[Senate Hearing 115-737]
[From the U.S. Government Publishing Office]


                                                   S. Hrg. 115-737

                      ROUNDTABLE ON SMALL BUSINESS
                              HEALTH PLANS

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

                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON PRIMARY HEALTH AND RETIREMENT SECURITY

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                                   ON

                 EXAMINING SMALL BUSINESS HEALTH PLANS

                               __________

                            JANUARY 30, 2018

                               __________

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

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

        Available via the World Wide Web: http://www.govinfo.gov
        
                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
28-549 PDF                  WASHINGTON : 2020                     
          
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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			MICHAEL F. BENNET, Colorado
SUSAN M. COLLINS, Maine			TAMMY BALDWIN, Wisconsin
BILL CASSIDY, M.D., Louisiana		CHRISTOPHER S. MURPHY, Connecticut
TODD YOUNG, Indiana			ELIZABETH WARREN, Massachusetts
ORRIN G. HATCH, Utah			TIM KAINE, Virginia
PAT ROBERTS, Kansas			MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska			TINA SMITH, Minnesota
TIM SCOTT, South Carolina		DOUG JONES, Alabama     
                                     
                                     
               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                 Evan Schatz, Democratic Staff Director
             John Righter, Democratic Deputy Staff Director
                                 ------                                

         Subcommittee on Primary Health and Retirement Security

                   MICHAEL B. ENZI, Wyoming, Chairman
RICHARD BURR, North Carolina         BERNARD SANDERS (I), Vermont
SUSAN M. COLLINS, Maine              MICHAEL F. BENNET, Colorado
BILL CASSIDY, M.D., Louisiana        TAMMY BALDWIN, Wisconsin
TODD YOUNG, Indiana                  CHRISTOPHER S. MURPHY, Connecticut
ORRIN G. HATCH, Utah                 ELIZABETH WARREN, Massachusetts
PAT ROBERTS, Kansas                  TIM KAINE, Virginia
TIM SCOTT, South Carolina            MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska               DOUG JONES, Alabama
LAMAR ALEXANDER, Tennessee (ex       PATTY MURRAY, Washington (ex 
    officio)                             officio)
                            
                            
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                       TUESDAY, JANUARY 30, 2018

                                                                   Page

                           Committee Members

Enzi, Hon. Michael B., Chairman of the Subcommittee on Primary 
  Health and Retirement Security, Opening statement..............     1
Sanders, Hon. Bernard, a U.S. Senator from the State of Vermont..     2
Alexander, Hon. Lamar, (ex officio) Chairman, Committee on 
  Health, Education, Labor, and Pensions.........................     3

                               Witnesses

Johnson, Brad, Representing the Casper Area Chamber of Commerce 
  and the Wyoming Chamber Health Benefits Plan, Casper, WY.......     5
    Prepared statement...........................................     6
Sturm, Mike, Principal and Consulting Actuary, Milliman, 
  Milwaukee, WI..................................................     7
    Prepared statement...........................................     8
Condeluci, Chris, CC Law & Policy, Washington, DC................    10
    Prepared statement...........................................    12
Kimmich, Jennifer, Co-owner of The Alchemist Brewery, Stowe, VT..    15
    Prepared statement...........................................    16
Kuenning, Tess Stack, CNS, MS, RN, President and Chief Executive 
  Officer, Bi-State Primary Care Association, Montpelier, VT.....    17
    Prepared statement...........................................    18

 
                      ROUNDTABLE ON SMALL BUSINESS
                              HEALTH PLANS

                              ----------                              


                       Tuesday, January 30, 2018

                                       U.S. Senate,
    Subcommittee on Primary Health and Retirement Security,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3:30 p.m. in 
room SD-430, Dirksen Senate Office Building, Hon. Michael Enzi, 
Chairman of the Subcommittee, presiding.
    Present: Senators Enzi [presiding], Alexander, Sanders, 
Murphy, Warren, Hassan, and Jones.

                   OPENING STATEMENT OF SENATOR ENZI

    Chairman Enzi. I will go ahead and call to order this 
Subcommittee meeting on Primary Health and Retirement Security 
roundtable.
    A roundtable is a little bit different than a hearing. We 
are mostly interested in gathering information from more 
presenters than we might normally have, and have some people 
who actually have done something in the areas that they will 
talk about, and that is very, very helpful.
    I am pleased to be able to open this roundtable. We have 
before us a policy that I have worked on for nearly 20 years, 
small business health plans. Sometimes it is called Association 
Health Plans.
    I would like to thank the Ranking Member, Senator Sanders 
and his staff, for working with me to put together an 
outstanding group of individuals to explore this policy issue, 
and inform us about both their individual experiences in this 
area, as well as their thoughts on the small business health 
plan rule proposed on January 5, 2018 by the Department of 
Labor.
    One thing that I hope we can all keep in mind is the idea 
that this is not a theoretical discussion. This is a 
conversation about a real change in policy that an agency is 
considering under their existing statutory authority. Nothing 
that they propose requires any Congressional action; they 
already have it and we have already given it to them.
    But this is an important shift in the Department of Labor's 
view on Association Health Plans. As policymakers, we need to 
make sure that the agency is appropriately considering the 
impact of what they proposed.
    There are some key considerations that have informed how I 
have looked at the proposed rule.
    First, protections from discrimination. There should be 
strong protections from discrimination that ensure that 
employees are not excluded from coverage inappropriately.
    Second, there must be accountability to beneficiaries. 
These plans should have accountability to an individual 
beneficiary, ideally in the state in which he or she lives. 
That kind of accountability may take different forms, and I 
know the ERISA does include various methods of recourse for 
beneficiaries.
    Third, the regulations around these plans must try to 
protect small business, and their employees, from fraud. The 
proposed rule contemplates several protections, but I hope to 
hear more from you about whether you view those as appropriate.
    Last, parity. It is important that the Department, as much 
as practicable, applies the same standards for benefits and 
other requirements to these plans as to other ERISA plans. The 
Department should not create a new, separate class of plans 
with different rules. Large employers and associated health 
plans, or small business health plans, should have comparable 
requirements and responsibilities.
    Senator Sanders, and then I will have Senator Alexander 
speak.

                      STATEMENT OF SENATOR SANDERS

    Senator Sanders. Thank you very much, Mr. Chairman.
    Before I go further, let me thank the witnesses that we 
have, two of whom come from the State of Vermont.
    Tess Kuenning is the President and CEO of Bi-State Primary 
Healthcare Association. I think she is going to express her 
concerns. We are 4 months into the fiscal year. Community 
health centers, which provide coverage for 27 million 
Americans, have still not been reauthorized.
    We also have with us Jen Kimmich, who is the co-owner of 
The Alchemist Brewery, and they make very good beer--but she 
did not bring it--and is a medium sized employer in the State 
of Vermont who does a very good job in trying to provide 
healthcare to all of her employees.
    I thank both of them for being here.
    Before I get into the thrust of my remarks, Mr. Chairman, I 
will tell you what I think, you already know that I believe.
    I believe that it is an international embarrassment that 
the United States of America remains the only major country on 
Earth not to guarantee healthcare to all people as a right.
    Today, we have some 31 million people who have no health 
insurance. And, as I am sure will be discussed today, we have 
far more than that who are underinsured with high deductibles 
and high co-payments.
    We pay the highest prices in the world for prescription 
drugs. The cost of healthcare continues to soar. And despite 
spending twice as much per capita as do the people of any other 
country, our healthcare outcomes are not particularly good.
    The bottom line is you have a failing healthcare system and 
everybody who has spent 5 minutes thinking about it, 
understands it. In my view, the time is long overdue for us to 
move to a Medicare for all, single payer program. I think the 
American people are catching on.
    Today, as you may have read, three major employers, and 
they are some of the most significant companies in this 
country--Amazon, Berkshire Hathaway, and JPMorgan Chase--have 
indicated that they are going to move in their own direction to 
a simple, nonprofit type of system. I would hope that becomes 
an indication to other businesses that when we talk about a 
Medicare for all system, we are not just talking about the 
needs of ordinary Americans and consumers. We are talking about 
what is good for the business community as well.
    We are making progress on that, and I hope the day comes, 
sooner or later, where the United States does not remain the 
only major country not to guarantee healthcare to all people as 
a right.
    In terms of this hearing, we know that small businesses, 
and self-employed individuals, face unique challenges with 
purchasing health insurance coverage. This is why, in response 
to the President's October 12 Executive Order, the Department 
of Labor published proposed rules to expand the availability 
and flexibility of health coverage sold to small businesses and 
self-employed individuals through Association Health Plans. 
This proposed rule also would make fundamental changes to short 
term plans and health reimbursement arrangements.
    Now, on the surface, this seems like a step in the right 
direction. In fact, it was described as a way to encourage 
competition, expand choice for small businesses and self-
employed individuals, while also lowering their exorbitant and 
cumbersome administrative costs.
    However, as is always the case, the devil is in the 
details. And the details in this proposed rule would take 
efforts to improve aspects of our Nation's healthcare system in 
a very wrong direction.
    The proposed rule does indeed offer more flexibility. 
However, that flexibility comes in the form of opening the door 
for plans to limit coverage for those with pre-existing 
conditions, to deny covering the current list of Essential 
Health Benefits, and to strip maximums that consumers would be 
charged in out of pocket costs.
    It would also allow short term plans, which currently do 
not offer comprehensive health insurance coverage and do not 
include any real consumer protections, to be sold as long term 
alternatives to what we all know is health insurance coverage 
under the Affordable Care Act.
    We have a lot of concerns with some of the rules that are 
being proposed.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you, Senator Sanders.
    This is a Subcommittee hearing. I am the Chairman and 
Senator Sanders is the Ranking Member of that Subcommittee, but 
we are honored today to have the Chairman of the Committee, 
Chairman Alexander, here. I know that he has been engaged on 
this issue, if you have any remarks to share, please feel free 
to do so.

                     STATEMENT OF SENATOR ALEXANDER

    The Chairman. Thanks, Senator Enzi.
    I want to thank you and Bernie for doing this, and thank 
the witnesses for coming. I am going to try to listen to what 
you have to say.
    I remember one time when I was on that side of the table. I 
concluded that these things are more of a ``talking,'' than a 
``hearing,'' so I want to be a listener today.
    I can think of two things to talk about.
    I think this is a very intriguing rule, because all of us 
who have worried about the individual insurance market see that 
it is very small. Really, 6 percent of all the people who have 
insurance in the country have it and half of those have 
subsidies to help pay for it. The people who are really left 
out are the people who pay for their own insurance.
    I was in a Chick-fil-A in Nashville, and a lady named Marti 
came up to me and said her policy had gone from $300 to $1,300 
a month in the last few years. She could not afford it. She is 
self-employed.
    As I understand this proposal, it could benefit her. It 
could give her the opportunity to have the same kind of 
insurance that an employee of a large company has. And, of 
course, what that does to begin with, is lower the cost because 
employees of large companies get roughly a benefit of about a 
$5,000 tax break per individual that self-employed people do 
not get. That lowers her cost. And being part of a larger pool 
would lower her cost.
    The second thing is, I am glad to see the protections that 
the regulation has. If you have the same sort of consumer 
protections that employees who receive healthcare from large 
companies have that means that Association Health Plans like 
this cannot charge a premium that is higher because you have a 
pre-existing health condition.
    You cannot deny coverage of a pre-existing health 
condition. You have to offer coverage to children up to age 26. 
You cannot cancel an employee's plan because the employee gets 
sick. You may not impose annual or lifetime limits on benefit 
coverage. You must cover preventive health services free of 
charge to the patient.
    I do not hear a lot of complaints about insurance that 
large employers have in terms of their protection, Mr. 
Chairman. If this really does offer an opportunity to lower the 
cost by about one-third, and to offer many of the same 
guardrails and protections that employees of IBM and other 
large companies have, I think it is a real opportunity for that 
self-employed farmer that I saw at Chick-fil-A. I am glad that 
the Secretary has proposed it.
    I look forward to the hearing.
    Chairman Enzi. Thank you, Mr. Chairman.
    I want to thank the participants for the testimony they 
submitted; extremely helpful. I will be encouraging everybody 
to take a look at that. It will also all be a part of the 
record.
    I will invite each of you to give a brief statement of your 
testimony.
    Senator Sanders and I are so appreciative of your 
willingness to give your time to be here. We know that some of 
you had significant travel to get here, but your contribution 
to this discussion is something that we think is important.
    I particularly appreciate the people from Wyoming who came 
because I make that trip almost every week and know how 
difficult that is.
    First, I would like to introduce Brad Johnson. Brad is the 
owner of the Covenant Insurance Group, which was started in 
1996 in Casper, Wyoming. Covenant specializes in employee 
benefits, and manages the Wyoming Chamber Health Benefits Plan. 
Covenant operates in all parts of the State of Wyoming and 
works with employers ranging from groups of two to employers 
with over 2,000 employees.
    The Wyoming Chamber Health Benefits Plan is an Association 
Health Plan and is available to members of the Wyoming Chambers 
of Commerce, and has been in operation for the last 12 years.
    I appreciate you making the trip. I know it is not easy to 
pop over to Washington from Casper for the afternoon. We are 
glad to be able to hear from you about how you work with the 
Chambers to provide a good and competitive health insurance 
option.
    Next, I welcome Mike Sturm of Milliman. He is an actuary 
and consultant who has experience working with a variety of 
clients including associations and trusts on health plan issues 
and employer sponsored insurance.
    He has insight into how these policies may affect broader 
health insurance markets, and how they can be structured to 
provide affordable options for small employers and employees.
    We appreciate your time and expertise on the current law 
related to AHP's and the potential implications of the proposed 
rule.
    Chris Condeluci of CC Law & Policy is an employment law 
expert with deep experience in understanding the regulatory 
structure that AHP's and ERISA plans have to comply with today, 
as well as what is contemplated under the proposed rule.
    He also served as a staffer for the Senate Finance 
Committee during the passage of the Affordable Care Act.
    Jennifer Kimmich, the co-owner of The Alchemist Brewery in 
Vermont, is also joining the roundtable today.
    I have heard really excellent things about your product and 
I am glad to have you here to share your experience as a small 
business owner and providing a health benefit to your 
employees. It is something I know that you and so many other 
small business owners value, but it has become increasingly 
expensive to provide.
    I appreciate your willingness to take time away from your 
business to be with us today.
    I would also like to welcome Tess Stack Kuenning, the 
President and Chief Executive Officer of Bi-State Primary Care 
Association, which is a community health center in Vermont.
    I am glad to have your insight as a provider on the 
importance of healthcare access as a critical value for our 
communities.
    I appreciate all of you being here and for your time and 
expertise.
    Mr. Johnson.

STATEMENT OF BRAD JOHNSON, REPRESENTING THE CASPER AREA CHAMBER 
   OF COMMERCE AND THE WYOMING CHAMBER HEALTH BENEFITS PLAN, 
                        CASPER, WYOMING

    Mr. Johnson. Mr. Chair and Ranking Member.
    Thank you for the opportunity to be here today. I 
appreciate it.
    In Wyoming, is a little bit of a unique state. We have 
various--as Senator Enzi can tell you, a lot of small 
employers.
    I was approached about 14 years ago by three chambers of 
commerce in three smaller towns asking about how to put 
together a benefit program that would give small employers the 
same options as large employers, kind of repeating a theme here 
today.
    After about a year and a half of legal work, we were able 
to put a plan together that now functions with 15 chambers 
across the state, available to all chamber members.
    It is a plan that does comply with all parts of the ACA, 
meaning that it has all Essential Health Benefits in the list. 
It meets all of the requirements. It works out very well, and 
we are proud of that program and how it has functioned.
    Thank you for the opportunity.
    [The prepared statement of Mr. Johnson follows:]
                   prepared statement of brad johnson
    Over the past 20 years, we have worked with 7 different MEWA 
(Multiple Employer Welfare Arrangement) programs. We have also worked 
with two that did not succeed, and assisted in either working through 
the insolvency issues of a shutdown or merging with a ``new'' program 
to make sure coverage continued for participants.
                  Wyoming Chambers Health Benefit Plan
    In early 2002, we were approached by three different small-town 
Chambers of Commerce to design and implement a benefit program whose 
goals were:

          Have the same benefit options as large employer 
        plans,

          Have the same funding options as large employer 
        plans,

          Have a benefit program that focuses on ``health'' 
        rather than just accident and sickness,

          Have a program with multiple plan design options for 
        participating employers (one size does not fit all),

          Be available for Wyoming employers from any industry 
        sector (excepting public entities)

    After about 18 months of setting the stage, establishing a legal 
entity and laying the groundwork, the program began on July 1, 2005. It 
started with 18 employers and 183 employees. It grew to over 770 
participants, then throughout the economic downturn, receded to 285 
participants, and recently has grown back to over 585 participants (11 
new employers added since July 2017). There are 15 Chambers in Wyoming 
involved for their membership.

    The success of this program is reflected in:

          The reserves held are at 400 percent of minimal 
        reserve needs as determined by the underwriters,

          For the last three renewal cycles, the rates have not 
        increased (0 percent rate change). This means participating 
        employers have had the same rates for 4 years for their plans.

          Has remained ACA compliant offering all Essential 
        Health Benefits as required (e.g.: no pre-existing waiting 
        period, unlimited maximum, full maternity coverage, etc.)

    The success of the program has to do with several component 
factors. These include:

          A privately developed software that handles the 
        eligibility, billing and on-line quoting. This system allows 
        the MEWA to be treated by interested administrators and 
        reinsurance carriers as ``one'' employer instead of multiple 
        employers.

          A reinsurance carrier, who also provides underwriting 
        and limited actuarial services, who keeps the program stable. 
        All employers are subject to limited medical underwriting and 
        either the entire group is accepted or denied into the Plan.

          Have a ``drop box'' at a Wyoming Bank, where premiums 
        are deposited directly from employers. The account is 
        reconciled regularly and audited annually from a Wyoming CPA 
        firm. Audit reports and financial reports are available to all 
        employers and submitted monthly to the Board of Directors.

          All employers pay the ``same'' premium regardless of 
        when they joined the plan. Claim loss-ratios are not tracked or 
        reported by employer. All employers receive the same renewal 
        rate change. Age-based or composite participant rates are 
        available for employer choice.

          The plan encourages wise consumption of services. 
        There are included programs such as: o Centers of Excellence 
        (medical providers that exceed in quality and pricing) where 
        travel costs are covered.

             Annual Wellness programs. If 80 percent of 
        participating adults do the annual blood draw and risk 
        assessment, the employer receives an 8 percent lower rate.

             Telemedicine programs available.

             Bill audit features. If a participant audits their 
        bill(s), finds any errors and gets them corrected, the plan 
        shares in the amount saved.

             Extensive annual educational opportunities.

    The proposed DOL regulations may assist in Association plan 
development, especially across state lines, but there are provisions 
which would hinder plans as well. In order to develop accurate and 
sufficient rates, quality underwriting is important, which the 
regulations appear to take away. The ability for MEWAs to choose some 
of the available benefit options would be crucial (similar to Medi-
share programs). The regular and ongoing reporting and oversite by an 
outside party is crucial; there can be no secrets from participating 
employers and actively involved administrators.
                                 ______
                                 
    Chairman Enzi. Thank you.
    Mr. Sturm.

  STATEMENT OF MIKE STURM, PRINCIPAL AND CONSULTING ACTUARY, 
                 MILLIMAN, MILWAUKEE, WISCONSIN

    Mr. Sturm. I am from Milwaukee, which is about, I am 
guessing, somewhere close to halfway between Wyoming and 
Vermont. I am in the middle, probably in more ways than one.
    All Senators and everyone in the room that works for the 
Federal Government, thank you for your service.
    My name is Mike Sturm. I am a consulting actuary with 
Milliman. I have been in the business for 30 years, 27 of them 
spent in healthcare.
    Milliman serves a variety of clients in the healthcare 
market including insurers, health systems, pharmaceutical 
manufacturers, employers, and many others.
    One of the reasons these diverse clients look to us for 
advice is because we are independent. That is, we are wholly 
owned by our employees. This independence is important to us 
because it allows us to advise our clients without the 
influence of outside interests. As such, we are not required 
to, nor do we take, political positions on any topic, including 
healthcare legislation or proposed legislation.
    I am not here to convince you the proposed Association 
Health Plan rule should or should not be implemented. Rather, 
my goal is provide unbiased, fact-based information to help 
inform the discussion with the hope that it will improve our 
healthcare financing system.
    Association Health Plans have the potential to change the 
healthcare marketplace. As with most regulatory actions, there 
are advantages and disadvantages, there will be intended and 
unintended consequences, and there will be those who are 
financially better off and those who are not. This is also the 
case with the Association Health Plan proposed rule.
    One needs to consider a number of factors when thinking 
about whether AHP's will achieve the Administration's stated 
goals of creating stable risk pools for small employers, and 
the ability for consumers to purchase policies at prices 
similar to the large group market without adversely impacting 
the current healthcare market.
    These factors include, but are not necessarily limited to, 
how rating rules for AHP's vary from the current rating rule. 
Different rating rules create the possibility of risk pool 
segregation between more expensive and less expensive members 
in a given market.
    I am going to repeat that because these are very important 
words.
    Different rating rules create the possibility of risk pool 
segregation between more expensive and less expensive members 
in a given market.
    The proposed rule as written appears to allow, and in some 
cases require, AHP's to vary rates differently than allowed in 
the current healthcare market to their benefit and to their 
detriment.
    For example, I believe they are allowed to rate differently 
for age, geography, family composition, gender, group size, and 
health status. Specifically on health status, AHP's will be 
required to rate the 51-plus, large group market without health 
status, which will lead to AHP's attracting less healthy risks 
versus the current market. The current market is allowed to 
rate for health status in the 51-plus market.
    In addition, benefits and nonparticipation in the risk 
adjustment mechanism should be considered when talking about 
AHP's and their risk segregation. In summary, all of these 
differences lead to the potential for segregation of the 
current risk pool.
    With that said, the million dollar question is: how much 
segregation will occur? It is difficult to tell.
    In addition, given that AHP's will be allowed to form 
around industry, it is likely that morbidity differences by 
industry will further segregate the risk pool between the 
healthy and less healthy populations.
    At this point, I am going to say, be mindful. There are 
many factors. There are savings. There is a trust issue when 
you buy from people in your own industry. There are the 
benefits whether they offer the same or less than the current 
marketplace, health insurance expertise, and the people running 
the AHP's, et cetera.
    I look forward to discussing these issues, and others, as 
we work together today to improve our healthcare financing 
system.
    Thank you.
    [The prepared statement of Mr. Sturm follows:]
                    prepared statement of mike sturm
    My name is Mike Sturm, and I am a Consulting Actuary with Milliman. 
I am 30 years into my career with 27 of them spent in health care.

    Milliman serves a variety of clients in the health care market, 
including health insurers, health systems, pharmaceutical 
manufacturers, employers, and many others. One of the reasons these 
divers clients look to us for advice is because we are independent 
(i.e., we are wholly owned by our employees). This independence is very 
important to us because it allows us to advise our clients without the 
influence of outside interests. As such, we are not required to (nor do 
we) take political positions on any topic, including healthcare 
legislation. I am not here to convince you the proposed Association 
Health Plan rule should or should not be implemented. Rather, my goal 
is to provide unbiased, fact-based information to help inform the 
discussion with the hope that it will improve our health care financing 
system.

    Association Health Plans have the potential to change the 
healthcare marketplace. As with most regulatory actions, there are 
advantages and disadvantages, there will be intended and unintended 
consequences, and there will be those who are financially better off 
and those who are not. This is the also the case with the AHP proposed 
rule.

    One needs to consider a number of factors when thinking about 
whether AHPs will achieve the administration's stated goals of creating 
stable risk pools for small employers and the ability for consumers to 
purchase policies at prices similar to the large group market without 
adversely impacting the current healthcare market.

    These factors include, but are not necessarily limited to:

         How rating rules for AHPs vary from current rating 
rules. Different rating rules create the possibility of risk pool 
segregation between more expensive and less expensive members in a 
given market. The proposed rule as written appears to allow (and in 
some cases require) AHPs to vary rates differently than allowed in the 
current healthcare market. For example, AHPs appear to be allowed to 
rate differently for:

      Age

           AHPs appear to be able to use age relativities wider than 
        the 3:1 restriction in the individual and small group markets

      Geography

           AHPs appear to have more flexibility in both area factors 
        and the area definitions themselves than is present in the 
        individual and small group markets

      Family composition

           The ACA requires carriers to consider at most the three 
        oldest dependent children when determining individual and small 
        group premiums

      Gender

           AHPs appear to be able to vary premiums by gender

      Group size (e.g., 1-5, 6-10 vs. 11-50)

           The current market requires self-employed individuals to 
        participate in the individual market, while premiums cannot 
        vary by group size for other small employers

      Health status

           AHPs appear to be able to experience rate based on the 
        aggregate risk of the association, while the current market 
        requires rating for market average risk for small employers and 
        the experience of the specific employer in the large group 
        market

      Benefits

           AHPs appear to have more flexibility in benefits, as the 
        current market prevents small employers from purchasing 
        coverage leaner than bronze/coverage that does not provide 
        EHBs.

      Avoidance of risk adjustment mechanism in the current market

           All of these differences lead to the potential for 
        segregation of the current risk pool. With that said, it is 
        difficult to determine the extent of the segregation that might 
        occur.
           In addition, given AHPs will be allowed to form around 
        industry, it is likely that morbidity differences by industry 
        will further segregate the risk pool between healthy and less 
        healthy populations. The younger and healthier industries will 
        likely find AHPs attractive and the older and less healthy 
        industries are unlikely to find AHPs attractive.

    Other factors to consider whether AHPs will meet their stated 
goals, include:

           How much savings are achievable and at what cost. Savings 
        will depend on whether the AHPs are fully insured or self-
        funded. Fully insured plans might be able to achieve some small 
        administrative savings and possibly benefit limitations. Self-
        funding will likely generate greater administrative savings, 
        but will likely require the AHP to raise a significant amount 
        of (what we refer to in the industry as) risk based capital, to 
        achieve the savings.

           Allowing AHPs to offer ``less than EHB'' coverage will 
        generate additional savings if they so choose to do so. One 
        benefit they might not offer is maternity given its elective 
        nature. However, I can tell you that most large employers cover 
        all the EHBs, including maternity.

           Will the fact that AHPs are subject to state laws create a 
        regulatory compliance scenario so onerous such that it limits 
        the formation of new AHPs?

           The health insurance expertise of the AHP's leadership will 
        likely play a large part in whether the association will 
        succeed long-term and protect its members.

           Regarding stable risk pools, insurance companies and at 
        least one current AHP I am aware of have stable pools. It may 
        be difficult for new AHPs to garner enough members to create a 
        stable pool in the first few years. Much of this will depend on 
        whether they can get historical data on new association members 
        to rate them accurately. A less stable risk pool could result 
        if AHPs cannot gain access to this data. With that said, if 
        AHPs are fully insured, the insurance carrier they select may 
        already have the data needed to estimate an accurate rate.

           In my experience, trust is an important factor in consumers' 
        purchasing decisions. AHP members may prefer to buy from their 
        industry leaders (given they have common goals) whether or not 
        the AHP is a more efficient funding vehicle than their current 
        health care payer.

           What will the role of insurance companies be in an AHP? I 
        suspect insurance companies will have much to offer AHPs given 
        their deep provider discounts, current abilities to administer 
        health care claims, and large amounts of reserves to protect a 
        new AHP.

    I look forward to discussing these issues and others as we work 
together today to improve our healthcare financing system.
                                 ______
                                 
    Chairman Enzi. Mr. Condeluci.

 STATEMENT OF CHRIS CONDELUCI, CC LAW & POLICY, WASHINGTON, DC

    Mr. Condeluci. Thank you, Chairman Enzi, Ranking Member 
Sanders, and Members of the Committee for the opportunity to 
speak with you today.
    My comments will focus on three areas: consumer 
protections, coverage options, and state regulations of AHP's.
    Unfortunately, much of the news coverage relating to AHP's 
is inaccurately described consumer protections that apply to 
health coverage.
    You will be interested to know that both fully insured and 
self-insured AHP's as group health plans cannot deny a plan 
participant health coverage if they have a pre-existing 
condition, cannot refuse to cover certain Government-approved 
preventive services, cannot impose annual lifetime limits on 
the Essential Health Benefits covered under the plan.
    Other requirements like covering adult children up to age 
26, free access to emergency care, and the prohibition against 
rescinding coverage absent fraud apply.
    Under HIPAA, premiums for AHP plan participants cannot be 
developed based on the participant's health condition.
    For example, the health status point, that the gentleman 
earlier brought up, a particular plan participant's premiums 
cannot vary based on the health condition of that participant. 
The HP regulations actually add important nondiscrimination 
rules that further protect workers that have health conditions.
    According to ERISA's consumer protections, there are 
specific notice and disclosure requirements, fiduciary 
responsibilities, and there are detailed procedures for filing 
health claims and rigorous internal and external appeals 
processes.
    Will AHP's offer more healthcare options to workers? 
Currently, self-employed individuals with no employees, like 
independent contractors, only have one healthcare option 
available to them: fully insured individual market health 
coverage.
    Based on my observations, both Democrats and Republicans, 
would like to give independent contractors more choice when it 
comes to healthcare. And the proposed AHP regulations aim to do 
just that by allowing these working owners to participate in a 
group health plan subject to all of the consumer protections 
that I just described.
    Now, when it comes to small employers, data shows that 
fewer small employers are offering health coverage today 
relative to 4 years ago. AHP health plans could provide more 
affordable coverage options for small employers and we could 
see many instances where employees do not have to go uninsured. 
It is important to emphasize that IRS data tells us that 18 
million Americans are going without health insurance because 
they are either paying a penalty tax or claiming an exemption 
from the tax.
    AHP health coverage at affordable price and with its 
consumer protections could allow workers to once again access 
comprehensive health coverage even in the absence of an 
individual mandate.
    Last, state regulations; the proposed AHP regulations do 
not change or inhibit a state's ability to regulate insurance. 
Some states, however, are looking to enact laws that would re-
characterize a fully insured large group AHP as a small group 
plan, but the statute of ERISA may preempt this state law 
because ERISA does not allow a state to regulate the plan, even 
a fully insured plan, in this manner.
    A self-insured AHP would be considered a Multiple Employer 
Welfare Arrangement, or a MEWA. Currently, self-insured AHP's 
as a MEWA must comply with each state MEWA law where the AHP 
health coverage is offered.
    Now, this patchwork of regulation could be streamlined if 
the Department of Labor issued a class exemption that would 
exempt self-insured AHP's from the non-solvency requirements of 
a MEWA statute.
    Issuing a class exemption is advisable to promote 
uniformity in the law and to allow self-insured AHP's to offer 
coverage in multiple states. And policymakers can take comfort 
because state solvency requirements would continue to apply to 
self-insured AHP's because these requirements cannot be 
exempted under a class exemption that could be under 
consideration.
    Thank you for your time. I look forward to answering any 
questions you may have.
    [The prepared statement of Mr. Condeluci follows:]
             prepared statement of christopher e. condeluci
    On January 4, 2018, the Department of Labor (DOL) released proposed 
regulations relating to ``association health plans'' (AHPs). Below is a 
brief discussion of the current treatment of AHPs, a description of the 
DOL's current definition of a ``bona fide group or association of 
employers'' for purposes of the Employee Retirement Income Security Act 
(ERISA), and an explanation of the coverage requirements and consumer 
protections applicable to AHPs as a ``group health plan.'' The 
following also examines various legal challenges that may arise.
        Current Treatment of ``Association Health Plans'' (AHPs)
    In 2011, the Obama administration issued guidance that essentially 
prohibited small employers from forming a fully insured ``large group'' 
health plan. This meant that the ACA's ``small group'' market reforms 
applied to fully insured AHP employer members with 50 or fewer 
employees.

    One exception to the 2011 guidance: If the ``group'' of employers 
forming a fully insured AHP is considered a ``bona fide group or 
association of employers'' for purposes of ERISA, the fully insured AHP 
could still be treated as a ``large group'' plan, meaning the ACA's 
``small group'' market reforms would not apply.

    The 2011 guidance does not apply to self-insured AHPs. However, 
ERISA's definition of a ``bona fide group or association of employers'' 
is important: If a ``group'' of employers forming the self-insured AHP 
fails to meet this definition, ERISA's preemption of state benefit 
mandates would not apply.
 ``Bona Fide Group or Association of Employers'' For Purposes of ERISA
    To be considered a ``bona fide group or association of employers'' 
for purposes of ERISA, the ``group'' must meet (1) the ``commonality of 
interest'' test and (2) the ``control'' test. The control test requires 
the employer members to have a say over the plan design and operation. 
The ``commonality of interest'' test, on the other hand, is a facts and 
circumstances test which is not always easy to satisfy. According to 
DOL guidance, a group of employers would not be considered ``bona 
fide'' unless (1) the employer members are ``related'' (i.e., the 
employers are in the same industry) and (2) the employer members are 
located in the same geographical area. Also, a group of employers would 
not be considered ``bona fide'' if self-employed individuals with no 
employees are a part of the group (which means self-employed 
individuals with no employees are forced to find health care coverage 
in the fully insured ``individual'' market).
                   The DOL's Proposed AHP Regulations
    The DOL's proposed regulations endeavor to make it easier for small 
employers to forma fully insured ``large group'' or self-insured AHP. 
For example, the proposed regulations would allow employers in the same 
industry or profession (i.e., ``related'' employers) to form an AHP, 
and offer ``large group'' fully insured or self-insured AHP health 
coverage to the employees of these ``related'' employers, regardless of 
the employers' geographic location. The proposed regulations would also 
allow employers in different industries and professions (i.e., 
``unrelated'' employers) to form an AHP, but only if these 
``unrelated'' employers are located in the same state or Metropolitan 
area (that spans a tri-state area).

    In addition, self-employed individuals with no employees (referred 
to as ``working owners'') could participate in an AHP. In this case, 
according to the proposed changes, working owners in the same industry/
profession and located in different geographic locations could 
participate in an AHP established by other ``related'' employer 
members. Working owners in the same industry/profession could also 
establish an AHP solely for ``related'' working owner members. And 
last, working owners in different industries and professions (i.e., 
``unrelated'' working owners) could join, for example, a local Chamber 
of Commerce AHP, provided the working owners are located in the same 
state or Metropolitan area as the local Chamber's employer members.
 Some of the Affordable Care Act's ``Individual'' and ``Small Group'' 
  Market Insurance Reforms Would Not Apply to Fully Insured and Self-
                              Insured AHPs
    Small employers and/or working owners forming a ``bona fide'' group 
and establishing a fully insured ``large group'' or self-insured AHP 
would not be subject to the Affordable Care Act's (ACA) ``essential 
health benefits'' (the Federal EHBs) and ``actuarial value'' (AV) 
requirements. The AHP would also not be subject to the new adjusted 
community premium rating rules and the single-risk pool requirement.

    It is important to note that the drafters of the ACA specifically 
decided against imposing these requirements on fully insured ``large 
group'' and self-insured plans. Why? Because the ACA drafters felt that 
these plans covered benefits that were as good if not better than the 
Federal EHBs. The drafters also discovered that the typical group 
health plan was an 80 percent AV plan. And, the practice of 
``experience rating'' to determine premium rates for a group of 
employees worked relatively well.
  The Affordable Care Act's ``Group Health Plan'' Requirements Would 
              Apply to Fully Insured and Self-Insured AHPs
    Several industry stakeholders were recently quoted as saying that 
fully insured and self-insured AHPs (1) can deny a person coverage if 
they have a pre-existing condition, (2) can refuse to cover preventive 
services, and (3) can avoid imposing annual and lifetime limits. 
Unfortunately, these statements are incorrect.

    As a ``group health plan,'' a fully insured and self-insured AHP 
(1) cannot deny a person who is eligible to participate in the plan 
health coverage if they have a pre-existing condition, (2) cannot 
refuse to cover preventive services (rather, the AHP must provide free 
coverage for certain government-approved preventive services), and (3) 
cannot impose annual and lifetime limits on the Federal EHBs covered 
under the plan.

    All three of the above stated requirements were enacted under the 
ACA--fully effective in 2014. Additional ACA requirements apply--most 
notably--coverage for adult children up to age 26, free access to 
emergency care, and the prohibition against rescinding coverage absent 
fraud.
  HIPAA Protections Also Apply to Fully Insured and Self-Insured AHPs
    The recently quoted stakeholders also overlook the consumer 
protections under HIPAA. For example, premiums for an AHP plan 
participant cannot be developed based on the participant's health 
condition. Instead, premiums are developed based on the ``health claims 
experience'' of the entire group. As a best practice, sponsors of a 
fully insured or self-insured group health plan charge every 
participant the same premium rate.
                       ERISA and Its Requirements
    Under ERISA, there are specific notice and disclosure requirements, 
and also fiduciary responsibilities that apply, requiring the AHP and 
its employer members to act in the best interest of the participants. 
Participants also have a private right of action to sue the AHP or 
employers if there is wrong-doing. And, there are detailed procedures 
for filing health claims, and rigorous internal and external appeals 
processes.
           State Benefit Mandates Apply to Fully Insured AHPs
    In the case of a fully insured AHP, the plan is subject to state 
benefit mandates. Most state benefit mandates are as good if not better 
than the Federal EHB standard. As a result, a strong argument can be 
made that fully insured AHPs are by definition required to provide 
adequate health coverage, in addition to meeting all of the rules, 
requirements, and consumer protections discussed above.
          State MEWA Statutes Applicable to Self-Insured AHPs
    A self-insured AHP must meet all of the same rules, requirements, 
and consumer protections discussed above. However, a self-insured AHP 
may not be subject to state benefit mandates on account of ERISA 
preemption.

    Importantly, self-insured AHPs will by definition be considered 
``multiple employer welfare arrangements'' (MEWA). ERISA explicitly 
gives states the authority to regulate self-insured MEWAs (i.e., a 
self-insured AHP). Many states have already enacted ``state MEWA 
statutes,'' which impose specific requirements on self-insured AHPs 
that offer health coverage within the state. Some states have an 
outright prohibition against self-insured AHPs operating within the 
state (e.g., California and New York have enacted this type of 
prohibition). Other states impose the state's benefit mandates and/or 
specific premium rating requirements on self-insured AHPs.

    States that have yet to enact a state MEWA statute are not 
prohibited from doing so in the future. In addition, states with 
existing state MEWA statutes are free to amend those statutes to impose 
specific coverage requirements on self-insured AHPs.
          Will the Proposed Regulations Face Legal Challenges?
    A number of stakeholders have suggested that the proposed 
regulations are ripe for legal challenge. In my opinion, if any such 
legal challenges are filed, I believe they will be unsuccessful. Why?

    The ``commonality of interest'' test--which is the test that the 
proposed regulations modify--is not specifically defined in the statute 
of ERISA itself. Rather, the ``commonality of interest'' test was 
born--and further developed--through DOL Advisory Opinions, meaning 
that the law in this area was solely created by Interpretive Guidance.

    Currently, there is no prohibition against a Federal Department 
changing its interpretation of the law. More specifically, so long as a 
Federal Department is not re-writing the statute, the Federal 
Department can make changes to its own interpretation of the law.

    This is also true in the case of allowing self-employed individuals 
with no employees to participate in an AHP. Currently, a DOL regulation 
prohibits self-employed individuals with no employees (and their 
spouses) from participating in an ERISA-covered plan. This rule, 
however, is not explicitly set forth in the statute, rather, this is an 
interpretation of the law developed by the DOL and memorialized in a 
regulation. Which means, the DOL can change its own interpretation of 
the law, and thus, change the regulation, provided the change in the 
regulation goes through the normal rulemaking process (e.g., proposed 
regulations, with a public comment period, prior to finalization).
           ERISA Preemption Challenges to Certain State Laws
    If a health plan is considered an ERISA-covered plan, state laws 
that have a direct impact on ``the plan'' will be preempted by ERISA 
(meaning, the state law would not apply). One exception to this 
preemption rule is if the state law is an ``insurance law'' that has a 
direct impact on the underlying ``insurance contract.'' If a state law 
directly impacts the ``insurance contract,'' then this law will be 
``saved'' from ERISA preemption (i.e., the law would not be preempted).

    The best example of a state insurance law that directly impacts the 
``insurance contract'' is a state's benefit mandate law, which requires 
the insurance contract to cover a specified medical service or benefit. 
In this case, the state's benefit mandate law would not be preempted, 
and the fully insured health plan providing coverage to employees must 
cover these mandated services or benefits (even an ERISA-covered fully 
insured plan).

    But, in cases where a state law attempts to ``re-characterize''--or 
``deem''--the ERISA-covered plan as an ``insurance contract'' in the 
state's attempt to regulate ``the plan,'' a court of law may find that 
this law is not ``saved'' from RISA preemption. Why? Because ERISA 
provides that a state cannot back-door its way into regulating ``the 
plan'' by calling ``the plan'' an ``insurance contract'' and then 
arguing that the state law is an ``insurance law'' that is ``saved'' 
from ERISA preemption.

    One example of a state law that may be found to have a direct 
impact on ``the plan'' is a law that re-characterizes a ``large group'' 
fully insured AHP as a ``small group'' plan. In this case, a state will 
likely argue that this law is an ``insurance law'' that has a direct 
impact on the ``insurance contract'' (and therefore, this law is not 
preempted by ERISA). But, an argument can be made that what the state 
is trying to do is to ``re-characterize''--or ``deem''--the fully 
insured AHP as an ``insurance contract'' and back-door its way into 
regulating ``the plan.'' A court of law may find that this law is not 
``saved'' from ERISA preemption, but instead, the law is indeed 
preempted (and therefore would be null-and-void, thus preserving 
``large group'' status for a fully insured AHP).

    There is another legal argument that could lead a court to rule 
that any law that attempts to re-characterize a ``large group'' fully 
insured AHP as a ``small group'' plan does not apply. The statute of 
ERISA itself states that a fully insured MEWA--which is synonymous with 
a fully insured AHP--may be subject to any state insurance law ``to the 
extent that such law--requires the maintenance of specified levels of 
reserve and specified levels of contributions.'' An argument can be 
made that a state law that re-characterizes the ``large group'' fully 
insured AHP as a ``small group'' plan is not a law that ``requires the 
maintenance of specified levels of reserve and specified levels of 
contributions.''

    An examination of these legal arguments is important because a 
number of states are considering enacting a state law that re-
characterizes a ``large group'' fully insured AHP as a ``small group'' 
plan. Some states already have a similar law on the books.
                                 ______
                                 
    Chairman Enzi. Thank you for your information.
    Ms. Kimmich.

STATEMENT OF JENNIFER KIMMICH, CO-OWNER, THE ALCHEMIST BREWERY, 
                         STOWE, VERMONT

    Ms. Kimmich. Thank you, Chairman Enzi, Ranking Member 
Sanders, and the Members of the Subcommittee for inviting me 
here today to discuss the importance of access to healthcare 
for our employees and their families.
    My husband and I started our craft brewery 15 years ago. 
The day we opened our small business in 2003, we had $20 left 
in the bank and no health insurance. Through lots of hard work 
and determination, we grew our business and our brands. Today, 
our gross annual sales are $20 million and we have 50 
employees.
    We offer full health insurance to all of our employees and 
their children. We also pay 50 percent for their spouses, and 
we spend over $300,000 annually on health insurance. This is 
about 15 percent of our gross payroll.
    The plan that we provide is considered a good one. It is a 
silver plan. The cost is $560 per month for each employee, and 
almost $1,600 per month for families. The deductible is $2,600 
per person.
    We provide this health insurance to our employees because 
it is a good business decision. We know that when our employees 
and their families are healthy, our business thrives. 
Productivity goes up, morale goes up, and we are successful 
with recruitment and retainment.
    Although premiums increase each year, the small employer 
health insurance market has been relatively stable over the 
past decade. Our health insurance plan may not be perfect, but 
we are able to ensure that every one of our employees, young 
and old, has access to the care that they need.
    Modern medicine has allowed many people to live and thrive 
with access to care and medication, so that our employee with 
Type 1 diabetes or our colon cancer survivor can each take good 
care of their health.
    But healthcare is not just for those with chronic or past 
illness. We need to make sure that our healthiest employees 
continue to see their primary care doctors and that they can 
prevent and detect future illness.
    I believe the proposed rule, and Association Health Plans, 
is a step in the wrong direction. We have significant concerns 
about several provisions that would undermine stability in the 
health insurance programs in which we have already invested so 
heavily.
    The Executive Order indicated an interest in allowing short 
term plans to be sold for longer periods than the current limit 
of 3 months. These plans are not required to meet the standards 
that are applied to individual market health plans. Short term 
plans do not have to cover the Essential Health Benefits and 
they may deny people who have pre-existing medical conditions.
    If we allow these short-term benefits to be sold as a long-
term alternative to regular health insurance, they will attract 
healthier consumers away from the regular insurance pool. This 
will endanger everyone's access to comprehensive coverage.
    We need to seriously consider the adverse effects of 
expanding and extending short term, limited duration health 
plans, increasing enrollment in Association Health Plans, and 
relaxing rules for employer health reimbursement arrangements.
    Businesses and their employees are most successful when 
there is a long term and comprehensive approach to healthcare 
so that providing and accessing health insurance is not a 
constantly changing and uncertain process for worker and 
business owner alike.
    Thank you.
    [The prepared statement of Ms. Kimmich follows:]
                 prepared statement of jennifer kimmich
    Thank you to Chairman Enzi, Ranking Member Sanders and the Members 
of the Subcommittee for inviting me to discuss the importance of access 
to health care for our employees and their families.

    My husband and I started our craft brewery 15 years ago. The day we 
opened our small business in 2003, we had 20 dollars left in the bank 
and no health insurance. What we did have was a dream and a vision for 
our future. Through lots of hard work and determination, we were able 
to successfully grow our business and our brand. Today our gross annual 
sales are about $20M and we have fifty full-time employees.

    We offer full health insurance to all our employees and their 
children without any employee contribution. We also pay for 50 percent 
of the premium for employee spouses. We spend over $300,000 annually on 
health insurance coverage--this is about 15 percent of our gross 
payroll. We also commit a significant amount of time and money to the 
administration of this plan. We spend many hours explaining the plan to 
our employees and helping them navigate the mysteries of coverage, co-
pays and out-of-pocket expenses.

    The plan that we provide is considered a good one--it is a 
``Silver'' plan. The cost is $560 per month for each employee and 
almost $1,600 per month for families. The deductible is $2,600 per 
person ($5,200 per family), but in many cases, once the deductible is 
met, out-of-pocket expenses continue. For example, once the full 
deductible is met, our employees are still responsible for a 40 percent 
contribution toward all in-patient billing, and they are also 
responsible for 50 percent of non-generic prescriptions.

    We provide health insurance to our employees because it is a good 
business decision. We know that when our employees and their families 
are healthy, our business thrives. Productivity goes up, morale goes 
up, and we are successful with recruitment and retention. Having 
healthy employees who are financially stable and not stressed is good 
for our bottom line. Although premiums, deductibles, co-pays and out-
of-pocket expenses increase each year, the small employer health 
insurance market has been relatively stable over the past decade. Even 
with increasing costs, we know that the coverage we provide is vital to 
the well-being of our employees and the long-term sustainability of our 
business. Our health care plan may not be perfect, but we are able to 
ensure that every one of our employees, young and old, has access to 
the care they need. Modern medicine has allowed many people to live and 
thrive with access to care and medication, so that our employee with 
Type 1 diabetes, or the colon cancer survivor, can each take good care 
of their health and maintain their positive quality of life. But 
healthcare is not just for those with chronic or past illness. We need 
to make sure that our healthiest employees continue to see their 
primary care doctors so that they can prevent and detect future 
illness.

    Our employees are our strongest asset and we need to make sure they 
are able to prioritize their health and well-being. I believe the 
proposed rule on Association Health Plans is a step in the wrong 
direction and would adversely affect small businesses like ours. We 
have significant concerns about several provisions that would undermine 
stability in the health insurance programs in which we have already 
invested so heavily.

    The Executive Order indicated an interest in allowing short-term 
plans to be sold for longer periods than the current limit of 3 months. 
Short-term plans are not comprehensive health insurance and could be 
exempt from consumer protections. These plans are not required to meet 
the standards that are applied to individual market health plans. 
Short-term plans don't have to cover the essential health benefits and 
they may deny people who have pre-existing medical conditions. They can 
also limit the amount of benefits covered under these policies. If we 
allow these short-term plans to be sold as a long-term alternative to 
regular health insurance, they will attract healthier consumers away 
from the regular insurance risk pool. This will endanger everyone's 
access to comprehensive coverage, especially the most vulnerable. We 
need everyone to be in the regular insurance risk pool so we don't 
limit more people's access to comprehensive coverage.

    I am extremely concerned about the potential impact of the policies 
put forward in the recent Executive Order on health care. By allowing 
Association Health Plans to become exempt from consumer protections, 
there is increased risk for higher premiums and fewer plan options on 
the individual market. In the past, when we have had association health 
plans that offered minimal benefits, consumers have suffered. We need 
to seriously consider the adverse effects of expanding and extending 
short-term, limited-duration health plans, increasing enrollment in 
Association Health Plans (AHPs), and relaxing rules for employer Health 
Reimbursement Arrangements. In a challenging labor market, providing 
quality health insurance coverage is a competitive advantage. 
Businesses and their employees are most successful when there is a 
long-term and comprehensive approach to healthcare, so that providing 
and accessing health insurance is not a constantly changing and 
uncertain process for worker and business owner alike.
                                 ______
                                 
    Chairman Enzi. Thank you.
    Ms. Kuenning.

 STATEMENT OF TESS STACK KUENNING, CNS, MS, RN, PRESIDENT AND 
  CHIEF EXECUTIVE OFFICER, BI-STATE PRIMARY CARE ASSOCIATION, 
                      MONTPELIER, VERMONT

    Ms. Kuenning. Thank you, Senators Enzi and Sanders, for the 
opportunity, and the Subcommittee Members for the opportunity 
to talk about the importance of health insurance coverage for 
patients at community health centers.
    My name is Tess Kuenning. I am the President and CEO of Bi-
State Primary Care Association, and we are a not-for-profit, 
nonpartisan, charitable organization that works to promote 
access to effective, affordable, comprehensive primary care 
including medical, behavioral health, mental health, including 
substance use disorders, and medication assisted treatment, 
oral health, pharmacy services in an interdisciplinary team 
approach regardless of the person's ability to pay.
    In New Hampshire and in Vermont, there are 29 community 
health centers caring for 302,000 people. Nationally, there are 
1,400 community health centers serving 27 million people in 
more than 10,000 locations.
    Community health centers are the Nation's largest primary 
care network holding the promise to assure access across our 
Nation's communities with a track record of quality care 
serving as a health home for whole person care.
    Important to community health center patients are assuring 
that they have robust, affordable insurance coverage. Insurance 
coverage is what makes access real.
    People with insurance coverage have greater ease in 
accessing community health center services without delays. 
Coverage allows for not only primary care, but specialty care 
including beyond the walls of the health center.
    Not having coverage, or being uninsured, or underinsured 
puts a strain on the patient and on the provider. Coverage 
should be affordable and a robust plan design allowing patients 
access to care that they need in preventive services acute care 
without barriers. Coverage eases financial barriers on the 
community health center Federal grants that go toward covering 
the cost of delivering care.
    I would be remiss to not mention the outstanding issue that 
is in Congress' hands right now. Community health center 
patients hang in the balance. The funding for community health 
centers, and the National Health Service Corps, ended September 
30, 2017. Without this funding, community health centers do not 
have 70 percent of their grant funds.
    In the HELP Committee, you represent 23 states, nearly 500 
community health centers, and 8.6 million patients, which is 
about one-third of the total patients served by community 
health centers. You have a lot of power in this Committee.
    In Vermont, a 70 percent loss is $14 million and in New 
Hampshire, $16 million. No community health center can 
withstand those kinds of reductions without a corollary 
reduction in critical health services. Your urgent action would 
be gratefully appreciated, especially at a time when we are in 
a public health crisis with an opioid crisis, with a flu 
crisis, with the Zika virus. Community health centers are where 
patients go.
    I have read the proposed rule by the Department of Labor 
that was issued on January 4 and the proposed rule gives me 
pause in a number of areas. I would like to share with you just 
the topics that I am concerned about and then through our 
discussion, to give you a little bit more detail.
    What gives me pause are the consumer protections; the 
states' authority to regulate; the market instability and 
fragmentation; the lack of adequate coverage; no limits on 
premium variation based on age; geography, especially in two 
rural states; gender; women of childbearing age; network 
adequacy; and the issue of churn.
    There are some protections in this rule that need to be 
addressed and I would like to be a part of the conversation to 
address those.
    Thank you very much.
    [The prepared statement of Ms. Kuenning follows:]
                  prepared statement of tess kuenning
    Thank you to Chairman Enzi, Ranking Member Sanders, and the Members 
of Subcommittee for the invitation to discuss the importance of health 
insurance coverage for patients of federally Qualified Health Centers 
(FQHCs or Health Centers).

    My name is Tess Kuenning, and I am the President and CEO of Bi-
State Primary Care Association located in Montpelier, Vermont, and Bow, 
New Hampshire. Bi-State is a non-partisan, non-profit 501(c)(3) 
charitable organization that promotes access to effective and 
affordable primary care and preventive services for all, with special 
emphasis on underserved populations. On behalf of the Bi-State and the 
29 Community Health Centers, which provide care for nearly 302,000 
Vermonters and New Hampshirites, I thank you for the opportunity to 
participate in the Roundtable discussion today before the Committee 
regarding the effects of a recently released Department of Labor 
Proposed Rule regarding Association Health Plans \1\ on Health Centers 
as they provide and expand access to comprehensive primary care 
services in medically underserved communities.
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    \1\  The proposed rule was released on January 5, 2018 and is 
available for comment until March 6, 2018. Definition of ``Employer'' 
Under Section 3(5) of ERISA-Association Health Plans, 83 Fed. Reg. 614 
(January 5, 2018) (to be codified at 29 CFR 2910).

    I have served as the President and CEO of Bi-State for nearly 23 
years and just prior worked for the U.S. Public Health Service and 
HCFA, now CMS. I am a clinician by training and have worked in tertiary 
ICU and primary care both in the United States and in Nepal. My 
background as a Clinical Nurse Specialist and experience across 
government agencies, as well as private health care sectors, have shown 
me that barrier-free access to comprehensive primary and preventive 
---------------------------------------------------------------------------
services is the difference between a robust healthy life or not.

    In New Hampshire and Vermont, as well as across the Nation, Health 
Centers are the Nation's largest network of comprehensive primary and 
preventive health care practices. Health Centers are and continue to 
hold the promise to fulfill access to care for our Nation's 
communities. Health Centers historically have, and will continue to 
care for all patients in their community, extending their expertise in 
caring for our most vulnerable: the uninsured and underinsured.
                        Association Health Plans
    The Department of Labor recently released a Notice of Proposed 
Rulemaking (NPRM) related to Association Health Plans. Association 
Health Plans are a type of health coverage for qualifying employers. 
The rules defining when Association Health Plans can be used have 
changed over the past several years, with this latest NPRM intending to 
expand access to this type of health coverage. According to President 
Trump's Executive Order signed in October 2017, this change related to 
Association Health Plans is meant to encourage competition and choice 
for small businesses and lower their administrative and other costs. 
\2\ Some states, like Vermont, also have laws that impact Association 
Health Plans (see 8 V.S.A. s. 3368 and 8 V.S.A. s. 4079(2)).
---------------------------------------------------------------------------
    \2\  Exec. Order No. 13813, 3 C.F.R. 48385 (2017) Executive Order 
found here: https://www.whitehouse.gov/Presidential-actions/
Presidential-executive-order-promoting-healthcare-choice-competition-
across-united-states/.

    The proposal intends to adopt a new definition of ``employer'' for 
purposes of determining when employers can join together to offer or 
enroll in an Association Health Plan that is treated as a group health 
plan under ERISA. Depending on the type of Association Health Plan, 
which state it operates in, and the number of individuals covered, the 
benefits covered and the costs incurred may be different than those 
currently required by Federal law for the small group and individual 
market. By design, the NPRM allows for more flexibility around benefits 
covered by Association Health Plans. The benefits impacted include: 
limitations on pre-existing conditions, essential benefits, and out-of-
pocket maximums. Under current law, these benefits are standardized for 
---------------------------------------------------------------------------
the small business and individual health insurance markets.

    Concerns have been raised by organizations like the National 
Association of Insurance Commissioners, National Governors' 
Association, American Academy of Actuaries, and the NCSL National 
Conference of State Legislators regarding health coverage options, like 
Association Health Plans, that could fragment existing health insurance 
markets. \3\ Fragmentation is considered to be bad for health insurance 
markets. The fragmentation would occur when employers and individuals 
leave the general small group and/or individual health insurance market 
and join an Association Health Plan. Those leaving would join an 
Association Health Plan because the cost is lower (the cost is lower 
because those in the Association Health Plan would either be healthier 
than those in the general insurance market and/or the coverage would be 
different-without maternity or mental health for example). If healthy 
individuals leave the general insurance market, that leaves those who 
are less healthy-and more expensive. Over time, the balance between 
health and unhealthy can shift so much that the general insurance 
market goes into a `death spiral' where the coverage becomes 
increasingly more expensive and potentially unattainable.
---------------------------------------------------------------------------
    \3\  ``The Association Health Plan Proposed Rule: What It Says And 
What It Would Do,'' Health Affairs Blog, January 5, 2018. Accessed 1/
11/2018 at: https://www.healthaffairs.org/do/10.1377/
hblog20180104.347494/full/.

    Other concerns harken back to past Association Health Plans that 
left a legacy of insolvency and fraud with millions of unpaid claims. 
These issues along with Federal preemption of state regulation of AHPs 
are noted among the reasons why some state governments, labor, provider 
groups and even consumers have expressed apprehension. \4\
---------------------------------------------------------------------------
    \4\  ``The Association Health Plan Proposed Rule: What It Says And 
What It Would Do,'' Health Affairs Blog, January 5, 2018. Accessed 1/
11/2018 at: https://www.healthaffairs.org/do/10.1377/
hblog20180104.347494/full/.

    In Vermont, Association Health Plans are regulated by the 
Department of Financial Regulation \5\ and this regulation can serve to 
mitigate potential market fragmentation and ensure Vermont consumers 
are protected. This regulation could also potentially be used to ensure 
that the coverage offered is similar to that offered in the general 
health insurance market and there are no exclusions for services like 
mental health or maternity. In Vermont, these Association Health Plans 
would be considered a type of Multiple Employer Welfare Arrangement 
(MEWA) and thus subject to state insurance laws and regulation 
including solvency and reserve contributions to ensure payment of plan 
benefits. However, Vermont's authority is limited to policies that have 
a minimum of 100 persons at the time of incorporation if formed outside 
the state, and a minimum of 25 persons at the time of incorporation if 
formed in the state. Association Health Plans that are created in 
another state, or are below the thresholds specified by Vermont law, 
may not be able to be regulated by Vermont and Vermonters could 
purchase plans that have different consumer protections that those 
offered within the state. Vermonters in the general health insurance 
market could end up with more expensive plans as those individuals 
would need Vermont's consumer protections.
---------------------------------------------------------------------------
    \5\  Short Term--Limited Duration Insurance and Association Health 
Plans. (2018). Vermont Legislature, House Health Care Committee. 
Retrieved from https://legislature.vermont.gov/assets/Documents/2018/
WorkGroups/House--Health--Care/Executive--Orders--Regarding--Health--
Insurance/W?Emily--Brown?Short--Term----E2--80--93--limited--duration--
insurance--and--Association--health--plans?1-9-2018.pdf.
---------------------------------------------------------------------------
                   Health Centers--General Background
    By way of background, Health Centers are community owned, not-for-
profit organizations that receive Federal funding under the Public 
Health Service Act to provide primary medical, dental, behavioral and 
mental health services--including Medication Assisted Treatment (MAT) 
to treat substance use disorders--and pharmacy services to all 
patients, regardless of their ability to pay. Health Centers also 
provide a variety of enabling and support services. To date, there are 
over 1,400 Health Centers located at more than 10,000 locations 
nationwide \6\, both urban and rural, serving as patient-centered 
health homes for more than 27 million patients. \7\ Every Health Center 
has relationships with their community partners such as hospitals, 
mental health centers, and home health agencies, to assure patients 
have the full continuum of care.
---------------------------------------------------------------------------
    \6\  Bureau of Primary Health Care. Uniform data system. U.S. 
Department of Health and Human Services. 2016.
    \7\  NACHC. ``The Number of Patients Continues to Grow at Community 
Health Centers,'' September 2017. http://www.nachc.org/news/the-number-
of-patients-continues-to-grow-at-community-health-centers/.

    Health Centers are funded through a myriad of resources. Primarily, 
just under 20 percent of Health Center revenues are from Federal 
grants; 65 percent are from patient related revenues, which includes 
Medicaid, Medicare, and private or commercial insurance; and just over 
15 percent is from other revenues, which may include competitive state 
and local grants, contributions from county and municipalities as well 
as foundations and philanthropy. \8\
---------------------------------------------------------------------------
    \8\  Bureau of Primary Health Care. Uniform data system. U.S. 
Department of Health and Human Services. 2016.

    In their communities, Health Centers are more than a safety net, as 
they have a demonstrated track record of improving the health and well-
being of their patients using a locally tailored health care home model 
designed to coordinate care and manage chronic disease. They employee 
skilled providers who chose to work at Health Centers given the 
multidisciplinary team approach to comprehensive all-inclusive whole 
person care. Numerous published studies over many decades have 
demonstrated that Health Centers are a proven cost saver. Studies have 
also shown that Health Centers improve the health status in 
communities, reduce emergency room use, and eliminate barriers to 
---------------------------------------------------------------------------
health care.

    The distinctive model of care delivered by Health Centers allows 
them to save the entire health system, including the government and 
taxpayers, approximately $24 billion annually by keeping patients out 
of costlier health care settings, such as emergency departments. \9\ As 
a result of their timely and appropriate care, Health Centers save 
$1,263 per person per year, lowering costs across the delivery system 
from ambulatory care settings to the emergency department to hospital 
stays. \10\
---------------------------------------------------------------------------
    \9\  Ku L, et al. Strengthening Primary Care to Bend the Cost 
Curve: The Expansion of Community Health Centers Through Health Reform. 
Geiger Gibson/RCHN Community Health Foundation Collaborative at the 
George Washington University. June 30 2010. Policy Research Brief No. 
19.
    \10\  Ku L, et al, 2010.

    Nationally, approximately 49 percent of health center patients are 
covered by Medicaid and another 23 percent are uninsured. \11\ In 
return, Health Centers bring significant value to the Medicaid program, 
serving 1 in 6 Medicaid patients \12\, \13\ for only 1 percent of 
Medicaid spending. \14\ Additionally, studies have shown that Health 
Centers save 24 percent per Medicaid patient compared to other 
providers. \15\
---------------------------------------------------------------------------
    \11\  Ku L, et al, 2010.
    \12\  Bureau of Primary Health Care. Uniform data system. U.S. 
Department of Health and Human Services. 2016.
    \13\  Kaiser Family Foundation. ``Total monthly Medicaid and CHIP 
enrollment'', December 2016. https://www.kff.org/health-reform/state-
indicator/total-monthlyMedicaid-and-chip-enrollment/
'currentTimeframe=10&sortModel=--7B--colId--:--Location--,--sort--:--
asc----7D
    \14\  Nocon R.S. et al. ``Health care use and spending for Medicaid 
enrollees in federally qualified health centers versus other primary 
care settings.'' American Journal of Public Health 106, No. 11 
(November, 2016): 1981-1989.
    \15\  Nocon R.S. et al. 2016.

    In addition to reducing health care costs, Health Centers serve as 
small businesses and economic drivers in their communities. Health 
Centers employ over 207,000 \16\ individuals and generate $45.6 billion 
in total economic activity in urban and rural communities. \17\
---------------------------------------------------------------------------
    \16\  Bureau of Primary Health Care. Uniform data system. U.S. 
Department of Health and Human Services. 2016.
    \17\  Capital Link. ``Infographic: Health centers have a powerful 
national impact.'' 2016.

    For today's discussion on Association Health Plans, what is most 
important to the Health Centers is that their patients have access to 
the best coverage available to them. Whether that be through 
Association Health Plans, the Marketplace, Medicare or Medicaid, or 
some other form of insurance, we believe that coverage is an important 
element in providing good health care. Studies have long shown that 
people with health insurance have greater ease in accessing health care 
---------------------------------------------------------------------------
services and fewer delays in receiving care when needed.

    Coverage does not just mean holding an insurance card, but rather 
the ability to access preventive services and care coordination, in 
addition to primary care needs. This also includes access to specialty 
care--including that beyond the walls of the Health Center. Too often 
we see Health Center patients that have an insurance card, but their 
options for care are limited, meaning that he or she must travel miles 
and miles to find a covered provider, or includes a prohibitively high 
deductible, making the coverage essentially useless to its holder. This 
under-insurance puts a strain not just on the patient, but on the 
Health Center too, who is required to provide the care, regardless of 
the patient's ability to pay. It is important that any proposal to 
create a new form of coverage offer affordable and robust coverage, 
allowing patients to access the care that they need, primary and 
preventive as well as acute, in their communities and without barriers 
to care.

    From a financial perspective, when our patients have good coverage, 
that in turn eases the financial burden on our Federal grant dollars 
that go toward covering the costs of delivering care effectively to our 
medically underserved patients and communities. Comprehensive coverage 
allows patients to access the care they need and frees up those much-
needed grant dollars for those with no insurance at all.

    This is even more important because of an outstanding issue that is 
in Congress' hands. On September 30, 2017, Health Centers went over the 
``funding cliff,'' because Congress had not yet renewed the Community 
Health Center Fund. Without action, Health Centers face a 70 percent 
reduction in funding, which would be detrimental to all Health Centers 
across the country. As we are here today discussing new insurance 
alternatives for our patients, I would be remiss if I did not mention 
the importance of renewing that funding. Our patients need both access 
to meaningful insurance coverage and restoration of full Community 
Health Center funding. In Vermont, a 70 percent loss in Federal funding 
equates to a $14M loss, and in New Hampshire, the loss would be nearly 
$16M. No health care system can withstand this reduction in funding and 
not have a corresponding reduction in critical health care services. 
The Health Centers have indicated they would reduce their services on 
average by 40 percent severely effecting access and care to our 
communities.

    Nationwide, Medicaid and CHIP make up the majority of most Health 
Center patients. While Health Centers see everyone in their community, 
they are experts in caring for low and moderate income families. In 
Vermont, many Medicaid beneficiaries have annual income contributing to 
their families' well-being. \18\
---------------------------------------------------------------------------
    \18\  Vermont: Health Coverage & Uninsured. (2016). Kaiser Family 
Foundation State Health Facts. Retrieved from https://www.kff.org/
state-category/health-coverage-uninsured/'state=vt.
---------------------------------------------------------------------------
                   Vermont's Community Health Centers
    Like their counterparts nationwide, Vermont's Community Health 
Centers provide comprehensive primary care and prevention to Medicaid, 
Medicare, commercially insured, and uninsured patients. Vermont 
Medicaid covers 183,000 Vermonters and the Health Centers serve nearly 
one-third of them. \19\ The majority of Vermonters on Medicaid are 
children, the elderly, pregnant women, and working adults. By serving 
these patients, and over 106,000 Medicare and commercially insured 
Vermonters, Vermont's Health Centers assure access to care a reality. 
Insurance coverage makes access real. By providing access to 
comprehensive, high-quality primary care, Vermont's Health Centers 
ensure Vermonters get necessary services.
---------------------------------------------------------------------------
    \19\  DVHA SFY18 Budget Adjustment Act (BAA). (2018). Vermont 
Legislature, House Health Care Committee. Retrieved from https://
legislature.vermont.gov/assets/Documents/2018/WorkGroups/House--
Health--Care/Bills/H.633/BUDGETADJUSTMENT?Cory--Gustafson?DVHA--SFY--
18--Budget--Adjustment--Act--(BAA)?1-10-2018.pdf.

    In 2000, Vermont had only 2 Community Health Centers with 7 sites 
serving just over 18,000 patients. Currently, Vermont has 12 federally 
funded Community Health Centers with 64 clinical sites in every county 
caring for the whole family from prenatal care to pediatrics, to adult 
and elder health care, providing a medical or health home to more than 
172,000 Vermonters. Vermont Health Centers have a significant market 
share serving 1 in 4 Medicaid, 1 in 2 uninsured, 1 in 3 Medicare 
enrollees and 1 in 5 commercially insured Vermonters. Over the past 10 
years in New Hampshire, Health Centers have grown to16 organizations 
across the state serving approximately 113,000 patients in underserved 
---------------------------------------------------------------------------
areas.

    Community Health Centers are also directed by patient-majority 
boards. This unique model ensures care is locally controlled, 
responsive to each individual community's needs and, at the same time, 
reduces barriers to accessing health care through various services. 
Health Centers provide or arrange for transportation to ease the 
geographic barriers. Throughout Vermont, Health Centers work to bring 
fresh food, pharmacies, and classes for the elderly to their 
communities. They are more than just a doctor's office, Health Centers 
are a driving force to support the economic development and communities 
in more rural parts of Vermont. As well, Health Centers provide care 
targeted to reduce various cultural barriers by providing culturally 
competent care including translation services.

    At the Community Health Center of Burlington, which is the 
community provider of choice for adult refugee health care, they serve 
a diverse population of patients that communicate in nearly 30 
different languages. Interpreter-assisted visits accounts for 18 
percent of our patient visits. CHCB's New American Health Program was 
founded to offer a solution to improve the health status of new 
arrivals, build relationships to establish a long-term Health Care 
Home, provide social services assistance, and offer education leading 
to better health and well-being. The Health Center provider teams have 
specific experience with multi-cultural health and cultural competency; 
all services are offered with interpreter services; essential 
informational materials have been translated to their language; a 
Limited English Proficiency Specialist provides in person education 
along with in house produced videos (made possible by a state grant) 
both help provide health literacy and how to navigate a western health 
practice. Participants are also connected to dental care, mental health 
counseling and psychiatry as needed.

    It is noteworthy that CHCB cares for over 5,000 Vermonters who 
identify as LGBTQ. This is testimony to their compassion, nonjudgmental 
and matter-of-fact attitudes and excellent quality care that we have 
developed into the provider of choice for these Vermonters. The Health 
Center specifically offer a Transgender Health Clinic, and, new this 
year, an LGBTQ Health Clinic. CHCB also purposefully hires to reflect 
their community. CHCB staff consists of French speaking Africans, 
Nepali, Bosnian, gay, lesbian and transgender individuals.

    In New Hampshire, attention to cultural competency is a high 
priority as well. At the Manchester Community Health Center, of their 
17,000 patients, over 7,600 patients (45 percent) spoke a language 
other than English as their primary language. There are 62 languages 
spoken and of the 223 staff, approximately 50 percent are either 
bilingual, bicultural, immigrants or refugees.

    Health Centers work collaboratively within their local communities 
to support the needs of their patients. Working with hospitals, 
community mental health agencies, nursing homes, and others, Health 
Centers and their committed staff combat opiate addiction, diabetes, 
and other chronic conditions day in and day out. Vermont's Community 
Health Centers also serve as economic engines and community anchors 
alongside other business leaders in their communities. Vermont 
Community Health Centers employed 1294 FTE and generated nearly $178 
million in total economic benefits; while New Hampshire Community 
Health Centers employed 896 FTE and generated over $114 million in 
total economic benefits in their communities. \20\, \21\
---------------------------------------------------------------------------
    \20\  2016. Capital Link. The Economic Impact of New Hampshire's 
Community Health Centers.
    \21\  2016. Capital Link. The Economic Impact of Vermont's 
Community Health Centers.
---------------------------------------------------------------------------
 Impact of Association Health Plans on Community Health Centers and Bi-
                                 State
    There are two main ways that Association Health Plans can impact 
Community Health Centers/Bi-State Primary Care Association: 1. Health 
Centers/Bi-State as employers; and 2. Health Centers as health care 
providers. This section will address each in turn:

          1. As employers, Health Centers experience rising 
        health care costs like every other business. Depending on their 
        size, Vermont's Community Health Centers provide either fully 
        insured coverage or self-insured coverage. Regardless of the 
        type of coverage, the cost has increased significantly over the 
        past several years. Health Centers, like other employers could 
        opt to select an Association Health Plan if one were available 
        for them.

          Vermont Health Centers' experience:

          Our Health Centers in Vermont over the last years have had 
        significant increases to premiums and deductibles with 
        increases to both the employee and employer.

          One Health Center self-insured with 145 employees covering 
        nearly 200 lives in their insurance plan are paying for a 
        single deductible $6,350 and family $12,700. Their premiums 
        this year are 20 percent higher and they have learned from 
        their insurer that premiums will go up at least this amount 
        yearly. They have multiple plans for employees to choose from 
        given the high costs. They note they can't absorb and new 
        increases in the medical premium costs. They have attempted to 
        join other risk pools without any success.

          Another Health Center with 150 employees have a commercial 
        product for their employees paired with a health reimbursement 
        account. They note their greatest barrier to offering health 
        insurance is controlling costs to the organization while trying 
        to keep costs affordable to their employees. While they have 
        tried to keep the employee premiums low, the deductibles have 
        increased.

          One of our largest Health Centers with 350 employees, is a 
        ``quasi self-insured'', using a commercial insurer with $45,000 
        deductible per covered life. Employees have a $1,750 individual 
        deductible and $3,500 stacked family deductible (Employee pays 
        first $1,750 and the Health Center pays the next $42,250 of the 
        total for a total of $45,000 for the individual deductible, 
        after which the insurance pays the remainder of the claim). The 
        Health Center has also has purchased and put in place 
        individual and aggregate stop losses to control their financial 
        exposure for individual and aggregate catastrophic events. 
        Under this high deductible plan with purchased stop loss 
        maximums the Health Center operates essentially like a self-
        insured, with less cost and catastrophic financial exposure. As 
        well, the employee has to pay around 20 percent of the actual 
        cost of the benefit through pre-tax payroll deductions and the 
        Health Center provides employees the option of HSA's to pay for 
        deductible and out of pocket costs. The Health Center reported 
        the high and increasing cost of health care, especially over 
        the last 4 years as grown in the neighborhood of 50 percent 
        increase (going from $25,000 to $45,000), and this is the 
        largest impediment to providing health insurance. The Health 
        Center does this because it feels it is important to offer a 
        robust health benefit program with includes health, dental, 
        vision, long term care, with options to purchase additional 
        supplemental insurance for accidents and hospitalizations.

          Bi-State experience:

          Bi-State as a small business employer for 25 employees 
        working in Vermont and New Hampshire. We have selected a plan 
        that allows for a strong in-state network and a comprehensive 
        package. Over the past 3 years, our premiums have been held to 
        a 11-16 percent increase only because Bi-State chose to 
        increase its deductibles from $2,000 to $5,000, added most 
        notably co-insurance which is the cost above the deductible 
        that employees must pay until the out of pocket maximum. There 
        have also been an overhaul in the structure and pricing of 
        prescription plans. The in-network out of pocket maximums are 
        $7,350 for individuals and $14,700 for a family of two.

          The summary of all these experiences have in common that 
        Health Centers and our organization care deeply about assuring 
        our employees have robust health insurance coverage.

          As health care providers, Health Centers provide the 
        necessary primary care services that reduce acute health care 
        costs on a daily basis. Those services go far beyond annual 
        check-ups. Managing patients and their conditions requires an 
        array of tools including prescription drugs, dental services, 
        access to mental health and addictions treatment services, and 
        many others. Over 20 percent of Vermonters have a mental health 
        condition, which can exacerbate their diabetes, hypertension, 
        and other chronic conditions. For example, if an individual is 
        in treatment of an opiate addiction, but their health plan does 
        not cover the medication used in medication assisted therapy, 
        Suboxone, that patient's chance of overcoming the addiction is 
        dramatically reduced. Given that Association Health Plans can 
        offer different benefits, the concern about specific benefit 
        offering is very real to primary care providers who have 
        appreciated consistency in benefits covered in Vermont under 
        current insurance market rules.
                               Conclusion
    Without their local Community Health Center, many communities and 
patients would often be without any access to primary care services. 
Community Health Centers have proven time and time again that access to 
a health center translated to improved health outcomes for our most 
vulnerable Americans and reduced health care expenditures for this 
Nation. Community Health Centers need assurances that their patients 
will continue to have insurance coverage that is comprehensive and 
allows them to get necessary treatment.

    Mr. Chairman, we stand ready to meet the demand among those in need 
of primary care. However, Community Health Centers can only meet these 
primary care demands if we can provide access to care.

    We look forward to working with you and the other Members of this 
Subcommittee to accomplish our shared goal of improving access to 
primary care while reducing overall health care costs across the 
country.

    I thank you for this opportunity to share the importance of 
comprehensive and reliable coverage options for health center patients.

    Thank you, Mr. Chairman.
                                 ______
                                 
    Chairman Enzi. Thank you.
    Now, we will go to questions. The way a roundtable works is 
that if any of you want to add something to a question that has 
been asked, if you will stand your card on end, we will give 
you a chance to comment on that too.
    I am going to start with Mr. Johnson, who had the really 
clear, one-page testimony that I hope everybody will look at. 
It is seldom that we get one page and that it is as concise as 
that. You really shortened your remarks more than we needed you 
to.
    Could you describe a little bit about the kind of 
participation you have in the health plan, the kind of plans 
that you offer, and what has made you competitive in the state?
    Mr. Johnson. The plan itself is, again, available to any 
member of a participating Chamber. We have 15 Chambers across 
the state that participate in the program. Those can be groups 
of two to as large as wish to participate. From an employer 
size, they can be any employer size.
    They are also multi-industry. We have accountants. We have 
trucking companies. We have oilfield companies, lawyers, lots 
of different industries in the plan. It is available to all.
    The benefit program was requested. When we first started, 
it was similar to a large employer's plan in that it has 
multiple benefit plans from $1,000 deductible on the low end to 
a $5,000 deductible on the high end. There are six different 
benefit structures.
    None of them, by the way, reach the required Affordable 
Care Act maximum of $7,350 out of pocket; they are all under 
that as far as the out of pocket maximums.
    They all provide extensive wellness coverage. They also 
provide for employer wellness participation. If the employer 
elects to do an annual screening, they get an 8 percent lower 
rate in their plan if 80 percent of their participating adults 
do the screening. It is a program that has worked very, very 
well. It is manifest in the fact we have a zero percent rate 
change for the past 3 years.
    Chairman Enzi. Pretty amazing.
    Mr. Condeluci.
    Mr. Condeluci. Yes, sir. I was trying to flip it up, but I 
have too much liquid in front of me, so the last thing I want 
is an accident. Thank you.
    I actually have a question for Mr. Johnson.
    Is your plan a fully insured arrangement or a self-insured?
    Mr. Johnson. Partial self-insured.
    Mr. Condeluci. Partial self-insured. And the reason why I 
ask that question is it is important to understand the current 
treatment of Association Health Plans. If you are a fully 
insured Association Health Plan, CMS issued guidance back in 
2011 that requires an insurance carrier to look through the 
Association to the underlying size of the employer member.
    If you are an employer member of this fully insured 
Association Health Plan, and you are below 50 or fewer 
employees, therefore you are in the quote/unquote, ``small 
group market,'' the rule says that the insurance carrier must 
impose the small group ACA insurance market reforms to that 
employer member.
    That is distinguished from a self-insured Association 
Health Plan in which this 2011 CMS guidance does not apply to. 
In general, a self-insured Association Health Plan currently is 
not subject to this CMS guidance, yet fully insured Association 
Health Plans are.
    But there is one exception to this 2011 CMS guidance and 
the reason I just wanted to bring this up, and I apologize if 
it is overly complicated, because there is an exception to this 
CMS guidance that says the 2011 guidance will not apply if the 
group is a bona fide group or association of employers as 
defined for purposes of ERISA.
    The Department of Labor has developed the rules in and 
around what it means to be a bona fide group or association for 
purposes of ERISA. And it is, to a certain degree, what the 
proposed regulations are getting to with allowing small 
employers and sole proprietors to actually meet this definition 
of a bona fide group in order to be considered a large group 
health insurance plan. Therefore, many of the ACA reforms--
Essential Health Benefits, actuarial value, adjusted community 
rating rules, and the single risk pool requirements--do not 
apply.
    But the last comment, Senator, is the group health plan 
rules, that I articulated during my comments, do apply. And the 
consumer protections under HIPAA, ERISA, and otherwise apply in 
addition to many of the nondiscrimination rules that are 
included in the proposed regulations.
    That is a long way of saying, there is a lot of kind of 
different moving parts here when it comes to trying to describe 
the different arrangements. I probably inartfully articulated 
some of these rules, but it is important to try to get a handle 
on the different aspects and the different rules that might 
apply because there is a lot of confusion that arises.
    Chairman Enzi. Thank you.
    Senator Alexander.
    The Chairman. Thank you, Senator Enzi.
    I would like to pick back up right there and make sure I 
understand. I carry around a card with me so Senators can know 
who has insurance; 18 percent have Medicare, 61 percent have 
employer insurance, 21 percent Medicaid, 6 percent individual 
in the country, something about like that.
    Let us look at employer, for just a minute. That is what we 
are talking about.
    178 million Americans have employer insurance; 61 percent 
employer. Now, Mr. Condeluci, you were saying that there are 
three groups of employer insurance. One is the ERISA; those are 
the self-insured.
    Mr. Condeluci. Yes, sir.
    The Chairman. Two is the fully insured, and three is the 
small group market.
    Now, the small group market is basically the 50 or less 
employees, and the ACA protections and rules apply to that.
    Right?
    Mr. Condeluci. Yes, sir.
    The Chairman. You were saying, I think, that even in the 
fully insured group, the next group up, that the ACA rules 
apply to that too?
    Mr. Condeluci. Maybe I will attack the question this way, 
Senator.
    Having been a part of the drafting of the ACA, the drafters 
of the law essentially said, ``We want to reform the individual 
market,'' and therefore there are individual----
    The Chairman. Yes, but without getting into all of that. 
Let me just skip that group. Let me go to ERISA.
    ACA does not apply to ERISA. Right?
    Mr. Condeluci. The group health plan requirements that I 
described earlier, sir, about not being able to, you cannot 
deny someone with a pre-existing condition, you cannot deny 
service.
    The Chairman. But the large group plans, the self-insured 
ERISA plans, which are about 35 percent of the total people 
with insurance, they are governed by their own rules, not by 
the ACA rules. Right?
    Mr. Condeluci. The ACA rules that do not apply to large 
group fully insured and self-insured are the Essential Health 
Benefits, actuary value requirements.
    The Chairman. Wait a minute.
    Mr. Condeluci. Those are the only rules, sir.
    The Chairman. But, no. The ACA itself does not change the 
ERISA, does it?
    Mr. Condeluci. It does not, but there are ACA rules that do 
apply.
    The Chairman. Wait, I am not asking you that. Is it yes or 
no? If I am IBM, I have an ERISA plan.
    Mr. Condeluci. Yes.
    The Chairman. I do not have to worry about the ACA because 
I am governed by the ERISA rules.
    Mr. Condeluci. Yes.
    The Chairman. The large employer rules. Right?
    Mr. Condeluci. I would say that you do have to worry about 
the ERISA rules in addition to the ACA.
    The Chairman. No, I mean----
    Mr. Condeluci. ACA rules in addition to ERISA.
    The Chairman. I have to worry about ERISA, not ACA.
    Mr. Condeluci. You have to worry about both.
    The Chairman. I do have to worry about ACA?
    Mr. Condeluci. Yes, sir.
    The Chairman. What do I have to worry about?
    Mr. Condeluci. You have to worry about--you cannot deny 
coverage if the person has a pre-existing condition. You cannot 
impose annual lifetime limits.
    The Chairman. But was that not the rule under ERISA to 
begin with?
    Mr. Condeluci. No, sir. Those were group health plan 
requirements that came in through the Affordable Care Act.
    The rules that also came in through the Affordable Care 
Act, which include the Essential Health Benefits, actuary 
value, I keep mentioning it, adjusted community rating rules, 
they came in through the ACA as well, but they only apply to 
small group plans and individual market plans. They do not 
apply to fully insured large group and they do not apply to 
self-insured.
    It really is those four rules, sir, that are ACA-related 
that do not apply in this case, but all of the other ACA group 
health plan requirements, in addition to ERISA, HIPAA, COBRA, 
et cetera, do apply to the self-insured ERISA plans, as well as 
fully insured large group plans.
    Does that help?
    The Chairman. The regulation that is proposed----
    Mr. Condeluci. Yes, sir.
    The Chairman ----in essence, would apply the same 
protections to those covered under the regulation that apply to 
the ERISA, those who are covered under the ERISA plan.
    Mr. Condeluci. Yes, sir. Other than the Essential Health 
Benefits, actuary value, and adjusted community rating rules, 
all of the other consumer protections that apply to a small 
group plan as well as an individual market plan.
    The Chairman. The Essential Health Benefits applies to 
ERISA?
    Mr. Condeluci. They do not, sir.
    The Chairman. That is what I thought.
    Mr. Condeluci. Yes. They will apply only to the small group 
and only to the individual market.
    The Chairman. Right.
    Mr. Condeluci. But many of the other ACA requirements and 
consumer protections will apply. If I may, sir, one of the----
    The Chairman. I thought the simple answer to this was that 
the regulation would give to the self-employed people who are 
insured under the regulation the same protections that 
employees who are insured under ERISA large group plans have.
    Mr. Condeluci. They would, sir.
    The Chairman. Is that correct?
    Mr. Condeluci. That is correct.
    The Chairman. We have about 35 percent, if my figures are 
right, of the total insured in America are insured under self-
insured ERISA plans. This would give some of the people--who 
are either now uninsured, or in small group, or in the 
individual market--an opportunity to be insured in the same 
way.
    Now, some of the figures that I have seen suggest that if 
you are insured in an employer plan, like ERISA and maybe this 
is one of the benefits of Wyoming, your costs go down 
dramatically, maybe about one-third because the tax break for 
each employee in an employer plan costs the taxpayer about 
$5,000 an employee.
    Does that sound right to any of you?
    Mr. Condeluci. If you are speaking to the tax preference, 
sir, for employees?
    The Chairman. Yes, a self-employed person does not get 
advantage of the tax break that an employer plan has.
    Mr. Condeluci. They would be permitted a 162(L) deduction, 
which is an above-the-line deduction for those costs, which 
does have a tax preference available to the self-employed.
    The Chairman. Yes, and the estimates I have seen, that is 
about a $5,000 per employee cost.
    What is your experience, Mr. Johnson? Those who come into 
your plan in Wyoming, it is less expensive to be a part of your 
plan if they go from individual to an employer plan.
    Right?
    Mr. Johnson. Many times, that is the case. Yes, sir.
    The Chairman. Yes.
    Mr. Johnson. The difference is some of the individual plans 
that are coming in with very, very high deductibles looking at 
the catastrophic style plans in your state.
    The Chairman. Right.
    Mr. Johnson. We do not have one of those, so in essence, 
the premiums may not go down, but the coverage can go way up.
    The Chairman. Yes.
    I understand that Mr. Sturm has talked about the effect it 
might have on other people in the market.
    But for an individual, a self-employed songwriter in 
Nashville, or a farmer, or a small businessperson who has seen 
his or her insurance go from $300 to $1,300 a month and who 
pays the whole thing, if they are able to combine under this 
rule and have the same protections that an employee of IBM in 
Nashville has--which, except for four rules, are the same as in 
the ACA according to Mr. Condeluci--they might have a less 
expensive plan. First, because it is an employer plan and 
second, because it is part of a larger pool.
    Is that correct?
    Mr. Condeluci. Comprehensive consumer protections, as I 
have articulated.
    Chairman Enzi. Ms. Kimmich.
    The Chairman. Yes, Ms. Kimmich.
    Ms. Kimmich. Thank you, Senator. I just want to back step 
for a moment.
    I am very concerned with Mr. Condeluci's breeze over 
Essential Health Benefits as though it is just one item. The 
Essential Health Benefit is really ten items that are critical 
for everyone: maternity and newborn care, mental and behavioral 
health, emergency services, outpatient services, 
hospitalization, preventative, labs, prescription drugs, 
pediatrics.
    I just want to make sure we are really clear that is not 
just one benefit.
    Thank you.
    The Chairman. But those benefits do not apply to employers 
with ERISA, do they?
    Mr. Condeluci. Sir, if I may.
    I did not want to get into the details of Essential Health 
Benefits because I was having trouble even answering the 
Senator's question. It is true that Essential Health Benefits 
are important.
    The Chairman. That means that all of the employees, the 
one-third of Americans, it looks to me like about 60 million 
Americans who get their plans through ERISA and ERISA-type 
plans, which would be IBM, Eastman, all these people, they have 
deficient plans because the Essential Health Benefits----
    Mr. Condeluci. Do not apply.
    The Chairman ----do not apply. Do they?
    Mr. Condeluci. But they offer very similar benefits, sir.
    The Chairman. No, but you said they applied, but that is 
not correct. It is similar.
    Mr. Condeluci. No, the Essential Health Benefits do not 
apply.
    The Chairman. Let me go to Ms. Kimmich, she was trying to 
answer the question.
    Ms. Kimmich. From how I understand it, you can carve out 
what you want for your plan. You can have gender and age 
ratings when you create your plan.
    The Chairman. Yes.
    Ms. Kimmich. You cannot include maternity and newborn care, 
and that would impact your hiring practices.
    The Chairman. Right. But if it is good enough for IBM, why 
is it not good enough for your brewery?
    Ms. Kimmich. We have a very diverse group of employees.
    The Chairman. So does IBM.
    Ms. Kimmich. We have employees that use all of our 
services, but I think what is really critical and what is 
really important when we talk about growing our economy and 
making our communities stronger, it is not just our 50 
employees. It is the 10,000 people in our community, the people 
that we rely on to come into our business and support our 
business.
    We are not talking about different silos. We need everyone 
to have comprehensive health care.
    The Chairman. Well, okay. But why should we let the IBM 
employee in your town have a better healthcare plan or a 
different healthcare plan than yours?
    Ms. Kimmich. In the great State of Vermont, we actually do 
have a unified market and it is working great for us. That is 
why our pricing is actually affordable, and we know what it is 
going to be every year.
    The Chairman. But if I have a plan through IBM and I live 
in your town, I do not have all the protections that you have 
to, and I am pretty happy with my plan.
    Ms. Kimmich. I do not know if that is the case. I do not 
know.
    The Chairman. Well, there are 60 million Americans who have 
plans through ERISA and we do not hear much complaint about 
that.
    Ms. Kimmich. I do not know if they are happy with their 
plans.
    What I do know is all the people that do not have the 
health insurance that they need, and the people who think they 
are insured, and then find out that they are not, and are 
short, or under and short, and it bankrupts them, it is killing 
our communities. That is what I do know.
    Chairman Enzi. Ms. Kuenning.
    Ms. Kuenning. Thank you.
    We were just talking about the Essential Health Benefits. 
Some of the things that I talked about, that I have concerns 
about with regard to this proposed rule, is about the Essential 
Health Benefits.
    You are right that the large group market does not have to 
have the Essential Health Benefits, but the people in the small 
market and in the individual markets do have the Essential 
Health Benefits.
    To Ms. Kimmich's point, you could actually have an 
insurance plan, a product that does not cover mental health. 
Imagine if you are a family that has a 23-year-old that now has 
a substance use abuse disorder. You are not covered for that, 
so that then you lose all of those benefits because the plan 
does not have the Essential Health Benefits.
    But the other thing that was brought up that are not 
covered in these Association Health Plans, you mentioned the 
actuarial, the community rating, and the pre-existing 
condition. For us, the community health center patients really 
are----
    The Chairman. But does not the Mental Health Parity plan 
apply to employer plans?
    Ms. Kuenning. Does the mental health parity?
    The Chairman. The Federal law called the Mental Health 
Parity and Addiction Equity Act, does that not apply to 
employer plans, ERISA plans?
    Mr. Condeluci. It does, sir.
    If a plan is offering mental health services, then they do 
have to provide parity. If the plan is not offering mental 
health services, then that aspect of the law does not apply.
    The Chairman. Thank you for the time. I see Senator Warren 
is here. I am going to have to leave.
    Thank you very much for taking time to be here and letting 
us hear from you.
    Ms. Kimmich. Thank you, Senator.
    Chairman Enzi. Thank you for being here, too, Mr. Chairman.
    Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    I want to pick up on this same theme because one of the 
driving motivations behind the Affordable Care Act was to 
improve insurance coverage for small businesses and for 
entrepreneurs. It worked.
    Nearly 5 million small business owners and entrepreneurs 
gained coverage under the ACA, and they were nearly three times 
as likely as other workers to purchase coverage through the 
exchange. This was a way to help small businesses get coverage.
    Look, I have a list a mile long in ways that the ACA could 
be strengthened so that everyone can afford coverage and get a 
high quality plan. But I worry that we are moving in exactly 
the wrong direction with Association Health Plans.
    These plans are deliberately designed to avoid the 
important protections that are there in the ACA, including 
requirements that they cover Essential Health Benefits, which 
is what you were just talking about, like maternity care or 
opioid treatment. They can charge people with pre-existing 
conditions more money than people who do not have pre-existing 
conditions. Now the Administration is advancing a rule aimed at 
increasing access to these plans.
    Just so I can get this on the record because I think you 
have been talking about this already, Ms. Kimmich. You are a 
co-owner of a brewery in Vermont. You have talked in the past 
about the importance of providing health insurance coverage for 
your employees. Let me just ask it.
    Is it also important that the health insurance you provide 
be good quality insurance?
    Ms. Kimmich. Absolutely. We need our employees to get the 
primary care they need, but we also need to make sure that they 
have the safety nets in place so that when they are most 
vulnerable, they are not going to go bankrupt. That they can be 
hospitalized and get the surgeries they need, get the 
chemotherapy that we need.
    Our employees have gone through it all and no one has had 
financial distress. We have helped them with some loans to pay 
their deductibles, but everyone has the protections that they 
need in place.
    Senator Warren. Good. I really appreciate it and I 
appreciate the point you are trying to make here. It is not 
just holding a piece of paper. It is a piece of paper that is 
there to help you when a medical problem arises.
    When a health policy is not worth the paper that it is 
printed on, it is not coverage. It is phony insurance and 
putting an end to these scams was a big part of the reason that 
Congress passed the Affordable Care Act and set some real 
standards for coverage.
    But there is another problem that I would like to probe 
just a little bit with Association Health Plans. They have a 
long track record of going belly up and leaving patients, and 
businesses, and health providers holding the bag.
    Association Health Plans are not subject to any Federal 
fiscal oversight to make sure that they can stay solvent. Under 
the changes proposed by the Trump administration, the state's 
authority to regulate them is ambiguous at best.
    Ms. Kuenning, you represent a group of community health 
centers in Vermont and New Hampshire. If a so-called insurer 
goes broke and cannot pay its bills, what does that mean for 
health centers in rural communities?
    Ms. Kuenning. Thank you for the question.
    I would first start with consumer protection. The community 
health centers exist to serve their patients. If their 
community health center patients, who are really the consumers, 
if they have a fraudulent plan where there is nobody to pay the 
unpaid claims, it not only then eliminates a covered benefit 
for the patient, it also affects the provider themselves.
    The state's authority to regulate, Vermont does regulate 
Association Health Plans, but in speaking to the people about 
the financial regulations, they know that they would have to 
strengthen those because, as you mentioned, there are no 
enforcement and authority for solvency, for any fiscal 
oversight to guarantee the coverage. Those consumer benefits 
and consumer protections are so important to the state's 
authority to regulate.
    Then this market instability and the fragmentation where 
Association Health Plans, by nature, segment the population. 
You could have a very healthy group of people come out of the 
market right now, and you left with people who are sick and 
unhealthy, which is essentially going to just increase premiums 
again. That segment is really a concern.
    The community health centers would see anyone regardless of 
their ability to pay. They would be there for that person, but 
the patient themselves would not have that robust coverage and 
the provider would not get paid.
    Senator Warren. Okay. It is powerfully important.
    Mr. Condeluci.
    Mr. Condeluci. Yes, ma'am. Thank you, Senator.
    Senator Warren. Do you want to make a comment?
    Mr. Condeluci. I appreciate it. Two quick comments.
    On the self-insured arrangements, which are governed by 
ERISA, which is a Federal law. ERISA explicitly gives states 
the authority to regulate self-insured Association Health 
Plans. They are called Multiple Employer Welfare Arrangements.
    The reason why Congress actually changed ERISA to give 
states the explicit authority to regulate was due to many of 
the fraudulent activities and abusive behaviors and the fact 
that many of these MEWA's went belly up.
    These MEWA laws are still on the books in about 23 states 
and those MEWA laws range from laws actually saying that a 
self-insured arrangement MEWA cannot even operate in the state. 
California and New York, for example, have laws on the books 
that say, ``Self-insured arrangement MEWA's cannot operate in 
our state.''
    There are other states that have some coverage requirements 
applicable to these self-insured MEWA's through the state MEWA 
statute as well as solvency requirements that arguably--I mean, 
I am not a student on all of the solvency requirements--but are 
typically as good as the solvency requirements that apply to 
the insurance companies operating in that state.
    Senator Warren. I understand that there are some places 
where there are adequate solvency requirements and some places 
where there are not. And obviously, where they are not, this is 
a real problem both for healthcare providers and for the 
patients who thought they had healthcare coverage.
    I also am under the impression, but tell me if this is not 
right, that the new regulations and approaches that the Trump 
administration are using are putting into question the roles 
that the states may play here.
    Are you telling me you believe there will be no change or 
there is no change in any of that language?
    Mr. Condeluci. Yes, ma'am. I am telling you that.
    Senator Warren. You are confident it is going to stay 
exactly the same.
    Mr. Condeluci. I am confident that the regulations, nothing 
to change.
    Senator Warren. We only have to deal with the problem of 
the places where they can go belly up right now, that these 
plans can go belly up and leave somebody else holding the bag.
    I think you wanted to add, Mr. Sturm.
    Mr. Sturm. I did want to add a little bit. Thank you, 
Senator Warren, for pointing that out with the MEWA's and the 
historical problem that we have had with solvency in the past.
    I would say that it would be wise to put risk-based capital 
requirements on these new AHP's so the history will not be 
repeated in that regard.
    I will stress again that leveling the playing field amongst 
the various markets, and making sure that one market cannot 
rate for age differently than the other one, and making it 
consistent with the ACA, would be very wise. Because when you 
have different rules in different markets, creative people will 
find ways to go and pick off the health risks and leave the 
poor risk behind.
    Senator Warren. I just want to say that is a very 
interesting point. I wish Senator Alexander were still here 
because one might argue that this is a big difference with the 
ERISA plans.
    When the people at IBM come together, they come together 
because of the job, and they come together because of the 
salary that is offered, and they come together because of the 
work to be done.
    When people come together on health insurance plans, they 
are coming together for a solely different purpose. They are 
not coming together to brew beer or to write code. They are 
coming together to pick a plan that they think is going to be 
least expensive for the employer.
    What impact that has on the customers, the patients, and 
what impact that has on the community health centers is a kind 
of devil take the hindmost; not their problem.
    They have very different incentive structures and I think, 
as a result, very different needs for what kind of regulation 
we put in place.
    Mr. Sturm. I agree with you. I think the proposed rule, as 
written, tries to limit that to the extent possible and it does 
a pretty good job, frankly, but there are a few areas that 
could be buttoned up.
    I think as well, if you put something in the proposed rule 
that requires that these AHP's be run by people with healthcare 
expertise, I think we can get in trouble when people come from 
outside industries, and think they have the solutions, and run 
a healthcare payer organization, there could be issues.
    Then finally, you talk about the paper it is written on. 
You may want to consider putting some bronze and better or EHB 
requirements in there. As Mr. Condeluci pointed out earlier, 
most employers, including IBM, offer the Essential Health 
Benefits.
    Senator Warren. Yes.
    Mr. Sturm. Why not just put it in the regulation if you are 
concerned that people are going to go and carve out the 
maternity, and mental health, and that sort of thing.
    Senator Warren. Thank you, Mr. Sturm.
    I think the whole point about having minimum regulations 
all the way through here and minimum requirements so that the 
Association Health Plans are not picking people off and leaving 
people with insurance policies that are not worth the paper 
they are printed on is really important here.
    The way I see this is there are a lot of things we could do 
to improve healthcare coverage for small businesses in this 
country.
    Massachusetts has been leading the way here launching major 
improvements just this year to our small business health 
exchange trying to make this better and more affordable.
    What worries me is the Trump administration seems to be 
heading in the opposite direction. They are dismantling a 
national version of exactly the exchange that we are using so 
small businesses can no longer use the Small business Health 
Options Program Website to select their health insurance plans.
    Instead of helping workers get good coverage, they want to 
push this phony insurance and then leave small businesses in 
the lurch when these fly by-night associations go broke. They 
want to leave community health centers in the lurch and most of 
all, they are going to leave patients in the lurch, and I just 
think that is the wrong direction for us to go.
    Thank you.
    Thank you, Mr. Chairman.
    Chairman Enzi. Ms. Kimmich.
    Ms. Kimmich. Yes, thank you.
    I would just like to add that even if the State of Vermont 
is able to continue regulating, it would still hurt the State 
of Vermont because we have a unified market. If we have lots of 
small businesses crossing state lines, that is going to be less 
people in our pool.
    We are a small state. When we had a fragmented system, it 
hurt us. Our large pool is really helping us now. Like many 
states, we are a small business state. Ninety percent of the 
businesses in Vermont have 20 or less employees. Imagine the 
impact if even one-third of them left the state, crossed lines, 
and had an AHP.
    Chairman Enzi. Ms. Kuenning.
    Ms. Kuenning. Yes, thank you.
    I just wanted to pick up on that, limits on the premium 
variation on age and gender.
    My business, 25 people across two states. We have 25 
employees and 90 percent of them are women. For us, we hire 
women 24 to over 70, and the ability of my staff to be able to 
have maternity care and childcare is extraordinarily important. 
I want to retain that talent and I do not want to lose that 
because of that, because of the gender, the bias there.
    The other thing that we have not talked about is there is 
nothing in the provision for network adequacy. That is one of 
the reasons why we go with a particular plan for both Vermont 
and New Hampshire because we want to make sure that our 
employees have an adequate network of primary care, and 
specialty, and hospital care in their community, and they can 
see their primary care provider. Thinking about how to 
strengthen this rule in network adequacy would be really 
important.
    The other thing when we lose the individual mandate, there 
is no penalty and then we lose it, you have this churn. 
Somebody--and this is what happened to many of our co-ops--
where somebody would purchase an insurance in June, for 
something that they knew that they had to do in July or August, 
and then they would stop paying the premium. The plans are 
actually left holding, paying out these claims.
    It goes into this cycle of plans not being able to have the 
kind of solvency requirements that they need in order to pay 
out all of the claims for the people that they are serving.
    I just wanted to add those points. Thank you.
    Chairman Enzi. Well, that is also a problem in the current 
system, when they come down with something, they can get 
insurance, not have to make any payments, and drop out of the 
system.
    I am hearing that from Wyoming and I have a Wyoming person 
here who is the only one that is actually doing one of these 
small business health plans. I would like to ask him a couple 
more questions.
    Can you tell me about how you have worked to inject some 
innovation into your insurance product and offerings that, of 
course, do meet the law?
    Mr. Johnson. The plan, just to reiterate, our plan does not 
discriminate based on gender, does not discriminate based on 
any factor that is not allowed in the ACA. I mean, it is 
structured to comply fully. We had a desire to do that because 
we wanted to let people access care as needed.
    When we got into the plan, I was asked, ``Let us make this 
a health insurance plan, not just an accident or sick plan.'' 
Again, we encourage wellness. We encourage anything that can 
be, the proper screenings to be covered under the wellness side 
of the plan.
    We also encourage people to become wise consumers through a 
variety of sources such as Healthcare Bluebook, through a 
center of excellence program that says, ``We have certain 
centers that you can go to that do it for less.''
    One example in Casper with multiple MRI's available, an 
employee that was in the plan called up and a particular MRI 
was going to cost just under $5,000. By calling around in town, 
not leaving Casper, was able to get it for under $1,200; the 
same MRI.
    The ability to shop and given the incentive to shop, the 
incentive to find high quality care, incentives to get out and 
work inside of being a wise consumer of costs is how we can 
help people develop. Because when it gets back to the end of 
the day, it is the cost that drives this animal. It is the 
claims cost, the cost of getting that care.
    That is what we are trying to educate, keep people 
involved, and help them grow. That actually has helped us 
maintain our costs inside the program.
    Chairman Enzi. How have the premiums been and any reserves?
    Mr. Johnson. Yes, the reserves that we hold, the way it is 
calculated by our underwriter is called terminal reserves is to 
say if the plan were to terminate, we need X number of dollars 
held. We currently hold 400 percent of that number, so we are 
well over insured as far as the premium numbers and the 
reserves held.
    For the majority of the employers, well, probably half the 
employers in the plan, they were there at the beginning. They 
have been there for the past 12 years.
    One of the things small employers can tell you, shopping 
for insurance--and it used to be every 17 months the average 
small employer changed plans in the Nation--there is a cost 
involved in that of change. There is turmoil to the employees 
with change. We have been able to take that largely away for 
the employers involved.
    Chairman Enzi. How about the premium increases, the amount 
of increase?
    Mr. Johnson. Well, the last 3 years, four calendar years, 
our plan years in the plan, they have not gone up at all. In 
fact this year, the Board of Directors voted a 3 percent rate 
reduction across the board to every participating employer in 
the plan.
    Chairman Enzi. Sounds to me like a good reason to do these 
things.
    Mr. Sturm, did you have a comment?
    Mr. Sturm. I was just going to follow-up one thing on the 
consumer protections that we talked about earlier.
    If you do go ahead with the AHP proposed rule, there is 
something in there that is going to harm them, and that is the 
inability to underwrite for health status in the 51-plus 
market.
    You cannot do that in 2 to 50 of the individual right now, 
so they just set up the AHP to say you cannot do it at all for 
all group sizes and that is because, I am guessing, when the 
AHP proposed rule was written, they were thinking mainly of 
individuals and small groups.
    But there is an unintended consequence because if AHP's are 
not allowed to underwrite for health status in a large group 
market in the current marketplace under the ACA that you are 
allowed to do that, you are going to attract the worst risk.
    Chairman Enzi. Mr. Condeluci.
    Mr. Condeluci. I just have a concluding comment to say.
    That is where it is difficult to parse this out where 
employer plans currently do offer benefits that are arguably as 
good as the Essential Health Benefits, for example, although, 
that requirement does not apply.
    The drafters of the ACA specifically exempted fully 
insured, large group plans and self-insured plans from the 
Essential Health Benefits requirement because the drafters at 
the time, not saying that was the right decision, felt that 
those plans were doing the right thing in offering these 
comprehensive levels of benefits.
    When you do not have that requirement, yet, there is a 
requirement in small group and individual, there is concern 
that, ``Essential Health Benefits do not apply.'' The concern 
has merit.
    When it comes to rating by age, and I would like Mr. Strum 
and Mr. Johnson to correct me if I am wrong, I know of no large 
employer that actually varies their premiums by age. Typically 
an employer's best practice is they develop a premium rate 
based on the health claims of the group, and they charge the 
premium, the same amount, to all of their employees. So a 
younger employee oftentimes is subsidizing an older employee 
because they are charged the same rate.
    The developing premium practice is not developing 
specifically on age. I would like to hear if you gentlemen have 
a different experience than mine.
    Again, not to say that the age rating should not be a 
concern, it arguably should, but in my experience, employers do 
not rate premiums based on the age of their participants.
    Mr. Johnson. Go ahead.
    Mr. Sturm. I can confirm that is right. Most large 
employers do not do that specifically to their employees.
    There is also a second age concern of rating at the group 
level, not at the employee level, the ACA requires three-to-
one. I do not believe the AHP proposed rule requires 3-to-1. It 
is possible that they could come in with a different age curve 
and create that risk segmentation. Just to differentiate from 
what you are saying, but I concur with your comment.
    Chairman Enzi. Mr. Johnson.
    Mr. Johnson. Just one comment about the structure.
    Correct. Most of the groups in Wyoming that are under 10 
employees are all age-based, age rate structure. When you look 
inside the SHOP program or the fully insured individual market, 
it is all age-based, even up to 50 employees.
    One of the impacts I can tell you about an employer in 
Casper, that when they went from an age-based to a composite 
rate, their rates actually went up 67 percent because they are 
an oilfield company working with mostly 20-something young 
males. The impact of not being able to do an age-based 
structure for him had a very negative impact.
    The sword can swing both ways on the advantages of 
disadvantages of age-based rate structures.
    Chairman Enzi. Ms. Kuenning.
    Ms. Kuenning. Thank you.
    I would like to congratulate Mr. Johnson. You were 
incorporated as an Association Health Plan before this new 
rule. Right?
    The new rule actually eliminates the requirement that 
Associations have a purpose other than offering healthcare. You 
are offering your members much more than just healthcare. You 
are business stimulation, group purchasing perhaps, all sorts 
of business reasons why you would want to come together. You 
have a vested interest in all of those members.
    But in this new rule, you can be a sole proprietor and you 
have no ability to spread any of that risk. So there is a 
distinct disadvantage to the changing of the way that it is 
written right now, that you are just going to be able to 
formulate these based on a common geography or a common 
industry. I think, is very different than what you have 
provided.
    One of the things that I just wanted to make mention is 
there has been a lot of conversation about the things that we 
are worried about. The public relies on Members of Congress for 
protections.
    In this negotiated rulemaking time and this proposed rule, 
I think those safeguards and protections, a lot of them that 
have been talked about today, have to be not only in the rule 
but in the law, so that there is some ability for states, for 
instance in terms of consumer protections, to be able to go 
back to the law and not to a proposed rule.
    Thank you.
    Chairman Enzi. Mr. Kimmich.
    Ms. Kimmich. Thank you, Senator.
    There has been a bit of discussion about there not being 
discrimination allowed with AHP's providing insurance, but I 
think it is important to note that the discrimination takes 
place in hiring practices.
    If I were to open a business tomorrow, and I needed to hire 
30 people, and I was looking at an AHP, I would certainly 
consider the age and gender of my employees because of the 
gender and age rating. That is really critical.
    Chairman Enzi. Would that not be breaking the law?
    Mr. Johnson, what kind of services do you provide besides 
health benefits?
    Mr. Johnson. As far as the plan, personally, which is what 
I consult for?
    Chairman Enzi. Yes.
    Mr. Johnson. The Chamber, of course, provides a lot of 
services that sponsors or endorses the plan. The Chamber has a 
whole variety of services that it offers to its membership of 
employers including business stimulation.
    Inside of what I provide to the Chamber is the consulting 
expertise in the Chamber Benefit Plan to help it grow, to help 
market it, to add new Chambers and new employers as it grows 
through.
    I am, specifically, as a consultant to the Chamber plan.
    Chairman Enzi. You would think that it could probably be 
done independent from all the other services?
    Mr. Johnson. It could.
    Chairman Enzi. As you are.
    Mr. Johnson. Yes.
    Mr. Condeluci. Sir.
    Chairman Enzi. Mr. Condeluci.
    Mr. Condeluci. Not that I agree or disagree with this 
change in the law which says an AHP can be created for the sole 
purpose of providing health insurance.
    But the underlying reason why, I believe it is in the 
regulation, is to allow, for example, Uber drivers who might 
want to band together. They are not finding affordable coverage 
in the individual market and to set up an organization that is 
a legally created organization that has a Board, has bylaws.
    It is that group that could then set up the Association 
Health Plan, which, again is governed by legal documents that 
set forth all of the requirements of coverage, set forth all 
the ERISA requirements, ACA requirements.
    To an extent, I agree with the concern that this is a 
change in the practice of Association Health Plans. Typically, 
they do offer coverage in addition to other services, but the 
underlying reason why they are breaking with that here is to 
allow different types of groups to actually access health 
coverage through an Association Health Plan.
    That is more of an explanatory reason as to why I believe 
that rule was put into place in the proposed regulation.
    Chairman Enzi. Well, I do not know what the purpose was, 
but it does allow single employee businesses to be a part of 
it.
    Mr. Condeluci. Yes, sir.
    Chairman Enzi. There are a lot of those single employee 
businesses, not because they want to be single employees, but 
because they have not grown yet. But they would like lower cost 
insurance too.
    Do any of you have questions for any of the others on the 
panel?
    Is there anything that you can see that could be done, 
should be done that might be beneficial in this rule that is 
not in the proposed rule at the present time?
    Just trying for a positive comment.
    Ms. Kuenning.
    Ms. Kuenning. Thank you.
    I think it has been noted here that the ability for the 
Federal financing standards to make sure that there is some 
fiscal oversight and guarantee that the Association Health 
Plans can remain fiscally viable, and that the financial 
standards, or reserved contributions, or the solvency 
requirements that can be enforced by a state.
    I think that is really important that the state actually 
can regulate the Association Health Plans, even if the 
Association Health Plans come together as an LLC in a different 
state; for instance, Texas.
    I think the other thing is the fragmentation. It worries me 
that one of the interests of the Association Health Plans is to 
make sure that you have affordable healthcare coverage, but you 
have a good insurance plan. A plan design that is robust.
    I think we have talked here about making sure that the 
Essential Health Benefits--and I think Mr. Sturm talked about 
these as well--are part of this product design. I think that 
would be really important as well.
    Making sure that we take out the variations of gender and 
age, which would be really important, and talking about network 
adequacy and churn. I think that those would helpful to the 
Association Health Plan as well.
    Chairman Enzi. Okay.
    Mr. Johnson.
    Mr. Johnson. I think one of the unintended consequences, 
obviously, of regulations then goes into cost.
    I am reminded back in 2010 in April when the ACA had come 
out and the American Society of Actuaries put out a study that 
said the ACA by itself will raise costs 34 percent for 
employers across the Nation over a period of time, just the 
regulation itself.
    Well, my neighbor in Casper is actually the former CEO of 
the largest hospital in Wyoming and I asked her. I said, ``What 
does regulation actually cost?'' because their costs are passed 
through to benefit programs in the form of premiums. Her 
comment was, ``If there was not that oversight, and the 
regulation, and the challenges, our costs could go down by 20 
percent.''
    If I went to every employer in Wyoming and said, ``We can 
lower your cost by 20 percent,'' by getting into a plan that 
did not have that kind of regulation and that balance of 
competing interests between having a quality plan with quality 
coverage at a fair price.
    It is also that interest of what do regulations actually 
cost us? Because it is added to the claims cost, which then 
translate into the premiums.
    I would encourage when you look at these about how we look 
at the cost impact of regulatory burden because that directly 
impacts employer premiums.
    Chairman Enzi. Mr. Sturm.
    Mr. Sturm. Along the lines of positive comments, if you 
allow an AHP to be fully insured, there is a lot of money that 
insurance companies set aside. This pile of cash called risk-
based capital. The NAIC makes those requirements.
    I would say that if you are going to allow them to be self-
funded, the last thing you want are these programs running out 
of money. As such, I think you should have risk-based capital 
requirements in there so that if they are going to be self-
funded, they have to have a pool of money so that when the 
actuary price is in the first year, and things go well or go 
poorly, they have enough money in that pool to offset any 
misestimates.
    Then last, I think you should put in the proposed rule that 
you have professionals that signoff on their business plan, and 
their reserves, and their premium recalculations so you do not 
have a situation where 30, 40 years ago, when the MEWA was 
reformed, where they were not set, the rates were not set 
properly and/or there were no capital requirements.
    Chairman Enzi. Mr. Condeluci.
    Mr. Condeluci. I would agree with Mr. Sturm's comment about 
the risk-based capital being application to self-insured plans.
    I do believe that many states do already have solvency 
requirements that are very, very similar to the risk-based 
capital requirement that Mr. Sturm is speaking to.
    But maybe we have a rule at the Federal level and a 
reasonable one that is applicable. If a state has a more 
onerous one or a more strict one, then that should be 
permissible. That is something to consider.
    The other comment is I do think it is critically important 
to allow self-employed individuals with no employees into these 
group health plans. They do only have one option, which is the 
fully insured individual market.
    If they have a low income, they are typically subsidized in 
the exchange market and I would argue that subsidy is going to 
be much greater than any benefit that they might get out of 
going to an Association Health Plan. Those folks will likely 
stay in the exchange market.
    But you do have folks that might be making more money such 
that they are not eligible for the subsidy. Thus, they are in 
the unsubsidized individual market. It is those folks that we 
all know are hurting most, and having another option available 
to them, I think, is critically important.
    Last, when it comes to this whole age rating issue, I agree 
that it is a big issue. Again, employers typically do not 
engage in that practice. The regulations as-written seem to 
allow Association Health Plans to engage in that practice.
    While I do not believe Association Health Plans will engage 
in specific age rating, that is not to say that it might be 
advisable to come up with a rule that tries to put some sort of 
guardrails around age rating for AHP's to say, ``This does not 
happen in the regular employer plan world. This should not 
happen in the AHP world.''
    Chairman Enzi. Ms. Kuenning.
    Ms. Kuenning. Yes, thank you.
    I wanted to get to Mr. Johnson's remarks about the cost.
    Whether you are a fan of the Affordable Care Act or not, it 
was really important for low and moderate income families 
because the pillars of that plan were to allow a Medicaid 
expansion for people 138 percent of poverty and below, which is 
around $13,000. That kind of healthcare coverage and that 
security was really important. I think Ms. Kimmich talked about 
bankruptcy. That was really important.
    Then the pillar of the marketplace where people could, to 
your point, get cost-sharing reductions. If you take the people 
out of the marketplace and into Association Health Plans, they 
will then not be able to get these cost-sharing reductions, 
which make the insurance product that they are buying much more 
affordable. There is a caution there as well.
    Thank you.
    Chairman Enzi. Thank you.
    Again, thanks to all of you for being willing to provide 
your ideas. If any of you want to put anything additional that 
you thought of in writing that we will make a part of the 
record, you are welcome to do that. We should have that within 
a week.
    Chairman Enzi. With that, I will conclude this roundtable.
    [Whereupon, at 4:53 p.m., the hearing was adjourned.]

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