[Senate Hearing 115-737]
[From the U.S. Government Publishing Office]
S. Hrg. 115-737
ROUNDTABLE ON SMALL BUSINESS
HEALTH PLANS
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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
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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
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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
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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.
---------------------------------------------------------------------------
\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
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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\
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\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.
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\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.
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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.
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\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\
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\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
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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\
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\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\
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\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\
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\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
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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\
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\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.
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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.
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\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
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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\
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\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.
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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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