurers pay into, expired in 
2017. Congress can immediately help by establishing a Federal 
reinsurance program, or significantly contributing to similar 
operations at a funding of State-level efforts. States play a major 
role in the process, but even under an expedited waiver authority, will 
not be prepared to act as readily for 2018 and 2019 as a Federal 
mechanism. However, we can improve upon the ACA and stabilize a Federal 
reinsurance program by making its funding source broader-based. CMS 
itself noted the critical role the Federal program played in 
encouraging issuers to participate in places they otherwise may not.

          ``Both the transitional reinsurance program and the permanent 
        risk adjustment program are working as intended in compensating 
        plans that enrolled higher-risk individuals, thereby protecting 
        issuers against adverse selection within a market within a 
        State and supporting them in offering products that serve all 
        types of consumers,'' CMS stated in its 2017 summary risk 
        adjustment and reinsurance report.\9\
---------------------------------------------------------------------------
    \9\ U.S. Dep't of Health & Human Services, Centers for Medicare & 
Medicaid Services, Center for Consumer Information and Insurance 
Oversight, Summary Report on Transitional Reinsurance Payments and 
Permanent Risk Adjustment Transfers for the 2016 Benefit Year (June 30, 
2017), at 2, https://www.cms.gov/CCIIO/Programs-and-Initiatives/
Premium-Stabilization-Programs/Downloads/Summary-Reinsurance-Payments-
Risk-2016.pdf.
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Emphasizing reinsurance at the Federal and State level would ensure 
those benefits continue.
    3. Protect consumers while enhancing State flexibility. It is 
important to provide States with flexibility to respond to market 
conditions and come up with innovative solutions that can ultimately 
improve coverage nationwide. However, existing law contains specific 
protections, known as guardrails, to ensure that waivers are consistent 
with the best interests of consumers. These guardrails 
(comprehensiveness, affordability, availability and deficit neutrality) 
make sense, and need to be preserved in any expanded waiver authority 
made available to States.
    At Kaiser Permanente, we have partnered with State regulators to 
consider State-level reinsurance programs, which can be developed 
within the scope of existing Sec. 1332 waiver authorities. At the same 
time, it makes sense to expedite the consideration of such State 
waivers by the Administration; it can be done faster than 180 days, 
especially for waivers substantially similar to those already approved. 
However, divesting the HHS Secretary of responsibility to verify 
validity of State waiver proposals would put consumers at a 
disadvantage. State flexibility is important, but so is the larger 
national goal of continuing to expand meaningful coverage for the 
American people. Where flexibility is provided, Federal funding needs 
to be adequate to the task.
    4. Repeal the health insurer tax to reduce costs in the system. In 
2018, the tax imposed by the ACA on health insurance offerings is 
scheduled to return. This tax increases the cost of health insurance 
and is a major deterrent to participation particularly by for-profit 
plans, and it raises costs for consumers. Reports have indicated that 
the tax, on average, will raise premiums. Seniors with Medicare 
Advantage plans, or those receiving coverage through Medicaid managed 
care, may be among the hardest hit by the return of this $100 billion 
tax.\10\ We urge Congress, as part of its refinement of the ACA, to 
repeal or further delay the tax.
---------------------------------------------------------------------------
    \10\ Caitlin Owens, How the health insurance tax will impact 2018 
premiums, Axios, Aug. 9, 2017, https://www.axios.com/how-the-health-
insurance-tax-will-impact-2018-premiums-2471-0366.html.
---------------------------------------------------------------------------
    I recognize that the fifth and sixth components of this blueprint 
are items largely resting under the executive branch's authority. While 
the first four speak to direct areas where Congress can act 
immediately, I am including these items to paint a fuller picture for 
the committee:
    5. Enforce the individual mandate. We recognize that the individual 
mandate is not the most beloved provision of the ACA. There needs to be 
a mechanism to incentivize participation and spread out the costs of 
care across as many people as possible, both healthy and sick, to 
ensure that important provisions like guaranteed issue, guaranteed 
availability and prohibition against health status rating will work. 
Without an enforced requirement that includes healthy people, more 
people would wait until they get sick to buy health coverage, which 
drives costs to unsustainable levels--and makes insurers skittish about 
market participation. Alternatives to the individual mandate have been 
proposed, but we do not believe that such proposals are as effective as 
simply enforcing the current law.
    The next step is for the Administration to take steps to enforce 
the individual mandate. That would make a significant difference. Some 
estimates indicate that the full consequence of an unenforced mandate 
could raise premiums by over $1,100 annually in 2018--with additional 
``uncertainty penalties'' that raise premiums still higher (especially 
when compounded by uncertainty regarding the CSR subsidies).\11\ All 
consumers are better off when the mandate is enforced, even if we don't 
necessarily like the requirement. I'd urge Congress to find ways to 
work with the Administration to enforce the mandate.
---------------------------------------------------------------------------
    \11\ Sam Berger and Emily Gee, The Trump Uncertainty Rate Hike, 
Center for American Progress, April 26, 2017, https://
www.americanprogress.org/issues/healthcare/news/2017/04/26/431162/
trump-uncertainty-rate-hike/.
---------------------------------------------------------------------------
    6. Fully support enrollment outreach activities. The 
Administration's recent announcement that it will reduce funding for 
marketing activities by 90 percent \12\ is a step in the wrong 
direction. Plans are spending their own money on marketing to 
consumers, Federal and State exchanges are engaged in marketing and 
outreach, and numerous non-profit agencies are working to encourage 
enrollment as well. Additionally, plans contribute financially to 
Federal operation of the Navigator consumer assistance programs, and 
should be able to benefit from that investment. Brokers also have a 
significant role to play in helping to encourage enrollment. If we are 
to continue expanding coverage under this public-private program, there 
is a lot more work to be done, especially with specific populations 
needing specialized linguistic or other culturally appropriate 
assistance, or those not positioned to benefit from internet-based 
interactions.
---------------------------------------------------------------------------
    \12\ U.S. Dep't of Health & Human Services, Centers for Medicare & 
Medicaid Services, Center for Consumer Information and Insurance 
Oversight, Policies Related to the Navigator Program and Enrollment 
Education for the Upcoming Enrollment Period (Aug. 31, 2017), https://
www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-
Marketplaces/Downloads/Policies-Related-Navigator-Program-Enrollment-
Education-8-31-2017pdf.pdf.
---------------------------------------------------------------------------
    Kaiser Permanente has learned through experience that States like 
California that have made it easier for consumers to get coverage, 
through standardized benefit packages, generally have more stable 
markets. Another part of this equation is outreach. We know that in-
person outreach is very effective at ensuring consumers get the right 
plans for them. The Administration can take steps to make the 
purchasing process more transparent to and easier on all consumers.
    Congress should consider what it can do to go a step further and 
promote engagement--meeting consumers where they are, and explaining 
the law and the benefits of obtaining and maintaining coverage.
                         c. a note on medicaid
    Before I conclude, I'd like to offer a couple observations about 
Medicaid. While I recognize that this program is outside of the HELP 
Committee's jurisdiction, it is essential that we acknowledge the 
critical role Medicaid coverage plays in our health care system, 
serving some 70 million Americans following the ACA's Medicaid 
expansion.
    That expansion should be preserved, with adequate Federal resources 
to match. At the same time, we would argue that remaining States that 
have yet to take advantage of the expansion should be given leeway to 
innovate, within the construct of the program's substantive protection 
for society's most vulnerable.
    We also need to recognize the significant interaction with the 
Medicaid program,\13\ when we consider individual market stabilization 
efforts. In terms of State flexibilities, I can't say where exactly the 
income cutoff should be between Medicaid and the private insurance 
market, but what is important is to ensure that individuals and 
families have the Essential Health Benefits that they need with the 
financial support that allows them to access care. It is also important 
that we don't divert funding from Medicaid to try to slightly lower 
premiums in the individual market, when there are so many other areas 
ripe for refinement, as I've identified today.
---------------------------------------------------------------------------
    \13\ Estimates provided to the board of Covered California, 
California's State-based exchange, estimates fluctuation of the 
subsidy-eligible population between programs at about 340,000 people 
annually. See Covered California 2016-2022 Market Analysis and Planning 
(May 12, 2017), at 10, http://board.coveredca.com/meetings/2016/5-12/
Covered%20CA%20and%20PwC%20
Market%20Planning%20and%20Analysis_Board%20 Draft.pdf.
---------------------------------------------------------------------------
                             d. conclusion
    Chairman Alexander, Ranking Member Murray, and members of the 
committee, thank you for holding these important hearings and inviting 
me to speak. Many Americans are hoping we can deliver, and these 
hearings are an important step in the right direction if we are to 
provide even more people with affordable, accessible and quality health 
care. I look forward to your questions.

    The Chairman. Thank you, Mr. Tyson.
    Ms. Tomczyk, welcome.

 STATEMENT OF TAMMY TOMCZYK, FSA, FCA, MAAA, SENIOR PRINCIPAL 
             AND CONSULTING ACTUARY, MILWAUKEE, WI

    Ms. Tomczyk. Good morning, Chairman Alexander, Ranking 
Member Murray, and members of the committee.
    My name is Tammy Tomczyk, and I am a Senior Principals and 
Consulting Actuary with Oliver Wyman, a business unit of Marsh 
& McLennan Companies. I am also a Fellow of the Society of 
Actuaries and a member of the American Academy of Actuaries.
    It is an honor to have the opportunity to provide testimony 
to you today.
    Since passage of the ACA, my colleagues and I have been 
actively involved in helping health plans, regulators, and 
other stakeholders understand and react to the various changes 
brought about by the law.
    Most recently, I have been working with the States to help 
them assess the impact that potential policy changes could have 
on premiums and enrollment in their market, and supporting 
States in their efforts to apply for 1332 Waivers.
    Starting this year, States are afforded flexibility to 
waive certain provisions of the ACA in an effort to develop 
innovative ways to provide access to quality health care and 
strengthen their local insurance markets.
    At the same time, States must demonstrate, through 
actuarial and economic analysis, submitted as part of their 
application, that the proposed changes satisfy each of four 
criteria commonly referred to as guardrails.
    States that are granted a waiver may receive pass through 
funding equal to reductions in Federal spending that result 
from their waiver, which may then be used to pay for a portion 
of their reforms. Only Hawaii and Alaska currently hold 
approved waivers.
    While Hawaii's waiver was unique in that it sought to waive 
requirements for the shop program that conflict with a 
longstanding State law, Alaska's waiver is focused on a State 
run reinsurance program aimed at reliving health plans of costs 
associated with individuals with certain high cost conditions.
    Early indications appear to show that Alaska's waiver has 
been successful in starting to stabilize its individual market. 
Rate increases for 2017 were reduced from 42 percent to just 
over 7 percent with the introduction of the reinsurance 
program. For 2018, Alaska's only health plan, currently 
offering coverage in the market, recently filed for a 20 
percent rate decrease.
    A number of other States are in the process of preparing or 
have recently submitted waiver applications to implement 
similar reinsurance programs.
    Governors and State insurance commissioners have raised 
concerns about the length of time it takes to develop and 
receive approval for 1332 Waivers.
    Actuaries will start to work on rates for 2019 in just a 
few months. Efforts to expedite the review and approval of 
applications, in particular waivers where another State has 
already received approval, will allow these positive effects to 
impact premiums sooner.
    Actuaries typically consider actuarial equivalents to be an 
aggregate measure examining the impact that a change in policy 
or benefits has on the covered population as a whole. The 
guardrails, as written in current law, appear to take this same 
aggregate approach ensuring that average premiums do not 
decrease and the total number of individuals insured is the 
same or greater.
    However, in December 2015, HHS issued guidance that 
includes prescriptive rules that seemingly go beyond these 
aggregate requirements and, in some cases, may limit a State's 
ability to implement certain changes even if those changes are 
expected to drive down average premiums and increase the 
overall number of individuals with insurance.
    The guidance also specifies that compliance with the 
guardrails must be met each year. Allowing States to, instead, 
meet these guardrails over the lifetime of the waiver could 
allow for more impactful and innovative waivers, in particular 
those that may require a ramp-up or a phase-in period before 
becoming fully effective.
    My written testimony outlines several additional areas for 
consideration for providing States flexibility to develop 
innovative and customized solutions that work locally.
    These include permitting States to submit coordinated 1115 
and 1332 Waivers; affording States more flexibility and 
Essential Health Benefit definitions; allowing for more 
flexibility around plan design that would permit States to 
explore additional value-based benefit plans; allowing States 
to waive or alter certain additional provisions of the ACA; and 
providing grants to States that support their efforts to study 
and apply for these waivers.
    Thank you again for this opportunity, and I look forward to 
your questions.
    [The prepared statement of Ms. Tomczyk follows:]
                  Prepared Statement of Tammy Tomczyk
                                summary
    Section 1332 affords States the flexibility to request approval to 
waive or alter certain provisions of the Affordable Care Act (ACA), in 
an effort to develop innovative ways to provide access to quality 
health care and foster strong insurance markets. At the same time, the 
ACA places limits on the scope of Section 1332 waivers, preserving 
certain aspects of the law such as prohibitions against imposing pre-
existing condition requirements, underwriting based on health status, 
and lifetime maximum coverage limits.
    Only two States, Hawaii and Alaska, hold waivers that have been 
approved so far. Alaska's waiver put in place a reinsurance program 
that utilizes Federal pass-through funding to pay for a large portion 
of the program, which has already worked to reduce rates in the 
individual market. Alaska's waiver received much attention by the 
administration and was highlighted by HHS Secretary Price as a model 
that other States should consider. Since then, Minnesota, Oklahoma, 
Oregon, and New Hampshire have submitted or are in the process of 
preparing similar waiver applications focused on reinsurance.
    Each State is unique in terms of its demographic and socioeconomic 
make-up, insurance markets, Medicaid programs, and existing Federal 
waivers. While Section 1332 provides States with flexibility to revise 
and shape their insurance markets to meet local needs, there are some 
limitations that impede States' ability to pursue certain strategies to 
stabilize and strengthen their markets. Allowing States flexibility to 
study and implement State-based solutions that are most effective for 
their local market, is likely to help in States' efforts to stabilize 
their individual markets.
    Some of the actions that Congress or the administration could 
consider to provide greater flexibility around 1332 waivers, and allow 
States to quickly address their unique challenges, include the 
following:
     Allow States to waive or alter some provisions of the ACA 
not currently included in Section 1332
     Allow States to demonstrate each of the guardrails are met 
in aggregate for the market
     Allow States to meet deficit neutrality and other 
guardrail requirements over the lifetime of the waiver, rather than 
each year
     Permit States to submit coordinated waiver applications 
that allow recognition of aggregate savings from current or proposed 
1115 waivers and Section 1332 waivers when assessing whether a Section 
1332 waiver application meets the deficit neutrality guardrail
     Afford States more flexibility in defining the Essential 
Health Benefits
     Allow for more flexibility around plan design, permitting 
States to better explore value-based benefit designs
     Provide for a more streamlined and expedited waiver 
approval process that allows States to take actions that can impact 
premium sooner
     Provide grants to States that support efforts to explore 
and apply for Section 1332 waivers
     Provide additional up-front guidance around reporting 
requirements for approved waivers, allowing States to better plan for 
implementation
                                 ______
                                 
                              introduction
    Chairman Alexander, Ranking Member Murray, and distinguished 
members of the committee, it is an honor to have the opportunity to 
provide this testimony to you regarding State flexibility to help 
stabilize the individual insurance market.
    My name is Tammy Tomczyk. I am a Fellow of the Society of 
Actuaries, a member of the American Academy of Actuaries, and I meet 
that body's qualification standards for providing this testimony. I 
have nearly 25 years of experience as a health care actuary and have 
been actively involved for more than 7 years in helping health plans, 
regulators, and other stakeholders understand and react to changes 
brought about by the Affordable Care Act (ACA).
    Most recently, I have been working with States to help them assess 
the impact that potential policy changes could have on premiums and 
enrollment in their local insurance markets, and supporting States in 
their efforts to apply for Section 1332 waivers.
    I am also a Senior Principal and Consulting Actuary with the firm 
of Oliver Wyman Actuarial Consulting, a business unit of Marsh & 
McLennan Companies (MMC). MMC is a leading professional services firm 
with a global network of more than 60,000 experts in risk, strategy, 
and people. The businesses of MMC, including Oliver Wyman, Mercer and 
Marsh & McLennan Agency, collaborate with our clients to navigate the 
increasingly complex health care marketplace to help individuals, 
families and employees stay healthy and productive, enable innovation, 
and lower costs.
    While this hearing is focused on issues that most directly affect 
Americans who receive health insurance coverage via the individual 
market, it is important to remember the significant role U.S. 
businesses--which cover nearly 61 percent of Americans--play in our 
health care system.
    Congress should take careful consideration of how potential reforms 
in the individual marketplace may impact employer-sponsored health care 
coverage. MMC shares your goal of expanding health coverage to more 
people while preserving the employer-based system that Americans value 
so highly.
    My testimony will focus on the following topics:

     Flexibility currently available to States under Section 
1332 of the ACA
     Ways in which States have used Section 1332 waivers to 
date
     Current limitations of Section 1332, its implementing 
regulation, and additional guidance issued by the previous 
administration
     Potential areas for additional State flexibility
                               background
    Starting in 2017, Section 1332 affords States the flexibility to 
waive certain provisions of the ACA in an effort to develop innovative 
ways to provide access to quality health care and foster strong 
insurance markets. The ACA limits the scope of Section 1332 waivers, 
preserving certain aspects of the law such as prohibitions against 
imposing pre-existing condition requirements, underwriting based on 
health status, and lifetime maximum coverage limits. Key provisions 
that may be waived under Section 1332 fall within the following four 
basic categories:
    Qualified Health Plans: States may revise the list of benefits that 
must be covered by plans sold through the Marketplace, including 
Essential Health Benefits, cost sharing limitations, metal-tier 
requirements, and definitions related to markets and employer size.
    Health Insurance Marketplaces: States can put in place alternate 
ways for individuals and/or groups to enroll in coverage and receive 
financial assistance, make revisions to enrollment periods, modify risk 
pool definitions, and make changes regarding limitations for coverage 
to citizens and lawful residents.
    Financial Assistance: States can alter both the ACA rules and 
Internal Revenue Code provisions related to tax credits and cost 
sharing reduction subsidies. These alterations include family 
contribution requirements, the benchmark used to calculate the amount 
of the subsidies, and the definition of minimum essential coverage.
    Individual and Employer Mandates: States can modify one or both of 
the requirements that most individuals have minimum essential coverage 
or pay a financial penalty, and the requirement that employers with 50 
or more employees offer coverage to employees working 30 or more hours 
per week.
    In waiving one or more of the provisions listed above, States must 
demonstrate in their waiver application that the proposed changes 
satisfy each of the following four criteria, often referred to as 
``guardrails'':
    1. Comprehensiveness of Coverage--States must demonstrate that, 
under the waiver, coverage would be at least as comprehensive as it is 
absent the waiver
    2. Affordability of Coverage--States must demonstrate that, under 
the waiver, coverage would be at least as affordable as it is absent 
the waiver
    3. Scope of Coverage--States must demonstrate that, under the 
waiver, coverage would be provided to at least as many residents as it 
is absent the waiver
    4. Deficit Neutrality--States must demonstrate that the waiver will 
not increase the Federal deficit
    Federal regulations outline several additional requirements that a 
successful waiver application must meet.\1\ Prior to submitting a 
Section 1332 waiver application, a State must enact a law providing for 
its implementation. The State must provide public notice of the waiver 
application and allow for a comment period, including public hearings. 
Through actuarial analyses and actuarial certifications, the State must 
demonstrate that the proposed waiver satisfies the comprehensiveness, 
affordability, and scope of coverage requirements outlined above. To 
demonstrate the waiver will be deficit neutral to the Federal 
Government, the State's application must also reflect economic 
analyses, including a 10-year budget plan. Finally, the application 
must both describe the data and assumptions used to demonstrate the 
guardrails are met, and provide an implementation timeline.
---------------------------------------------------------------------------
    \1\ Application, Review and Reporting Process for Waivers for State 
Innovation, Federal Register Vol. 77, No. 38, page 11700, February 27, 
2012.
---------------------------------------------------------------------------
    States that are granted a waiver may receive pass-through funding 
from the Federal Government equal to any reductions in Federal spending 
for premium tax credits, cost sharing reduction payments, and small 
business tax credits.\2\ The State can then use these funds to pay for 
a portion of its reforms. The waiver application must include 
information needed to estimate the pass-through funding amount 
including data on enrollment, premiums, and Federal subsidies. All 
waivers are approved for a period of 5 years,\3\ and States must comply 
with quarterly and annual reporting requirements.\4\
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    \2\ ACA, Sec. 1332(a)(3).
    \3\ ACA, Sec. 1332(e).
    \4\ 31 CFR 33.124 and 45 CFR 155.1324.
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                      recent 1332 waiver activity
    While Section 1332 waivers may be viewed as an opportunity for 
States to take action to promote stability in their individual markets, 
only 14 states have enacted legislation authorizing the submission of a 
Section 1332 waiver as of August 25, 2017.\5\ Only two states, Hawaii 
and Alaska, hold waivers that have been approved by the U.S. Department 
of Health and Human Services (HHS) and the U.S. Department of Treasury.
---------------------------------------------------------------------------
    \5\ http://www.statenetwork.org/more-states-looking-to-section-
1332-waivers/.
---------------------------------------------------------------------------
    Hawaii's waiver was unique in that it sought to waive the 
requirement under the ACA that it operate a web-based Small Business 
Health Options Program (SHOP). The SHOP has requirements that conflict 
with a long-standing State law requiring employers to provide robust 
health insurance coverage to employees at minimal cost. Through its 
waiver, small employers will enroll directly with health plans offering 
coverage that meets the requirements of the Hawaii Prepaid Healthcare 
Act. The State will receive pass-through funding equal to small 
employer tax credits that otherwise would have been paid to employers, 
and these funds will be used to supplement the State's long standing 
Prepaid Premium Supplementation Fund.
    Alaska's waiver is focused on a State-managed program, the Alaska 
Reinsurance Program (ARP), aimed at relieving health plans of costs 
associated with individuals with certain high-cost conditions by ceding 
those costs to a separate risk pool. Although costs for these 
individuals are ceded to the ARP, existence of the ARP is essentially 
unknown to them. Ceded members pay the same premium as similarly 
situated members whose costs are not ceded to the ARP, and members' 
coverage continues with the carrier through which they enrolled, 
meaning they continue to have access to the same network providers, 
receive the same covered services, and have the same cost sharing 
provisions as individuals who are not ceded to the ARP.
    Initial 2017 rate filings for Alaska's individual market indicated 
premiums that were projected to increase by 42 percent. However, State 
action and the introduction of the ARP, which was initially funded 
using $55 million in State funds, reduced those increases to roughly 7 
percent. In addition, Premera, the State's only health plan currently 
offering coverage in the individual market, recently filed for a rate 
decrease of more than 20 percent for 2018.\6\
---------------------------------------------------------------------------
    \6\ Erica Martinson, ``Premera expects big cut in health insurance 
premiums on Alaska's individual market,'' Alaska Dispatch News, August 
2, 2017, https://www.adn.com/alaska-news/health/2017/08/01/premera-
expects-a-21-6-percent-decrease-in-individual-market-premiums-for-2018//
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    Oliver Wyman assisted the State of Alaska by providing the required 
actuarial analyses to support its Section 1332 waiver application. Our 
modeling showed that investing $60 million into the high-risk pool in 
2018, and lowering premiums by that amount, would result in a net 
decline in Federal outlays for premium subsidies and other items of $49 
million. The waiver proposed that the Federal Government provide pass-
through funding of $49 million to Alaska, leaving $11 million to be 
borne by the State.
    In March 2017, while Alaska's Section 1332 waiver was under review 
by the Federal Government, it received much attention from the 
administration and was highlighted by HHS Secretary Price as a model 
that other States should consider.\7\ Minnesota,\8\ Oklahoma,\9\ 
Oregon,\10\ and New Hampshire \11\ have all passed Section 1332 
authorizing legislation and are in the process of preparing or have 
submitted waiver applications. Each of these States is proposing to 
implement a reinsurance program and is using an approach similar to 
Alaska's. However these States' proposed reinsurance programs are not 
based on individuals' specified health conditions like Alaska's and are 
instead structured similarly to the transitional reinsurance program 
that was in place under the ACA from 2014 through 2016.
---------------------------------------------------------------------------
    \7\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-
Innovation-Waivers/Downloads/March-13-2017-letter_508.pdf.
    \8\ https://www.revisor.mn.gov/bills/
bill.php?b=house&f=HF5&ssn=0&y=2017.
    \9\ https://legiscan.com/OK/text/HB2406/id/1624145.
    \10\ https://olis.leg.state.or.us/liz/2017R1/Downloads/
MeasureDocument/HB2391/Enrolled.
    \11\ http://gencourt.state.nh.us/bill_status/
billText.aspx?sy=2017&id=714&txtFormat=html.
---------------------------------------------------------------------------
    Minnesota and Oklahoma have already submitted their waiver 
applications, while Oregon and New Hampshire have released draft 
applications. The expected impact of these reinsurance programs varies 
widely by State, from a reduction in average premiums of roughly 7 
percent in Oregon \12\ and New Hampshire,\13\ to a reduction in average 
premiums of as much as 20 percent in Minnesota \14\ and 34 percent in 
Oklahoma.\15\ All four States are projecting that the waiver will lead 
to an increase in the number of insured individuals.
---------------------------------------------------------------------------
    \12\ http://healthcare.oregon.gov/Documents/draft-OR1332-waiver-
app.pdf.
    \13\ https://www.nh.gov/insurance/legal/documents/
nh1332waiverapplication.pdf.
    \14\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-
Innovation-Waivers/Downloads/Minnesota-Section-1332-Waiver.pdf.
    \15\ https://www.ok.gov/health2/documents/
1332%20State%20Innovation%20Waiver%20
Final.pdf.
---------------------------------------------------------------------------
              current limitations to section 1332 waivers
    While Section 1332 provides States with flexibility to revise and 
shape their insurance markets to meet local needs, there are some 
limitations that impede States' ability to pursue certain strategies to 
stabilize and strengthen their markets. Some of these limitations 
include the following:

     Section 1332 places restrictions on which provisions of 
the ACA can be waived. The current statute does not allow States to 
make certain changes that might help stabilize their individual markets 
and increase the number of young or healthy individuals enrolled in the 
risk pool. These changes could include widening the 3:1 age curve to 
produce premiums that align more closely with underlying risk by age, 
introducing benefits and other provisions that encourage individuals to 
maintain continuous coverage, and implementing rules that work to 
eliminate inappropriate steerage of Medicare and Medicaid individuals 
into the individual market.
     Federal guidance issued in December 2015 includes 
prescriptive rules that limit a State's ability to produce actuarial 
analyses that support meaningful changes expected to drive down 
premiums and increase enrollment. For example, Section 1332 by itself 
does appear to allow States to modify premium structures to vary by 
both age and income, and lowering subsidized premiums for younger 
individuals could improve the average morbidity of the risk pool. 
However, guidance issued by the prior administration in December 2015 
looks beyond statute and regulation and requires that the impact a 
waiver will have on specific groups, such as low income individuals, 
the elderly, and those with significant health needs, will also be 
considered when assessing whether a waiver meets statutory guidelines.
     The December 2015 guidance also specifies that compliance 
with coverage, affordability and deficit neutrality requirements will 
be measured each year, rather than in aggregate over the lifetime of 
the waiver. This could prohibit innovative waivers that may require a 
ramp-up or phase-in period to become fully effective and may not 
initially meet all of the guardrails even though they will over the 
lifetime of the waiver.
     While States may submit coordinated applications for a 
1332 waiver and a Medicaid-related 1115 waiver, the December 2015 
guidance indicates that each waiver will be evaluated separately under 
the applicable Federal guidelines, and that savings from an 1115 waiver 
cannot be used to off spending under a 1332 waiver when demonstrating 
deficit neutrality requirements have been met. This restriction limits 
States' ability to develop waivers that reduce costs and/or increase 
the number of individuals covered when looking at the broader 
population.

    In addition, while Section 1332 does allow States, within the 
confines of the law, to modify how Federal funding is employed at the 
State level, it does not make available new Federal funding. This means 
that certain waivers, such as Alaska's reinsurance waiver and the 
reinsurance waivers currently being considered by several States, 
require additional funding at the State level. Therefore, States with 
budgetary constraints may be limited in the waivers they can pursue.
    Finally, States that utilize Healthcare.gov may face barriers to 
the implementation of certain waivers, such as those that would alter 
premium and/or cost sharing subsides, if the Federal exchange is unable 
to implement State-specific requirements. These same barriers may not 
exist for State-based exchanges.
                        areas for consideration
    Each State is unique in terms of its demographic and socioeconomic 
make-up, insurance markets, Medicaid programs, and existing Federal 
waivers. Therefore, solutions that work best for one State may not be 
the most efficient or affordable solution for another. Allowing States 
to study and implement State-based solutions that are most effective 
for their local market may help in efforts to stabilize the individual 
markets.
    Congress or the administration could provide greater flexibility 
around 1332 waivers and allow States to address their unique challenges 
and circumstances by taking the following actions:

     Allow States to waive or alter additional provisions of 
the ACA not currently outlined in Section 1332 while still maintaining 
basic consumer protections
     Rescind the December 2015 guidance on Section 1332 and 
allow States to:

         Demonstrate each of the guardrails are met in 
        aggregate for the market
         Meet deficit neutrality and other guardrail 
        requirements over the lifetime of the waiver, rather than each 
        year
         Permit States to submit coordinated waiver 
        applications that allow recognition of savings from current or 
        proposed 1115 waivers when assessing whether a 1332 waiver 
        application meets the deficit neutrality guardrail

     Afford States more flexibility in defining the Essential 
Health Benefits (EHBs) that must be covered by all plans
     Allow for more flexibility around plan design, permitting 
States to explore value-based benefits with lower out of pocket 
maximums for high-value services in exchange for slightly higher out of 
pocket maximums for lower-value services to ensure individuals in 
lower-cost bronze plans do not forgo needed services for managing 
chronic conditions

    In addition, Congress or the administration could consider the 
following items in support of Section 1332 waivers:
     Provide for a more streamlined and expedited waiver 
approval process that allows States to take actions that can impact 
rates sooner, including fast-tracking approval of applications for 
waivers that have already been approved and implemented in other States
     Provide grants to States that support efforts to explore 
and apply for Section 1332 waivers
     Provide additional up-front guidance around reporting 
requirements for approved waivers, allowing States to better plan for 
implementation
    Thank you again for the opportunity to provide this testimony, and 
I welcome any questions you may have.

    The Chairman. Thank you for your really helpful 
suggestions.
    We will now go to 5-minute rounds of questions. I will try 
to keep the questions and answers to about 5 minutes so all the 
senators have a chance to have at least one round of questions, 
and then we may go to two.
    Senator Enzi.

                       Statement of Senator Enzi

    Senator Enzi. Thank you, Mr. Chairman.
    I am going to thank you for the excellent summary you did 
of last week's roundtable suggestions in your opening 
statement.
    I want to thank Senator Murray for working with you and 
coming up with another group of outstanding people to provide 
testimony. This really is helpful.
    One theme that has emerged from the course of the hearings 
we have had on the individual market is the need for 
meaningful, tangible reforms on the 1332 Waiver.
    Governor Leavitt, from your testimony, you have some hands-
on experience with the Waiver and that process. I thank you for 
any wisdom you can shed on specific changes you would make 
right now to the process for the Waiver. You mentioned tweaking 
the 1115 and 1332, and also that neutrality.
    Could you expand on that a little more?
    Mr. Leavitt. Yes. I mentioned three areas that I think 
would fall under that category.
    The first would be having a menu of standardized waivers 
that have actually come through their experience. If they have 
permitted a reinsurance facility in Alaska, Minnesota should 
not have to wait if it met the same criteria. A menu of those 
could be developed.
    You maintain the guardrails, the national standards if you 
will, but you give States the capacity to use their own, a 
series of different options to craft their solution.
    The second you alluded to was that right now waivers under 
Medicaid fall under Section 1115. Waivers related to exchanges 
fall under 1332. Those are often codependent. In other words, I 
cannot do what I need to do on 1332 unless I am able to do 
something with Medicaid under 1115.
    Currently, those are parallel processes. There is no reason 
they could not be done together. The law would need to be 
amended to allow that.
    Last, I mentioned the fact that budget neutrality, one of 
the important guardrails, that I believe there will be wide 
agreement on, is currently required to be achieved in every 
separate fiscal year.
    Oftentimes when a State or if the Federal Government makes 
an investment that spans 5 or 10 years, there is an upfront 
cost that has to essentially be amortized into the following 
years.
    If budget neutrality could be amended to be achieved during 
the waiver period, as opposed to in every specific year, it 
would enable States to find those solutions while maintaining 
the national standards that make up the so-called guardrails.
    Senator Enzi. Thank you. I have some additional written 
questions regarding that.
    Mr. Bragdon, I want to thank you for the Milliman White 
Paper. It gives quite a bit of information about the Maine 
invisible risk pool and some flexible models that we might be 
able to use.
    Could you give me a few more details, though, on your any 
competitor purchase?
    Mr. Bragdon. Thank you for the question, Senator.
    The Maine law really looked at, how do you achieve this 
bipartisan consensus over two aspects of the cost of health 
care?
    One is, if you will, on the republican side, there was 
concern about ever-increasing costs and ever-increasing 
deductibles. In the Maine legislature on the democrat side, 
there was concern as insurers get narrower and narrower 
networks, how do you maintain access to high value providers 
who, in many cases, are being arbitrarily shut out of networks?
    The legislation that passed unanimously in Maine says that 
if we are going to empower patients, we have to give them two 
things. We have to give them true price transparency building 
off a Massachusetts law in 2012 that said, ``Here are the 
actual negotiated prices for you as a patient in this 
particular insurance plan.''
    The second piece was that if you could find a provider that 
was lower than the average cost, even if that provider was out 
of network, you as a patient had a right to go to that 
provider. The insurance company had to treat it as an in-
network expense.
    It was this combination of giving patients the information 
and then the power to shop that, in State employee plans and 
other self-insured plans, shows that is the way to reduce the 
cost of health care.
    Senator Enzi. Thank you and my time is almost expired.
    Thank you, panel.
    The Chairman. Thank you, Senator Enzi.
    Senator Murray.
    Senator Murray. Again, thank you to all of our panelists. 
This is very helpful.
    Ms. O'Toole, let me start with you. Minnesota is a pretty 
unique insurance marketplace, and in the past couple of years, 
I know you took steps to adopt a basic health plan, limit 
insurers' financial risk to keep them in your market, and 
provide premium rebates to enrollees to keep your coverage 
affordable.
    As you mentioned in your opening remarks, you are hopefully 
within a few days of getting a 1332 Waiver, and its purpose is 
to establish a reinsurance program. Correct?
    Ms. O'Toole. That is right. Yes.
    Senator Murray. OK. I am glad you agreed with the need for 
a long-term Federal reinsurance program, as well, when you were 
speaking. We heard a lot of bipartisan support for that 
approach at last week's hearings.
    As you know, today we are talking about how we make it 
easier for States to get these waivers. My priority is that we 
protect the so-called 1332 guardrails that give States 
flexibility without hurting people with preexisting conditions.
    Did those guardrails do anything to prevent Minnesota from 
applying for its waiver?
    Ms. O'Toole. No, they did not. Our application is well 
within those guardrails.
    Senator Murray. OK.
    I really do support finding ways to let States like 
Minnesota innovate and bring down the cost of coverage while 
maintaining that quality of care. I want to make sure that we 
avoid proposals that actually increase deductibles or other out 
of pocket costs. Your waiver request made sure that you 
maintained that. Correct?
    Ms. O'Toole. That is right.
    Senator Murray. OK.
    Mr. Tyson, thank you for your thoughtful testimony, and I 
especially want to thank you for making clear that the 
insurance marketplaces are a partnership between the Federal 
and State governments, and the insurers compete for business 
within that market.
    The Federal Government needs to live up to its end of the 
bargain, and provide certainty and stability. That is important 
so that there is a level playing field for competition among 
insurers that helps drive down the cost for people seeking 
coverage. It is up to insurers like Kaiser to come to the table 
and provide high quality coverage options for patients and 
families.
    In your testimony, you provided a number of options for 
stabilizing the individual market. I wanted to ask you, what 
are the two or three most important things the Federal 
Government can do to stabilize the insurance market in the 
short term?
    Mr. Tyson. Thank you very much.
    I know that it is a difficult time right now in terms of 
getting a bipartisan agreement. I know that we talk about CSR 
as a 1-year deal. It is a mistake. You have to solve it for the 
year, but quite frankly, including myself and my colleagues are 
thinking now about 2019 and 2020 is right around the corner.
    I would strongly recommend that you consider at least a 
multi-year solution for the CSR of at least 3 years, if not 
more permanent. I understand that there are issues that you 
have to work through to get to that point.
    Because what you want to do is create stability and 
credibility where the insurers will come back more into the 
marketplaces around the country.
    The pay back to you will be that once the market starts to 
behave as a market, once the competitors begin to really 
compete against each other to add value--and by the way, play 
by the rules, the guardrails and the rules that have been 
established--you then get us to begin to act more like what you 
see in Kaiser Permanente where we compete on value.
    We compete on price. We compete on coverage. We compete on 
access. There is a difference between getting coverage, but not 
being able to afford to go see the physician or go into the 
delivery system, and obviously on service and quality.
    The second area I would recommend is around the reinsurance 
and to solve to the reinsurance issue that would also create 
better stability in the marketplace.
    Then probably the third area would be around what is 
currently a tax holiday with the tax, is to consider that, 
which drives costs out of the system.
    I would recommend that you focus in those areas.
    Senator Murray. OK. Thank you very much.
    I just have 30 seconds left, but Ms. O'Toole, I wanted to 
go back to you. You talked about outreach and assistance to get 
people into your marketplace.
    As I am sure you know, the Trump administration cut the 
Federal marketplace outreach funding from $100 million to $10 
million and cut the budget for Navigators. We heard at our 
hearings last week about how Navigators help people with 
complex financial situations and health conditions choose 
coverage that is right for them.
    Based on your experience, how important is funding for 
consumer outreach and assistance?
    Ms. O'Toole. It is critical, and it is critical not only to 
meet our mission of enrolling and informing as many consumers 
as we can about their coverage options, but it is also critical 
in balancing that risk pool.
    We see in Minnesota that the older, sicker folks sign up 
first and it takes extra effort to get younger and healthier 
Minnesotans into that pool. That involves not only on the 
ground assistance, free, in-person assistance for consumers, 
but also a robust marketing campaign.
    We work with both Navigators and brokers across the State. 
I call them our ``Army of Assisters,'' and they are really 
critical to our success.
    Senator Murray. OK. Thank you very much. I appreciate it.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murray.
    Senator Collins.

                      Statement of Senator Collins

    Senator Collins. Thank you, Mr. Chairman.
    Governor Leavitt, thank you so much for your testimony and 
the guideline of ``National Standards, State Solutions.'' I 
think that is a great motto for the bill that we are crafting.
    We know from the experience in some States, including the 
State of Maine, that a high risk or a reinsurance pool, can 
help drive down the cost of premiums. Milliman--in looking at 
the costs if the Federal Government were to play a role--has a 
range of costs. If you are going to cover everyone, all 
individual market policies, it could be as high as $16.7 
billion.
    On the other hand, if you took the Alaska approach, it 
could be far less. We have had some conversations with the 
National Association of Insurance Commissioners and it might be 
in the neighborhood of $3 billion.
    My question to you is this. Given the savings that 
reinsurance can provide on the premium side, do you think that 
it would make sense for the Federal Government for a brief 
period of time, say a couple of years, to provide some seed 
money to help States set up reinsurance pools?
    Mr. Leavitt. Let us acknowledge if money was readily 
available to States, more would do it and do it more quickly.
    In the long term there is, in fact, a need for States to 
have reinsurance facilities that are integrated with the 
balance of their priorities that I believe can be developed in 
a way that essentially are not just budget-neutral at the 
Federal Government, but also at the State level.
    I am a strong advocate for reinsurance facilities, but I do 
think they have to integrate into a much broader construction 
of a health care system than the Federal Government can 
contemplate in every State and therefore, they need to be done 
at the State level.
    What we can do at the Federal Government to facilitate it 
should also be a significant part of the discussion.
    Senator Collins. Right. I am not suggesting that the 
Federal Government should dictate how it is set up. Maine had 
an invisible, high risk pool that neither providers nor 
beneficiaries knew that they were assigned to the high risk 
pool. It was funded through premium dollars, in part, with the 
seeded risk, but also by a $4 per month surcharge, essentially, 
that was built-in to premiums for all plans.
    A lot of States do not have funding available right now. I 
know Alaska ponied up some $55 million originally, and that was 
very impressive. Down the road, they are using the savings from 
the Advanced Premium Tax Credits to help finance the pool.
    I guess my question is, should we be trying to expand 
reinsurance pools by initially providing some assistance to 
States, just in the short term?
    Mr. Leavitt. That will be an appropriation decision, 
obviously, of the Congress.
    I think it is safe to say that if the Congress were to do 
that, there would be an acceleration of State pools. I think, 
from my view, that would be a positive thing.
    On the other hand, I think it is important that it is not 
an ongoing Federal responsibility.
    Senator Collins. Right, I am talking short term. Thank you.
    Ms. Tomczyk, you mentioned, as did the Governor, the issue 
with the guidance that was put out by the Obama administration 
in December 2015 that required that States demonstrate budget 
neutrality, and they had to do so in each year of the Waiver.
    Is it not very difficult to produce savings from innovation 
in the very first year that you try a new approach?
    Ms. Tomczyk. Yes, it can be. It depends on, of course, what 
type of program you are trying to put in place.
    Certainly, one of the challenges with the market today and 
the instability is a good functioning insurance market needs a 
broad cross section of risks, and we are having trouble drawing 
in the young and healthy individual.
    There may be innovative solutions and programs that can be 
put in place to draw those people in, but it may take some 
time.
    Many of these people may have come to the exchanges, and 
looked for coverage, and saw that it was too high. After 
programs are put in place to bring those premiums down, we need 
to get those people to come back and take a second look. That 
may take some time to implement.
    I think if you can meet the deficit neutrality requirement 
over the long term, even though it may not in the first year, 
that that should be something to consider.
    Senator Collins. Thank you.
    The Chairman. Thank you, Senator Collins.
    Senator Franken.
    Senator Franken. Thank you, Mr. Chairman.
    The chairman and I hung around a little after the coffee 
today, as a number of you did, to discuss the interplay of 
State flexibility and the Essential Health Benefits.
    I would like to get some clarity--and I want to include all 
of you--on what 1332 Waivers currently allow regarding 
Essential Health Benefits. If the law were modified to permit 
additional State flexibility, in terms of either changing the 
guardrails or what States are able to waive under these 1332 
Waivers, what the potential implications would be for 
individuals with a preexisting condition?
    I feel this is really important. This is a basic concept 
for us to get on the committee and in the Congress to get our 
hands around. It feels important that we educate ourselves and 
the public on this issue.
    As I understand it, the Affordable Care Act requires that 
all plans offered on the exchanges cover the same set of 
Essential Health Benefits, which are broad categories for 
coverage including coverage for emergency services, maternity 
care, and mental health, and substance use disorders. States 
then identify an insurance plan that serves as a benchmark for 
what it will consider as meeting the Essential Health Benefits 
requirements.
    Under Section 1332, States may seek to revise the list of 
benefits that must be covered on plans sold through the 
marketplace. They may even see changes to the Essential Health 
Benefit plans, as long as these changes meet certain consumer 
protections that were established in the ACA, and some folks 
refer to those protections as guardrails.
    These guardrails require that any proposed change guarantee 
that coverage under the proposed waiver would be as 
comprehensive as coverage absent the Waiver as affordable, 
cover at least as many people as the ACA, and be budget 
neutral.
    My republican colleagues want more State flexibility and 
are seeking changes to the 1332 Waivers. I oppose changes that 
would weaken the consumer protections in the law or the 
Essential Health Benefits package.
    I would like all the panelists to clarify whether I am 
correct about what is allowed under existing law and also about 
what problems you could foresee if the guardrails or the 
Essential Health Benefits packages were changed under Section 
1332.
    Ms. O'Toole, since you are from Minnesota, I would like you 
to go first.
    Ms. O'Toole. OK.
    The Chairman. Let me just say this, this is going to take a 
little longer than the 5 minutes, but I am going to, with the 
consent of the other members, this goes to the heart of 
something we are going to have to resolve if we want to get an 
agreement.
    I would like for each of you to answer and have time to 
answer Senator Franken's question.
    Senator Franken. Thank you, Mr. Chairman.
    Ms. O'Toole. Thank you, Senator.
    I believe you are correct on what you stated is the law and 
that has always been very important, those consumer 
protections, so important in Minnesota. I share your focus 
there. I think the potential problem that I see----
    I talk with Minnesotans all the time and I know you do too, 
and I was just out at Farm Fest in greater Minnesota, in 
western Minnesota; a great gathering. I hear consumers. Two 
concerns, two top concerns that they have.
    One, they are worried if their coverage is going to be 
there for them. They wonder if they are going to get coverage 
this year and into the future. They are worried about just 
basic coverage.
    The second goes to one of my previous answers too. They 
need to know what they are buying and they need clarity about 
what they are buying, and what their coverage is, and what they 
are going to pay out of pocket. What I see as a potential 
issue, and I am hoping we can all help the committee thread 
this needle, but consumers really need that clarity in their 
coverage to make good decisions for their families.
    Senator Franken. I am sorry, but what you mean is when 
people are buying insurance, if the Essential Health Benefits 
are changed and insurance policies are allowed to not cover 
certain things, is it going to become more complicated to buy 
insurance?
    Ms. O'Toole. That is right, Senator.
    Senator Franken. OK.
    The Chairman. Why don't the other witnesses please answer 
Senator Franken's question?
    Senator Franken. Sorry.
    Mr. Leavitt. I am happy to respond, Senator.
    There is a bit of ambiguity, in my view, on how this is 
laid out. The statute lists 11 essential benefits. At the same 
time, it uses the word ``comprehensiveness''. I think being 
able to determine what is comprehensiveness as it relates to 
those 11 benefits.
    There is a concept that is often used in Federal statute 
referred to as ``actuarial equivalency.'' Rather than trying to 
look at a list of benefits and say, ``They have to all be 
provided at the same level,'' you can create some flexibility.
    If this were a car, for example, we would say, ``It is a 
$25,000 car. You need a motor, but some people believe it is 
also essential to have a back up camera. You could have a 200 
horsepower motor and a back up camera, or you could have 300 
horsepower motor all for $25,000 but you choose the list of 
options and how you will weigh them.''
    It is my view that the State flexibility would be 
profoundly enhanced, rather than just speak of 
comprehensiveness, if it could be ``actuarial equivalent 
comprehensiveness'' so that the States had the ability to 
construct an option menu of benefits and provide either the 
State or even consumers the ability to choose plans that weigh 
those differently.
    Mr. Bragdon. Thank you. I think your question is really on 
point.
    First of all, in the current 1332 statute, States have 
flexibility with Essential Health Benefits. When I think of 
State flexibility, it should be a gain of addition not 
subtraction.
    Right now, States could subtract things off the Essential 
Health Benefit list assuming that they pass through those 
guardrails.
    I think part of the conversation about additional State 
flexibility should instead look at, how can you vary other 
things that can reduce cost besides just reducing the number of 
benefits? How could you change actuarial value, some of the 
comments that the Governor made? How could you have greater 
flexibility when it comes to cost sharing?
    I think with State flexibility, you want to use all these 
different tools so that people have lower cost options. Because 
what is happening now in the unsubsidized market is people are 
choosing nothing, which has unlimited cost sharing, if you 
will, rather than something that is at a price that they cannot 
afford or they are not willing to pay for what they are buying.
    You want to increase that State flexibility, but Essential 
Health Benefits are already on the table.
    The Chairman. Mr. Tyson.
    Mr. Tyson. To use that earlier analogy--I view the 11 
Essential Benefits as being the tires on the car, the steering 
wheel, the seats, et cetera.
    I believe after being in this market for so long and before 
the ACA, the way the insurance companies and others got their 
costs down was either to eliminate some of the benefits and/or 
continue to increase the deductibles.
    What you ended up with was a lot of people buying something 
that, when they needed it, they found it completely useless at 
times to get access into the front door of the care delivery 
system.
    I do believe that there is room for flexibility and we 
should explore that in partnership between the government and 
the health care delivery system.
    I am not stuck that there is only one way, but I think that 
the essential benefits provides a great foundation for us to 
build on that gives a predictable set of benefits to be 
expected that we all then compete against.
    The Chairman. Ms. Tomczyk.
    Ms. Tomczyk. My understanding is also that the current law 
allows the flexibility to alter the Essential Health Benefits. 
It is one of the guardrails, the comprehensiveness of coverage 
and that they can be altered at the State level, but they have 
to be actuarially equivalent.
    There cannot be the takeaway that was being described. If 
you take something away, you have to put something else in. 
That package at a State level, each State may have different 
needs.
    I think the flexibility for the States to design their own 
package, as long as it is consistent across the State, is a 
good thing. I think the law says that if you take something 
out, the value of what you end up with at the end of the day 
has to be the same. It has to be actuarially equivalent.
    If we start talking about different packages at the 
consumer level within a State, I think we just have to be 
really careful about adverse selection. In other words, if you 
have that one consumer can choose to not have a certain 
benefit, or one consumer can choose to swap out a different 
benefit.
    We will have to look at that closely to make sure that 
folks are not selecting just the packages that work for them, 
and therefore the costs of those benefits are not spread 
broadly across a very robust, broad risk pool.
    The Chairman. Thank you, Ms. Tomczyk. Thank you, Senator, 
for the question and to all of you for the answers.
    Senator Franken. Thank you for the extra time.
    The Chairman. We can go back to it after the first round.
    Senator Young.

                       Statement of Senator Young

    Senator Young. Mr. Bragdon, you have mentioned a couple of 
times in your testimony here today that we should address the 
underlying cost of health care, in part, by providing for 
greater price transparency.
    True price transparency has been done in Massachusetts, and 
also ensuring that there is actual access that enables 
consumers to act on that transparency. You cite the Maine law 
that passed in a bipartisan fashion earlier this year.
    Are there any initial indications that you can speak to 
about how that law is working for consumers?
    Mr. Bragdon. Thank you for the question, Senator.
    The Maine law was actually built upon a program for State 
employees in New Hampshire that has been replicated in other 
States as well.
    The approach simply says that patients need to have true 
price transparency, not the charge, but the actual negotiated 
price.
    It went one step further because as networks are getting 
narrower and narrower, patients are being shut out of 
providers, even providers that are lower cost. There are a lot 
of perverse incentives in the health care system to encourage 
that.
    The Maine law is going into effect beginning next year.
    Senator Young. I see, yes.
    Mr. Bragdon. We do not have early results. It gives 
patients that right to choose a high value provider even if it 
is out of network. There are incentives.
    What the New Hampshire State employee plan saw was just 
with making the market more transparent, new providers came in 
at a lower cost because patients now could see that they could 
go somewhere cheaper, and they voted with their feet.
    Senator Young. Are there barriers that would be unique to 
the Federal level, Federal implementation of this right to 
comparison shop approach that we should be concerned about, if 
this committee were to embrace that approach?
    Mr. Bragdon. No.
    Senator Young. Very good.
    You also have spoken with some specificity in your 
testimony about targeted and invisible risk sharing.
    Can you elaborate on this idea? What do you mean exactly by 
``targeting?''
    Mr. Bragdon. Sure.
    Several different actuaries have talked about the biggest 
premium driver, as a result of the ACA, was guaranteed issue 
saying that all individuals with preexisting conditions need to 
have access.
    The idea is, how do you maintain that access, but take that 
unpredictability and high cost out of the system?
    In the past, States used to do it by segregating folks to a 
high risk pool that had different plans and was treated 
differently.
    The Maine approach, and this is actually quite similar to 
the program starting in Alaska, the Maine approach said that 
rather than doing that, let us specially take those individuals 
with high cost, preexisting conditions--in Maine's case, when 
they walk through the front door, in Alaska's case, after the 
fact--let us take them and let us limit insurance companies' 
exposure. Let us take away the high cost and take away the 
unpredictability on them.
    You keep the policy choice of giving everyone access, but 
you limit the cost by targeting reinsurance just to those 
individuals.
    Senator Young. I see. You have advocated jumpstarting or 
providing seed capital at the Federal level to expand this idea 
in other States. Right?
    I share what I thought I heard were Governor Leavitt's 
concerns about this being, perhaps, an ongoing Federal 
responsibility.
    Do you share that concern?
    Mr. Bragdon. I think the ideal situation is to jumpstart it 
at the Federal level, but then to allow States to customize it. 
Maine chose 8 preexisting conditions; Alaska chose 33. There 
are real reasons for that variety.
    The ideal is to get it started at the Federal level so you 
can get premium relief as quickly as possible, and then 
transition to the State so they can customize.
    Senator Young. Are there things we might do, Mr. Bragdon or 
Governor Leavitt, to prevent States from coming back to the 
Federal Government 2 or 3 years down the road and saying, ``We 
would like continued funding,'' for whatever reason as States 
are incentivized to do?
    Mr. Bragdon or Governor.
    Mr. Leavitt. One, you could structure it not as a grant, 
but something that the Federal Government expects over time, 
once the program is moving and functioning to be able to 
recapture some of the savings that are developed at the Federal 
level.
    I would have to think that through more clearly, but I 
think what you have suggested is a danger.
    Senator Young. Yes, OK. Thank you.
    I yield back the balance of my time.
    The Chairman. Thanks, Senator Young.
    Senator Bennet.

                      Statement of Senator Bennet

    Senator Bennet. Thank you, Mr. Chairman, and thank you for 
holding this hearing, as always.
    Ms. O'Toole, I wanted to start with you because you are on 
the frontlines of this. Part of solving a problem is making 
sure we understand the nature of the problem that we are trying 
to solve.
    It would help the committee if you could walk through what 
the sources of the historic volatility have been in the 
individual market, as you understand it. I am not talking about 
what we are dealing with today, although it may come to that, 
but the historic volatility that people face.
    Because again, as the chairman said, what concerns us today 
is something that relates to 7 percent of the people that are 
insured in America. There is so much more that we need to deal 
with in our health care system than that, but we have had a 
challenge because our politics has been focused on this 7 
percent. A lot of the reason for that is, I think, because of 
the volatility you described.
    That is the context for my question and then I am happy for 
you to use as much time as you need to answer it.
    Ms. O'Toole. Thank you, Senator.
    In Minnesota, just like many other States, we have 
experienced a lot of volatility. When we were getting going, 
the carriers were not as clear on the risk pool. We had two 
major carriers withdraw right in the first couple of years and 
we saw premiums increase dramatically.
    I would be lying to say that a lot of the confusion lately 
is around the politics that I see because I talk to consumers 
all the time and they are confused about what is going on.
    The volatility has had a big impact on our market. The 
flexibility we see now and the opportunity to settle down our 
market is going to have a huge benefit to consumers. That is 
why you hear me talking about our reinsurance waiver and the 
importance of that flexibility to do that.
    Also, our flexibility as a State-based exchange has helped 
us move forward more quickly in Minnesota because we have the 
reins at a local level. We know what we need to do and we are 
doing that.
    Some of these solutions are very short term, though, and we 
need some longer term help from all of you.
    Senator Bennet. Mr. Bragdon, I do not want to get lost in 
this again, but on the transparency question, my colleagues 
were asking about.
    Does this mean that in Maine, if you are going in to get a 
hip replacement that you have some means for knowing what 
providers all across the State charge for a hip replacement? Is 
it, at its most basic level, is that what you are talking 
about?
    Mr. Bragdon. Yes, that is the first part of it and it 
builds on a Massachusetts law that was in 2012.
    Senator Bennet. OK.
    The last question I have for you folks, is it your 
understanding that the 1332 Waiver, as is it written now, would 
allow a State, if it wanted to, to apply to have a public 
option in their State; some option other than private or 
nonprofit insurance?
    Ms. O'Toole. I am happy to dive in here.
    I believe that it does and, in fact, in Minnesota, our 
Governor has proposed a public option. It would be a buy-in to 
our Minnesota care program, which is our basic health plan. 
That idea is still percolating but it is envisioned that if it 
ever comes to fruition, that it would be handled through a 
waiver.
    Senator Bennet. Is that a consensus view on the panel?
    Mr. Bragdon. Yes, I would agree.
    Mr. Tyson. I would agree.
    Can I back up to your first question, if you do not mind?
    Senator Bennet. Sure.
    Mr. Tyson. Just to add to the perspective. One of the ways 
that I think about it, and would offer for your consideration, 
is what was happening before ACA.
    You had a situation where individuals with preexisting 
conditions, in essence, were not covered. And/or if they got 
coverage, they bought it at a very expensive price.
    What you have now with ACA is we are trying to make sense 
in the market of how do you now put this risk inside of the 
coverage for a segment of the population? The expert is sitting 
next to me about how you deal with the actuarial data and 
everything around that.
    Senator Bennet. Yes.
    Mr. Tyson. Then the second thing you have is a lot of 
people who, historically, have not had coverage to get care 
except for when they needed care, they showed up in the 
emergency department.
    As we now have taken on more of this population and are 
providing them with coverage and they have access to get care, 
we are discovering different kinds of illnesses and areas that 
we have to focus on to, in essence, get them to really perform 
in a preventative way going forward.
    That adds to the cost in the short term, but if managed 
correctly in the long term, you will end up with better-managed 
care and the person would have better outcomes.
    Senator Bennet. My time is up, so I will yield back to the 
chairman--but it also, I think, relates to the misery that a 
lot of the others, the 93 percent that are not the 7 percent we 
are talking about here, are also feeling.
    I would also share the view, as a couple of you suggested 
that one source of great unhappiness that I hear about from 
people is that when they buy their insurance, and then when it 
is time for them to use their insurance, they are denied the 
opportunity to use their insurance.
    Insurance is not like buying a loaf of bread where you 
consume it today or this week. It is very different than that. 
I think that is what the Affordable Care Act tried to 
recognize.
    I thank the witnesses for your excellent testimony and 
thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Bennet.
    Senator Murkowski, I know you are very interested in the 
Alaska waivers, and I gave Senator Franken a little extra time. 
If you need it for your questioning, please, take it.

                     Statement of Senator Murkowski

    Senator Murkowski. Thank you, Mr. Chairman.
    I appreciate the question from Senator Franken because I do 
think it does go to the core of what we are trying to get to 
here. I paid attention very clearly to your introductory 
remarks as well as those of Senator Murray as the ranking.
    It seems to me that there is a path forward here to get a 
consensus product out of this committee. That is something that 
I wholeheartedly endorse, and embrace, and have been very 
consistent about.
    It seems that one of those pieces is what we do with the 
CRS and dealing with the time on that. I think we can work that 
through.
    It is this issue of flexibility to the States that we have 
identified as one avenue being through the 1332 Wavier program. 
I am not sure whether or not State flexibility is being 
interpreted as, somehow or other, code for something nefarious 
to take place.
    I want to go back to Senator Murray's requirement here, and 
I think it is absolutely fair, that what we are looking to do 
here in this committee with this targeted approach is to 
stabilize the individual market in this short term period here 
without eroding protections and without increasing the premium 
costs.
    As one who comes from a State with really high premium 
costs, even with the reductions that we have seen through the 
1332, quite honestly, going from $1,000 a month to $800 a month 
still is no screaming deal. This is important to me as well.
    I am going to ask you, Ms. Tomczyk, as the actuary at the 
table, in terms of some of these proposals that have been laid 
out here today and last week on ways that we can better enhance 
the 1332 Waiver, whether or not any of them actually would have 
a consequence, an unintended consequence of increasing 
premiums. Whether it is the proposal for the coordination 
between the 1115 and the 1332, the menu of waivers as Governor 
Leavitt has indicated, the budget neutrality issue, whether it 
is in each year or over the course of the Waiver.
    Can you speak to whether or not these proposals, that are 
being discussed, would have an impact on premiums and premium 
increases?
    Ms. Tomczyk. Yes. Thank you for the question.
    With any of these proposals, it may differ by State. Even 
things that we have not mentioned, each State is starting from 
a different place in terms of whether they have expanded 
Medicaid, whether they have transitional policies in the 
market.
    Any proposal could have a different answer for each State 
and that is, I think, where the State flexibility is beneficial 
where States can look at what might work for them.
    Overarching all of this, we still have the guardrails, the 
guardrails that are outlined in law. If any of the proposals 
were found to increase the number of uninsured individuals or 
increase premiums, my understanding is that waiver would not be 
approved because it is not passing the guardrails.
    I think there some other options and flexibility that could 
be provided with that December 2015 guidance that I mentioned 
right now is maybe keeping States from looking at where they 
would work to reduce premiums in aggregate and they would work 
to increase the number of individuals who are insured.
    It is that looking at the one level down at the 
subpopulations that is, perhaps, preventing some of those 
things from being explored further.
    Senator Murkowski. Effectively, streamlining a process is 
not going to increase premiums.
    Ms. Tomczyk. Yes, streamlining the waiver process. I do not 
think so.
    Senator Murkowski. Or allowing for a menu of standard 
waivers and then, to Governor Leavitt's point, you have 
national standards but State solutions.
    Could that have potential impact to premiums? Are you 
saying it depends? It is State-specific.
    Ms. Tomczyk. Yes, I do not think having the menu itself to 
help expedite and streamline the process would add to the cost. 
Again, depending on what is on that menu, because each State is 
a little bit different, it could potentially pass the 
guardrails in one State and not another, if that makes sense.
    When we talk about reinsurance because the way reinsurance 
works, it brings down premiums for all. Some type of standard 
menus for reinsurance waivers is probably going to work for 
just about every State.
    As we start looking at more unique and innovative and maybe 
they would not be on this simple menu. Maybe the menu has to be 
simple, straightforward type waivers that would work in every 
State. There certainly are more innovative type waivers that 
may or may not work depending on the State specifics.
    Senator Murkowski. I appreciate that and I do not know 
whether anybody had anything that they might want to add to 
that.
    It sounds from your answer that if we are talking about 
some of these, basically improving on a provision that was 
already outlined in the ACA by making it work as intended.
    Ms. Tomczyk. Correct.
    Senator Murkowski. Allow for a level of efficiency is 
something that we should be striving for regardless of what we 
do.
    Ms. Tomczyk. Yes.
    Senator Murkowski. Everyone is nodding their head.
    Ms. Tomczyk. At least give the States the opportunity to 
explore that, the flexibility, yes. I agree.
    Senator Murkowski. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thanks, Senator Murkowski.
    Senator Whitehouse.

                    Statement of Senator Whitehouse

    Senator Whitehouse. Thank you very much, Chairman.
    I want to thank both you and Senator Murray for the 
comments that you made at the beginning of the hearing and join 
Senator Murkowski in endorsing and embracing what appears to be 
an emerging path toward a bipartisan solution here.
    To all of the witnesses, I assume that you will all agree 
that to the extent, either through a risk pool or through 
reinsurance, that you can lift the cost of certain very 
expensive conditions out of these markets, that that will have 
the effect of lowering premiums in those markets.
    Is that an agreed baseline fact here?
    [All nod affirmatively.]
    Senator Whitehouse. Yes, all heads nod.
    The effect of lowering the premium would be expected to 
attract more participation in the market as would have been 
opposite of adverse selection.
    Is that also a baseline principle we can agree on?
    [All nod affirmatively.]
    Senator Whitehouse. Yes, all heads nodding. OK.
    That takes us to the question, and I would like to have Mr. 
Bragdon and Ms. Tomczyk address this.
    You have chosen, Mr. Bragdon, to do a reinsurance type 
mechanism. Alaska, Ms. Tomczyk, advised by your firm has chosen 
to do a conditions-based mechanism.
    Do you see huge differences, advantage and disadvantage, 
between a conditions-based, i.e., once you are diagnosed, you 
move into either the reinsurance or the risk pool versus 
hitting a dollar cap level?
    Make your best case for either or let me know if you do not 
think that is a very important difference as long as the 
underlying job is being done.
    Let me ask Ms. Tomczyk first, Mr. Bragdon.
    Ms. Tomczyk. I think both of those types, or any type of 
reinsurance program, one thing it does is it adds 
predictability and stability to the market. As an actuary, it 
makes it a little bit easier to price when you are taking those 
most volatile claims out of the market.
    Senator Whitehouse. The condition once established is set, 
then you do not have to worry about chasing billing records and 
other things to get to a spending cap.
    Correct?
    Ms. Tomczyk. Right, and I will be corrected if I am 
incorrect.
    I think the Maine program is also condition-based, but 
folks enter the pool at the time of application. They look at 
the conditions that they have, and if they have one of those 
conditions, they go into the pool. Whereas Alaska, individuals 
can develop those conditions throughout the year and then they 
move over to the pool.
    One advantage that I think that has from a predictability 
and a pricing standpoint is the insurer is protected against 
those large claims if someone develops them during the course 
of the year.
    Senator Whitehouse. Mr. Bragdon, do you fundamentally have 
a conditions-based program that moves to that through your 
multiplicity of claims method? How does it work?
    Mr. Bragdon. The Maine approach looked at eight preexisting 
conditions at time of application, and then at the same time, 
if certain individuals, based on how they looked at the time of 
application were going to be high cost, insurers could 
voluntarily put them into the pool.
    I think whether you do the Alaska approach or the Maine 
approach, both are similar. You are correct in that they are 
based on certain preexisting conditions. The idea being that if 
guarantee issue, policy choice has a premium increase because 
of the uncertainty and the high cost, then target the 
reinsurance to that driver. That is the approach.
    Senator Whitehouse. You are both fairly comfortable with 
either way, as long as we are accomplishing the goal of 
extracting those costs from the market allowing premiums to 
come down and allowing more participation in the market because 
premiums have come down.
    Ms. Tomczyk. Yes.
    Senator Whitehouse. OK. Good.
    The last question, which I will actually make, because my 
time is running out, as a question for the record comes out of 
Mr. Tyson's testimony.
    He has said very clearly, ``We need to reform our delivery 
system to encourage integration and efficiency and reduce 
costs.'' That the ACA tried to catalyze market incentives to 
support delivery system reform, but did not do enough and that 
we need to move from sick care, fee for service models of care 
to a system that emphasizes well care with incentives for value 
and for keeping people healthy.
    What I have asked other panels, I will also ask each of 
you, which is in that context to evaluate the opportunities in 
improving patient safety and reducing hospital-acquired 
infections; one.
    Learning from the wide variations in care and outcomes, and 
how to drive toward the better care and outcomes models within 
that range of variation.
    Three, reducing administrative overhead. There is way too 
much warfare between payers and providers that produces no 
health care benefit.
    Four, improving our adherence to the wishes of patients at 
end of life, so they are not being dragged through a lot of 
procedures that they do not want.
    Finally, reforming the payment system to encourage health 
care rather than sick care.
    I am out of time, so I will standby for questions for the 
record.
    Mr. Chairman, just as one general observation, I would like 
to note that the other senator from Maine is in the audience. 
It is not uncommon for me to see, when there is a very 
interesting hearing going on, Senator King just showing up in 
the audience in judiciary hearings, here in the HELP committee.
    I just wanted to note that he is here also reflecting Maine 
and it reflects, I think, an admirable curiosity on the part of 
Senator King that he turns up at hearings and just sits quietly 
in the audience.
    Senator Franken. Or maybe he has nothing to do.
    [Laughter.]
    Senator Whitehouse. Pay no attention to the Senator from 
Minnesota.
    The Chairman. We are glad to have both senators from Maine 
and this is not the first time Senator King has come.
    Senator Cassidy.

                      Statement of Senator Cassidy

    Senator Cassidy. Thank you.
    By the way, Senator Murray's comments, although not 
mentioning me by name, I saw people in the audience looking at 
me because, obviously, I am trying to advance the Graham-
Cassidy-Heller Amendment.
    Let me be explicit. We are not trying to be partisan; this 
is bipartisan.
    Even Ms. O'Toole, I mentioned somebody in our pre-meeting. 
It turns out for a 60-year-old person in a Minnesota family, 
they are paying over $31,000 a year for their Bronze Level plan 
with a family deductible of $13,700.
    Even in a State doing relatively well, it is $44,000 out in 
a bad year plus a pharmaceutical deductible.
    I will also say, we do not want to be partisan. I have met 
with ten different democratic senators as we have discussed 
this. Under our plan, Wisconsin does incredibly well. Virginia 
does incredibly well.
    No, Tim. When you see the language, your State will get 
hundreds of millions of dollars more over 5 years to care for 
lower income Virginians.
    We have specifically tried to make this a nonpartisan, 
taking the portion that Senator Collins agrees with and giving 
flexibility to the States. Senator Collins, for the record, 
does not like the per-cap cap, but I will just say that it was 
just that good work.
    Let me just commit. We are not trying to be partisan with 
the Graham-Cassidy-Heller. We are actually just trying to be 
fair to all Americans no matter where she or he lives.
    I hope partisan is not something that, unfortunately, just 
originates on one side of the aisle because truly I have made 
an effort, and I know Senator Collins did when we were working 
together, and other senators have to reach across the aisle on 
something which is bipartisan.
    By the way, other States represented by democratic senators 
do substantially better including Missouri and Florida.
    That said, what we have heard from our democratic and 
republican insurance commissioners and Governors is they want 
flexibility. They think they can do more with flexibility than 
the Federal Government can do telling them how to do it, and 
then they come and ask, ``Can we have an exception?''
    Mr. Leavitt, I really agree with, liked what you had to 
say. A combined 1115-1332 Waiver with guardrails is your 
recommendation of how to proceed.
    Is that a fair summary?
    Mr. Leavitt. That is an option States should have.
    Senator Cassidy. Yes.
    If the Graham-Cassidy-Heller Amendment, which basically 
takes the dollars a State would receive under the status quo, 
and gives it to them with guardrails, a combined 1115-1332.
    As you said in the pre-meeting, a kind of a check off list, 
``If you do this, this, and this, you can have the money. We 
are going to watch to make sure you are going to do this, this, 
and this, but you have the money.'' Again, that seems kind of 
consistent with the direction you think we should go in.
    Mr. Leavitt. In many cases, it is not money. In many cases, 
it is the authority to move and to organize a system in a 
particular way.
    In essence, what you have suggested is true.
    Senator Cassidy. I totally get that. I know more about 
Alaska's health care system than I ever thought I would know, 
but I think I know they have 11,000 people in the individual 
market.
    The idea that you can have a risk pool based upon 11,000 
people, I can make a joke about marijuana being legal in 
Alaska, but the point is that you just cannot do it. You would 
have to be hallucinating to think that you can.
    Mr. Tyson, would you agree with that because you are the 
fellow that actually has to put together a plan, as the head of 
Kaiser? A risk pool of 11,000 people would be difficult to 
score, I presume, difficult to bid on.
    Mr. Tyson. Yes.
    Senator Cassidy. You had mentioned in your earlier pre-
meeting that the folks you are seeing in the individual market 
before and since the ACA have always been an unstable group.
    If you could combine those with your Medicaid expansion 
risk pool which, I think, in California probably numbers in the 
millions, I presume that would make it far more stable. A fair 
statement?
    Mr. Tyson. Yes, that is very fair.
    Senator Cassidy. What Governor Leavitt suggested, which 
would be that you would combine the two. You have the option of 
combining the two, particularly for a State like Alaska would 
be a kind of bipartisan solution giving the Governor the option 
to put together something that would take care of those in the 
individual market. At least conceptually, that would be a fair 
approach, I presume.
    Mr. Tyson. With the proper guardrails in place, I think, as 
stated earlier, you would create those guidelines, create those 
guardrails, and then allow some flexibility to look at the 
marketplace and how the marketplaces are unique in some cases, 
but generic in other cases. To look at other ways of coming up 
with solutions.
    Senator Cassidy. Is it fair to say, though, that California 
is different than Alaska in terms of how you would design 
insurance?
    Mr. Tyson. Probably so, in some areas.
    Senator Cassidy. Yes.
    Mr. Tyson. Yes.
    Senator Cassidy. Yes, so I just say that because, again, I 
will repeat. I will finish where I started.
    We do not attempt to be partisan with Graham-Cassidy-
Heller. We are actually trying to be bipartisan, allowing a 
State, a blue State and a deep red State, God bless you, to 
come up with a solution which is specific for your State, which 
works best for the lower income folks, and at the same time, 
delivering more dollars to States like Wisconsin and Virginia 
than they ordinarily have.
    I yield back.
    The Chairman. Thank you, Senator Cassidy.
    Senator Baldwin.

                      Statement of Senator Baldwin

    Senator Baldwin. Thank you, Mr. Chairman.
    Thank you all for sharing your expertise with us today. I 
am very encouraged about these hearings and the bipartisan 
approach that we are taking to the issues of market stability 
and affordability.
    I agree that we should consider ways to help the States 
implement innovative reforms that work for their constituents, 
particularly to help address high health costs like 
prescription drugs, to name one.
    I am concerned with proposals that would allow States to 
rollback the vital consumer protections and benefits that our 
families rely on today.
    Last week, we heard from a panel of Governors that we 
should do more to help States share best practices. Best 
practices on innovative outreach efforts to enroll more young 
and healthy people.
    I believe that this is an essential element of stabilizing 
the insurance market. We should pursue Federal and State 
reforms that would allow more young adults to enroll in 
comprehensive and affordable coverage.
    Ms. O'Toole, as a State exchange, you implemented unique 
marketing and outreach campaigns in Minnesota, specifically for 
various communities, for example, ethnic minorities, targeted 
to help more Minnesotans enroll.
    Mr. Tyson, you have had similar experiences with targeted 
outreach on California's exchange.
    How can Congress facilitate the sharing of best practices 
to help others learn from your efforts and help States, 
including those with Federal marketplaces, implement similar 
efforts to enroll more young and healthy people and make the 
process more transparent?
    I would love to hear from each of you.
    Mr. Tyson. I do believe that the marketing efforts that we 
have deployed in California, and other parts of the country, 
have been very important to both educating the public, to 
really describing what it is that we can offer as a health care 
system in those markets around the country. To deal with the 
uniqueness of the population, in some cases, in which they have 
not had the experience of getting coverage. There is a whole 
educational piece.
    In addition to that, we had to add staff into our call 
centers to educate them after they make the purchase, to 
understand how to access care, to understand what it means to 
have a deductible versus a co-payment, and the kind of basic 
things that you educate the different populations on.
    I also think that the whole advertising of it has been very 
effective in California in which we tell our story around why 
this is a good thing for individuals and families.
    I can tell you from my own experience of working in these 
vast communities around the country, and now focused in 
California, is that these are individuals who really do want to 
provide coverage and care to their families and for them 
individually. They really do want to understand how to get 
engaged in it.
    The challenge continues to be, how do we continue to make 
this more affordable to them? Ongoing reforming of the health 
care delivery system, I think, is the best path to really deal 
with the affordability of care.
    Senator Baldwin. Thank you, Mr. Tyson.
    Ms. O'Toole, I want to give you the opportunity to answer 
that question, but let me add just an additional component 
that, I think, reflects on Minnesota.
    You shared that Minnesota's flexibility in implementing 
special enrollment periods when needed for your constituents 
had helped you enroll additional thousands in the marketplace.
    In 2014, I secured a special enrollment period for 
Wisconsinites who were being transitioned, by virtue of our 
Governor's decision of not expanding Medicaid, off of our 
BadgerCare program, which resulted in about 2,000 more 
individuals receiving coverage.
    Can you talk also about that flexibility in your response?
    Ms. O'Toole. I am happy to. Thank you, Senator.
    I think to your first question, and I will try and be 
succinct here, I think the critical part of outreach and 
enrollment and marketing is that we invest in it because I see 
that as meeting our mission of informing and helping as many 
people enroll into coverage as possible. Also, it helps to 
stabilize the risk pool and I cannot underscore that enough.
    I think when we have control over our outreach efforts, I 
think, we also benefit from the Federal investment too and I 
think it is absolutely critical to continue that.
    In terms of special enrollment periods, our flexibility to 
do that has also been critical. We had a bipartisan agreement 
come out of Minnesota about premium relief. It was a 1-year, 
almost a rebate, for people who did not benefit from the tax 
credits because we had upwards of 50 percent premium increases 
last year.
    That law passed with a week to go in open enrollment, and 
that was not enough time for Minnesotans to enroll. We added a 
week onto the end of open enrollments, kept our doors open, had 
assisters all over the State working like mad to help people 
and we enrolled an additional 5,000 people in that week.
    I think it was just critical that they could take advantage 
of the relief.
    The Chairman. Thank you, Senator Baldwin.
    Thank you, Ms. O'Toole.
    We are running toward the end of our hearing time. We have 
several senators remaining, so we are going to try to keep to 
the 5 minutes on the questions and answers.
    Senator Murphy.

                      Statement of Senator Murphy

    Senator Murphy. Thank you very much, Mr. Chairman.
    Let me underscore the importance of marketing. I was just 
with the head of Connecticut's exchange, one of the most 
successful in the country. This week we will know whether our 
insurers are staying in for the next enrollment period.
    Folks that were on our exchange could not imagine a worse 
time for the President to have announced the dramatic rollback 
of marketing. Even though we do a lot of it ourselves in 
Connecticut, we rely on those national marketing campaigns as 
well. It was a moment where at least one of our insurers is 
right on the precipice of walking away, this announcement may 
be the straw that breaks the camel's back.
    I followed Senator Young out following his question about 
how you make sure that any Federal assistance on setting up 
reinsurance funds does not become a permanent burden, extra 
burden on Federal taxpayers. I understand that to be a very 
legitimate concern that many of our republicans will bring.
    I just suggested to him, and I will suggest it to you and 
leave it for the panel to think about, that maybe there is a 
way to place a bet that the cost savings that Alaska has 
achieved will be achieved in other States, but do it in a time 
limited fashion.
    If the savings are not achieved after a period of several 
years that the Federal contribution clause back. That may be a 
way to protect the Federal investment while recognizing that 
States may not be able to make these investments upfront.
    Maybe there is some middle ground where we can recognize 
that helping States set up these pools is important, but 
protecting taxpayers is important as well.
    I just have one question, and it is frankly that maybe be a 
little bit of a devil's advocate on a concept that I actually 
support, which is State-based reinsurance, perhaps backed up by 
the Federal Government, and I want to ask this of Mr. Tyson.
    Your whole business model is built upon accountable care. 
We spent a lot of time talking about the importance of building 
a system of insurance and a system of reimbursement based upon 
getting insurance companies, and big physician groups, and 
hospitals to care about outcomes.
    One of the risks of taking off of insurance companies the 
cost of very highly medically acute patients is it then does 
not put the risk on patients who do not get preventative health 
services and who spiral out of control into the highest 5 or 10 
percent of spenders, takes it away from the insurance company.
    As a representative of a company who thinks a lot about how 
you build accountable systems of care, imagine a world in which 
we do have a State-based, universal system of reinsurance.
    How do you make sure, then, that insurance companies, who 
would still be providing the care for everybody else, have an 
incentive system in place to make sure that they just look the 
other way as somebody gets really medically complex because 
they do not have to worry about it on the backend?
    Mr. Tyson. It is a very, very good question and a very 
thought provoking question, just to preference my comments by 
saying that. I think it is just an excellent question.
    It goes back for me to the earlier conversation we had this 
morning, which is if we are not dealing with the delivery 
system the reform of care itself, while we can watch costs go 
down on a temporary basis if we are focused on the claim side 
or just the coverage side, sooner or later they are going to 
have to access that system of care and that is going to 
ultimately drive the cost of care back up.
    Really figuring out how to bring the two together, which is 
both the coverage and the care aspect, and to create an 
accountable system is going to be critically important in the 
long run for this to be successful.
    Added to that would be, how do you make sure that you are 
incenting the system to perform the way it is intended to 
perform, which is to take those individuals at high risk with 
the illnesses as we described? To make sure that their care is 
being provided in a way that it manages the costs in the long 
run. That is critically important.
    Senator Murphy. How do you do that if you are not 
responsible for it financially?
    Mr. Tyson. You want to create that financial linkage to the 
delivery system. We have it in Kaiser Permanente because we 
provide the care and the coverage under one roof, if you will, 
the model itself.
    Over time, you want to build those kinds of mechanisms with 
that high risk pool against the provider population as well.
    I know we did not talk about that today in the proposals, 
but it is something for the long term that we would need to 
solve to. Or, you are right, no one will own, if you will, the 
cost of care for that high risk population.
    Senator Murphy. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murphy.
    Senator Warren.

                      Statement of Senator Warren

    Senator Warren. Thank you, Mr. Chairman.
    The Affordable Care Act makes sure that when you buy 
something called ``health insurance,'' that it is real and not 
just some junk plan that is not worth the paper that it is 
printed on.
    Your plan has to cover, now, mental health problems, and 
maternity care, and addiction treatment. It cannot limit how 
many chemo treatments you get, and every plan has to cover a 
share of average, out of pocket costs.
    Silver Plans, the ones that most people buy, that share is 
at least 70 percent; and those are huge steps forward in the 
insurance market.
    A lot of families are still paying a lot of upfront costs 
before their insurance kicks in and many Silver Plans, for 
example, have very high deductibles.
    When you visit your primary care doctor, you write a check. 
When you get a biopsy, you write a check. When you have a mole 
removed or you get minor knee surgery, you write a check, you 
write a check, you write a check until you have paid down your 
deductible and insurance starts picking up the tab.
    Ms. O'Toole, I want to ask you in Minnesota's basic health 
plan program for low-income families, insurers are required to 
offer plans with very low deductibles.
    Can you say a word about why that is so important?
    Ms. O'Toole. Yes. Thank you, Senator.
    We are really proud of our basic health plan. It has been 
around for 25 years. It predates the ACA and then was certified 
under the ACA. It is called Minnesota Care.
    Minnesota Care covers about 80,000 to 90,000 Minnesotans 
who do not qualify for Medicaid, but are still very low income. 
You think about a family making about $30,000 who could be 
exposed to a $10,000 deductible. That is not doable for them.
    What Minnesota Care has done is allow these families to get 
the security of coverage and to seek health care services for 
their families has been critical.
    Senator Warren. Thank you. That is really important to 
hear.
    In Massachusetts, one way we have made it easier for 
consumers to know they are getting a good deal when they buy 
their insurance is to require every insurer to offer plans with 
standard benefit structures. That it is specifically designed 
to have low, upfront costs. Every person buying a plan on the 
exchange has this option available to them.
    Mr. Tyson, I know that in several States where Kaiser 
offers coverage, like California and in Oregon, they have the 
same requirement as we have in Massachusetts.
    You mentioned in your written testimony that standardized 
benefits can stabilize the market by making it easier for 
consumers to get coverage.
    I take it that means that offering these standardized plans 
has not limited your ability to compete for customers in those 
States if you cannot charge for things like emergency care or 
an ultrasound as part of the deductible.
    Is that right?
    Mr. Tyson. That is correct.
    Senator Warren. Good. I am glad to hear that.
    Mr. Tyson. That is correct, and I fully support that you 
end up really doing the work that is required to continue to 
look at how to drive down the cost of care and building 
efficient systems to actually do that.
    Senator Warren. Right. The Federal Government now runs the 
insurance exchanges in 28 States. They considered having the 
same requirement, but then they backed down and made this 
optional rather than required.
    Mr. Tyson, Kaiser also sells plans on exchanges that are 
run by the Federal Government, so where it is optional.
    If the Federal exchange required insurers to offer 
standardized plans where some services fell outside the 
deductible, like emergency room care, would that harm your 
ability to participate in those markets?
    Mr. Tyson. We would still participate, obviously, because 
of our commitment. We would look at how to keep that as 
standard as possible across the program because we feel that 
that is vitally important for the person to have access into 
the care delivery system when needed.
    We can show you the history over 70 years that if the 
person does not get the care early, you end up paying much more 
later downstream. In addition to that, the person is 
unnecessarily suffering a longer period of time.
    Senator Warren. Right. Pay now, or pay more later, plus all 
the additional suffering.
    There has been a lot of talk that in order to stabilize 
markets and reduce peoples' cost, we need to go back to junk 
plans that do not actually cover much of anything. I think that 
is a bad idea and so does my republican Governor, who was here 
to testify last week.
    We need to be making it easier, not harder, for families to 
buy quality plans and that means holding insurers to higher 
standards, not lower standards as we do this. I think we have 
demonstrated, you can have competition that really helps 
consumers here. Thank you.
    Thank you, Mr. Chair.
    The Chairman. Thanks, Senator Warren.
    Senator Hassan.

                      Statement of Senator Hassan

    Senator Hassan. Thank you, Mr. Chair, and Ranking Member 
Murray, again, for holding these hearings.
    Thank you to all the witnesses for being here today. We 
really appreciate your time and your expertise.
    Just as a kind of introductory matter, because I have been 
going back and forth to different hearings, I take it that 
there is general agreement among you that in terms of market 
stabilization right now having the CSR's continue for more than 
a year is a really important thing.
    Do I see head nods generally?
    [All nod affirmatively.]
    Senator Hassan. OK. I will take that as a yes.
    I wanted to touch on an issue that is particularly 
challenging in my State of New Hampshire. I know many of you 
are familiar with how States are grappling with the opioid 
addiction crisis. New Hampshire has been particularly hard hit.
    I understand from a former Governor's point of view how 
important flexibility is and how important the flexibility 
within the 1332 Waiver process is.
    I also believe it is critical that we make sure people have 
access to comprehensive coverage and really protect those 
guardrails in 1332s.
    Mr. Tyson, this is a question for you. Essential Health 
Benefits like coverage for substance use disorders ensure that 
people get treatment. In my home State right now, it is 
particularly important that those trying to buildup treatment 
capacity know that there is going to be coverage for treatment.
    Do you agree that as we consider stabilization options, we 
need to make sure that people maintain coverage of these 
Essential Health Benefits, including substance use disorder 
services?
    Mr. Tyson. Yes, I agree.
    Senator Hassan. Thank you very much.
    Another question that has come up in some of the testimony, 
as I reviewed it, was testimony, I think, from Mr. Bragdon 
discussing widening the ACA's age bands.
    As you know, currently plans cannot charge older adults 
more than three times what they charge younger adults. Widening 
the age band would let plans charge older adults more than 
this.
    Actually, way back before the ACA, when I was in the State 
senate in New Hampshire, there was a bill passed that allowed 
the widening of age bands and we saw increases of a couple 
hundred percent for middle-aged folks, especially people who 
own their own businesses. I have concerns about the idea.
    Mr. Tyson, I am interested in Kaiser Permanente's 
perspective here. Does your organization support widening the 
age bands?
    Mr. Tyson. We prefer not to. We do think that the issue of 
how you balance the overall costs, how do you incent the 
younger, healthier population to get into the pool? How do you 
make sure that you are not overtaxing the elderly population 
and/or the high risk population as part of that calculus?
    Senator Hassan. Yes.
    Mr. Tyson. We would prefer not to widen it to the extreme.
    Senator Hassan. Thank you very much.
    Last, we have talked, a number of us have asked questions 
about the importance of advertising and outreach here. Ms. 
O'Toole, I wanted to go back to that for a second.
    If we reduce funding for advertising and for Navigators, if 
the Federal Government reduces that funding, what do you think 
that does in terms of market stability?
    Ms. O'Toole. Thank you, Senator. I think it makes it worse.
    Senator Hassan. Thank you, very much. That is all the 
questions I have at this time.
    Thank you, Mr. Chair.
    The Chairman. Thank you, Senator Hassan.
    Senator Kaine.

                       Statement of Senator Kaine

    Senator Kaine. Thank you, Mr. Chair.
    I want to, again, express my appreciation to both Senator 
Alexander and Senator Murray for these hearings.
    Healthcare is the most important expenditure anybody ever 
makes with a dollar in their pocket. There is not one that is 
more important.
    I think the stakes are existential for us to get this right 
because, frankly, the last 8 months, the American public has 
just been assaulted with words like ``repeal,'' ``implode,'' 
``sabotage.'' This government is scaring people to death about 
the most important expenditure that they are ever going to make 
in their life.
    If we had had a discussion about the future of the 
Affordable Care Act with the Administration just committing, 
``We are going to continue to make the cost sharing payments. 
We are not going to upset the applecart while you are having 
discussion,'' people still would have been concerned.
    The combination of a discussion about repeal with an 
Administration that, frankly, has rooted for an implosion has 
people very, very frightened in the most important area in 
their life.
    You are holding these hearings so that Congress can try to 
step up and be an Article One Branch again. Not an Article Two-
and-a-half Branch reacting to something that the President 
does, but an Article One Branch.
    As important as health care is, there is an ever bigger 
existential stake. I think the American public has to see the 
democrats and republicans can work together to solve their 
problems. They have to see that.
    An Administration praying for implosion is not showing them 
that. They have to see from Congress that in the most important 
expenditure anybody makes in their life, we are willing to work 
together as democrats and republicans to solve problems.
    I see this committee as a, I am not going to say last hope, 
but after many, many months, if we do not get it right, if we 
cannot find common cause, even if it is in modest ways about 
this most important area, I do not see anybody doing it. I 
think the stakes are very, very high for us.
    I wish my colleague, Dr. Cassidy, Senator Cassidy was here 
because he pointed here, ``I am not trying to do something 
partisan,'' and I agree with him. The proposal that he and 
Senator Graham has is not intended to be a partisan proposal. 
It is pursuing a process that, unfortunately, is very, very 
partisan.
    Because trying to come up with a bill to get through the 
narrow budget reconciliation goal and pass with 51 votes, and 
having no language about it--we still do not have it--and 
trying to force it through on a snap vote in 2 weeks without 
being able to adequately consider it.
    I am reading articles about its negative effect on 
Virginia. I am glad that my colleague today said it was going 
to help Virginia. All of the published articles say it is going 
to hurt my State.
    You cannot fix health care just with one party. You cannot 
fix health care with just some snap vote with language that 
nobody has seen.
    The process that we are underway here on, where we are 
hearing from experts--you are the third panel, democrats and 
republicans--to tell us what works, what does not work, and 
what needs to be fixed is the only way that we are going to be 
able to address this most serious issue.
    It is not going to be through tweets. It is not going to be 
through a snap vote. It is going to be through earnest people 
with differences of opinion listening to experts, and then 
engaging in the hard work of listening to each other and 
crafting compromise.
    You have committed to this and that is why we are here. I 
do not mean to put even more pressure on my chair and ranking, 
but the stakes could not be higher. They could not be higher.
    I just have one question. Governor Leavitt, who I have 
known for many years, talked about a couple of areas of 
flexibility where States might really find the ability to craft 
solutions. The two that he mentioned are, and I am just going 
to ask the panel members whether you agree with these two or 
whether you have some differences of opinion, because you have 
different perspectives on this.
    The first one was that the guidance given by the Obama 
administration at the end of 2015 that said that the budget 
neutrality requirement on these waivers should be adjusted so 
that budget neutrality should be measured over the period of 
the waiver rather than required in every fiscal year to which 
the waiver applies.
    Does everybody think that that adjustment would be a 
positive flexibility move or does anybody see problems there 
that we ought to know about? Anybody see problems?
    I am going to ask for it in writing too, so if you think 
about it afterwards, and you can think of something that I have 
not thought of, I would like to know.
    Second, Governor Leavitt suggested that we ought to figure 
out a way to more significantly combine the 1332 and 1115 
Waiver provisions so that there are not two separate processes 
that often States are making proposals that are integrated, and 
there ought to be a more streamlined way to consider them 
together.
    Does anybody see real world problems to that, that I am not 
seeing?
    [No audible response.]
    Senator Kaine. That can be a little bit problematic here 
because a 1332 Waiver deals with the exchanges, which is under 
the jurisdiction of this committee and 1115 Waivers deal with 
Medicaid, which is under the jurisdiction of the Finance 
Committee.
    Who outside this building cares about that? We are talking 
about health care and we ought to come up with something that 
can effectuate the flexibility promise of these two waiver 
provisions and not needlessly gum them up.
    I will ask those for the record, but it sounds like 
Governor Leavitt has gotten essentially an ``amen'' across the 
aisle on both of those flexibility recommendations, and I think 
they are good ones.
    Senator Kaine. I appreciate it, Mr. Chair.
    The Chairman. Thank you, Senator Kaine.
    Senator Murray, do you have any remarks before we conclude 
or questions?
    Senator Murray. I just want to thank you, again, and I 
really appreciate all of the participation here.
    I think that we are all working in a very coordinated way 
to try and come up with a thread-the-needle solution that can 
get through Congress and it is not easy. If we focus on that 
short-term stability issue, and making sure we do not 
accidentally increase costs for people, and make sure we move 
in the right direction, we can get there.
    It is not going to be easy, but we remain committed to work 
with you.
    The Chairman. Thanks, Senator Murray.
    Mr. Bragdon, just for clarification, you mentioned that the 
Maine invisible risk pool model nationally would cost $3 to $5 
billion based upon a Milliman report.
    Is that right?
    Mr. Bragdon. Correct.
    The Chairman. Senator Collins mentioned $16.7 billion. What 
is the difference?
    Mr. Bragdon. Sure. It is to whom the strategy applies to.
    One thing that States can do right now in 1332 Waivers is 
they can segment the risk pool to those folks who are on-
exchange, most of whom are receiving subsidies, and those folks 
who are off-exchange paying full boat.
    The smaller price tag is to have a targeted approach to 
those folks off-exchange and that is why it is cheaper. You get 
more bang for your buck.
    The Chairman. It would be a risk pool for everybody off the 
exchange or the two out of three people who pay some of their 
insurance?
    Mr. Bragdon. It would depend on how you structure it.
    The Chairman. You could do it either way.
    Mr. Bragdon. Correct.
    The Chairman. It would be a way to reduce premiums for the 
people who are really getting hammered.
    Mr. Bragdon. Correct.
    The Chairman. Who are the people who have no Government 
support or less Government support, and that would 
significantly reduce the cost of the invisible risk pool.
    Mr. Bragdon. Correct.
    The Chairman. In Maine, my second clarification question, 
Maine put a $4 per policy charge to pay for it.
    Did that pay for all of it?
    Mr. Bragdon. It did, because like the Alaska plan, it also 
required insurers to contribute their premiums for everybody 
who was covered by the pool.
    Traditional reinsurance is just a pot of money to the 
insurance companies. This kind of targeted reinsurance says to 
the insurer, ``This is a partnership. You give us all,'' or in 
Maine's case 90 percent.
    The Chairman. If you are going to give us the person, you 
give us the premium money.
    Mr. Bragdon. Exactly, and that pays about 40 percent of the 
cost, which is why you get more bang for the buck. It is 
targeted to folks with preexisting conditions and insurers have 
to pony up as part of a partnership.
    The Chairman. There has been lots of talk about 
reinsurance, as Senator Murray said. Senator Kaine has 
introduced a bill on reinsurance.
    Then others of us have pointed out, we have a $20 trillion 
debt here. Actually, we hit $20 trillion today. In theory, 
there is no extra Federal money lying around, but based on what 
you just said, the State of Maine could----
    Why could States not fund their own invisible risk pools 
with a plan like you just described?
    Mr. Bragdon. They can, they just have to go through the 
1332 process in order to get there. They cannot do it now under 
the ACA in the current framework. You have to make policy 
decisions and pass through all those guardrails.
    The Chairman. Yes.
    Mr. Bragdon. That is why States need more flexibility.
    The Chairman. Finally, I see Senator Franken is back on the 
question he asked. Several of you mentioned both in the 
committee and afterwards the words ``actuarially equivalent,'' 
in terms of dealing with the issue--if you give States more 
flexibility and a benefit package--do you infringe upon the 
Essential Health Benefits in a bad way?
    The suggestion as I understood it--and I will ask you to 
comment on this, if I have mischaracterized this or even if I 
have characterized it correctly--is that if you use the words 
``actuarially equivalent,'' instead of the word 
``comprehensive,'' that you could arrange the benefits in a 
different way in the same package, but they would have to, in 
the end, be of the same value to the consumer.
    Would you comment on that, and that will be my last 
question?
    Governor Leavitt, did I say that correctly?
    Mr. Leavitt. I believe you have captured the concept.
    The Chairman. Ms. O'Toole? Does anybody else have a comment 
on that?
    Mr. Bragdon. No, I agree.
    The Chairman. Mr. Tyson.
    Mr. Tyson. Just a caveat, the precaution is to make sure it 
does not get set up where you go back to adverse selection.
    The Chairman. OK.
    Ms. Tomczyk, any comment on that from an actuarial point of 
view?
    Ms. Tomczyk. No, I agree. I think that is how all of the 
guardrails are actually designed is to be actuarially 
equivalent. When we talk about the number of people covered, 
that is pretty easy, if you have X people.
    The Chairman. That is what you think it should mean today 
under the current language? There is some question about 
whether it does.
    Ms. Tomczyk. Yes, I think it would definitely, it would 
benefit from clarity in terms of what it means today. It is not 
very clear, I am trying to think of the exact wording, but 
comparable coverage. That the comprehensiveness----
    The Chairman. ``Comprehensive'' is the word.
    Ms. Tomczyk [continuing]. Has to be comparable.
    The Chairman. From your point of view, ``actuarially 
equivalent'' would be a definition of a reasonable goal for 
that.
    Ms. Tomczyk. Yes, and something that we, at least as 
actuaries, know what it means.
    The Chairman. That means something to you, those words?
    Ms. Tomczyk. It does.
    Senator Franken. Yes. Full employment.
    [Laughter.]
    The Chairman. Yes. We are winding up the hearing. I do not 
know if Senator Franken, did you come back?
    Senator Franken. Just for that joke.
    The Chairman. Good.
    [Laughter.]
    The Chairman. This has been extremely helpful. You have 
given us a lot of time. You have focused on a variety of 
issues, but specifically on probably the single issue that is 
essential for us to resolve before we see if we can get some 
sort of consensus among us in the next few days.
    Our goal, as we have stated before, Senator Murray said and 
I have stated, we want to see--while it is a formidable 
challenge--if before the end of the month, we can have a 
limited, bipartisan agreement that would affect the individual 
market in 2018 to help keep rates from going up. We have 
focused on a number of ways to do that.
    Thank you very much for being here.
    The record will stay open for 10 days. Let me encourage 
you, if you have comments, particularly on that last question 
about language, we would like to have it in the next three or 4 
days.
    The Chairman. On September 14, the HELP committee will hold 
the last in our series of four bipartisan hearings on 
individual health insurance marketplace stability. I look 
forward to that.
    The committee will stand adjourned.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

  Response by Allison Leigh O'Toole to Questions of Senator Whitehouse
                    MNsureSM,
                                        St. Paul, MN 55101,
                                                  October 20, 2017.
Hon. Sheldon Whitehouse,
Hart Senate Office Bldg., Rm. 530,
Washington, DC 20510.

    Dear Senator Whitehouse: Thank you for your questions regarding 
ways to address cost and improve quality in our health care system. 
While all five of the areas you identify have merit and deserve 
consideration, there are two areas where great progress could be made.
                                 ______
                                 
    Question. 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 health 
care-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. Advancing payment reform to encourage prevention and 
primary care.
    Minnesota has had great success in advancing payment reform through 
several initiatives, including Health Care Homes, Integrated Health 
Partnerships, innovative county-based public programs, and Behavior 
Health Homes.
    These initiatives have improved the health of Minnesotans and 
reduced health care costs by over a billion dollars over the last 
several years. In Minnesota we have found that oftentimes reforms begun 
in the public sector can help drive innovation in the private, and vice 
versa.
Health Care Homes
    The Health Care Homes (HCH) program is one of the centerpieces of 
Minnesota's health reform initiatives. Through a focus on redesign of 
care delivery and meaningful engagement of patients in their care, 
Health Care Homes is transforming care for millions of Minnesotans. 
This is a shift from a purely medical model of health care to a focus 
on linking primary care with wellness, prevention, self-management and 
community services.
    In order to receive health care home certification, providers must 
demonstrate a team approach to primary care delivery and meet standards 
for care coordination, as well as factor in social determinants of 
health in their care delivery. Additionally, providers must engage with 
their patients on critical prevention issues.
    The Health Care Home model serves patients in both public and 
private coverage.
    Currently, the Minnesota Department of Health has certified 361 
clinics, or 54 percent of all primary care clinics in Minnesota. About 
3.6 million Minnesotans receive care in clinics certified as health 
care homes.
    A 2016 University of Minnesota Study estimated that the Health Care 
Home model saved $1 billion over a 5-year period.
Integrated Health Partnerships
    In 2013, the Minnesota Department of Human Services launched its 
Integrated Health Partnerships (IHP) demonstration, which strives to 
deliver higher quality and lower cost health care through innovative 
approaches to care and payment.
    With this demonstration, Minnesota is one of a growing number of 
States to implement an ACO model in its Medical Assistance (Medicaid) 
program, with the goal of improving the health of the population and of 
individual members. In their first year of participation, delivery 
systems can share in savings. After the first year, they also share the 
risk for losses. Delivery systems' total costs for caring for Medical 
Assistance members are measured against targets for cost and quality.
    Over the last 4 years, Minnesota has saved over $200 million in 
health care costs through these partnerships and seen a 14 percent drop 
in expensive hospital stays.
    Participation in the program has grown every year of the program, 
from six in 2013 to over 20 in 2017. These providers cover 460,000 
Minnesotans, or about half of Minnesota's public health care program 
population (Medicaid and MinnesotaCare).
Hennepin Health
    Hennepin Health is a county-operated Managed Care Organization that 
targets complex, unmet care needs linked to mental illness and 
substance use. This innovative care model offers a single point of 
contact for navigating health and social services and is operated in 
partnership with the State. Hennepin Health covers about 10,000 
Medicaid beneficiaries in the city of Minneapolis and surrounding areas 
and has done noteworthy work integrating traditional health care with 
other social services, including housing, food support and behavioral 
health treatment. A 2016 study tracked 120 homeless members for whom 
Hennepin Health had secured housing and found per-person spending on 
inpatient hospital stays dropped 72 percent and emergency department 
spending fell 52 percent.
Behavioral Health Homes
    Beginning July 1, 2016, behavioral health home services became a 
Medical Assistance (MA) covered service in Minnesota. This health home 
model is a provision of the Affordable Care Act that is available to 
States to serve the needs of complex populations covered by Medicaid. 
It provides an opportunity to build a person-centered system of care 
that achieves improved outcomes for individuals and reduced costs to 
the health care system. Innovative behavioral health home services 
providers across Minnesota are improving care for Medicaid enrollees 
who have serious mental health issues.
    There are currently 26 behavioral health home services providers 
certified by the Minnesota Department of Human Services (DHS). The 
providers integrate their care models by:

     Using a multi-disciplinary team to deliver holistic, 
coordinated care;
     Addressing individuals' physical, mental, substance use 
and wellness goals;
     Engaging and respecting individuals and families in their 
health care, recovery and resiliency;
     Respecting, assessing and using the cultural values, 
strengths, languages, and practices of individuals and families in 
supporting individuals' health goals.

    Minnesota is still early in this initiative and is still evaluating 
its outcomes.

    2. Identifying ways to reduce administrative overhead and dispute, 
specifically the bureaucratic warfare between insurance companies and 
providers over reimbursement.
Managed Care Contracting Reform
    In 2011, Minnesota transformed the way it contracts for health care 
services for Minnesotans on public programs by instituting a 
competitive bid process for managed care organizations. This process 
challenged managed care organizations to innovate at the payer level by 
forcing them to compete against one another for the State's business. 
Competitively bidding these contracts, along with other managed care 
reforms, saved over a billion dollars in its first round and subsequent 
rounds of bidding produced an additional $650 million in savings.
Standardized Electronic Billing Transactions
    Minnesota requires health plans to submit many of its billing 
transactions electronically and in a standardized format. Standardized 
data formats encourage insurance companies to compete on quality of 
care rather than billing processes and reduces administrative overhead.
    One area not included in your question about where progress can be 
made regarding cost containment is prescription drug prices. 
Prescription drug prices are one of the biggest drivers of health care 
costs, and utilizing the purchasing power of government programs like 
Medicare to help drive those costs down would be a welcome step in 
improving both the solvency of the Medicare program as well as the 
pocketbooks of American citizens.
    If you or your staff are interested in more information on these or 
other initiatives underway in Minnesota, please do not hesitate to ask.
            Sincerely,
                                           Allison O'Toole,
                                                       CEO, MNsure.

    [Whereupon, at 12:22 p.m., the hearing was adjourned.]

                                 [all]