[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
HEALTH CARE SOLUTIONS: INCREASING PATIENT CHOICE AND PLAN INNOVATION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MAY 11, 2016
__________
Serial No. 114-143
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
20-983 WASHINGTON : 2017
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Chairman Emeritus Ranking Member
ED WHITFIELD, Kentucky BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania ELIOT L. ENGEL, New York
GREG WALDEN, Oregon GENE GREEN, Texas
TIM MURPHY, Pennsylvania DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee MICHAEL F. DOYLE, Pennsylvania
Vice Chairman JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington KATHY CASTOR, Florida
GREGG HARPER, Mississippi JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky PETER WELCH, Vermont
PETE OLSON, Texas BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia PAUL TONKO, New York
MIKE POMPEO, Kansas JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida KURT SCHRADER, Oregon
BILL JOHNSON, Ohio JOSEPH P. KENNEDY, III,
BILLY LONG, Missouri Massachusetts
RENEE L. ELLMERS, North Carolina TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, OKlahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
Subcommittee on Health
JOSEPH R. PITTS, Pennsylvania
Chairman
BRETT GUTHRIE, Kentucky GENE GREEN, Texas
Vice Chairman Ranking Member
ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois LOIS CAPPS, California
TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee KATHY CASTOR, Florida
CATHY McMORRIS RODGERS, Washington JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida KURT SCHRADER, Oregon
BILLY LONG, Missouri JOSEPH P. KENNEDY, III,
RENEE L. ELLMERS, North Carolina Massachusetts
LARRY BUCSHON, Indiana TONY CARDENAS, California
SUSAN W. BROOKS, Indiana FRANK PALLONE, Jr., New Jersey (ex
CHRIS COLLINS, New York officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
C O N T E N T S
----------
Page
Hon. Joseph R. Pitts, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 3
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 4
Prepared statement........................................... 5
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 5
Prepared statement........................................... 7
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 8
Witnesses
Scott Gottlieb, M.D., Resident Fellow, American Enterprise
Institute...................................................... 10
Prepared statement........................................... 13
Answers to submitted questions \1\........................... 73
Avik Roy, Senior Fellow, Manhattan Institute..................... 24
Prepared statement........................................... 26
Sabrina Corlette, J.D., Research Professor, Center on Health
Insurance Reforms, Georgetown University....................... 34
Prepared statement........................................... 36
Answers to submitted questions............................... 75
Submitted Material
Statement of the Committee for Economic Development, submitted by
Mr. Pitts \2\
----------
\1\ Mr. Gottlieb did not respond to questions for the record.
\2\ Available at: http://docs.house.gov/meetings/if/if14/
20160511/104905/hhrg-114-if14-20160511-sd003.pdf.
HEALTH CARE SOLUTIONS: INCREASING PATIENT CHOICE AND PLAN INNOVATION
----------
WEDNESDAY, MAY 11, 2016,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:58 a.m., in
room 2322, Rayburn House Office Building, Hon. Joseph R. Pitts
(chairman of the subcommittee) presiding.
Present: Representatives Pitts, Guthrie, Shimkus, Murphy,
Burgess, Blackburn, Lance, Griffith, Bilirakis, Long, Ellmers,
Bucshon, Brooks, Collins, Upton (ex officio), Green, Engel,
Capps, Schakowsky, Butterfield, Sarbanes, Matsui, Schrader,
Kennedy, Cardenas, Pallone (ex officio).
Staff Present: Adam Buckalew, Professional Staff Member;
Rebecca Card, Assistant Press Secretary; Graham Pittman,
Legislative Clerk; Chris Sarley, Policy Coordinator,
Environment & Economy; Jennifer Sherman, Press Secretary; Kyle
Fischer, Minority Health Fellow; Tiffany Gurascio, Minority
Deputy Staff Director and Chief Health Advisor; Samantha
Satchell, Minority Policy Analyst; and Arielle Woronoff,
Minority Health Counsel.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Pitts. The time of 10 o'clock having arrived, we will
call the subcommittee to order. The chair will recognize
himself for an opening statement.
The subcommittee is holding a hearing today to take a
closer look at healthcare solutions centered on promoting
patient choice and innovation in the design of health coverage.
Health care is the most personal of any political issue,
and when Congress gets involved in health policy we are
changing people's lives. Decisions we make in Washington can
have a tremendous effect on the well-being of families and
their budgets.
A country in which 45 million people went without health
insurance was certainly in need of health reform. However, the
Affordable Care Act is not the health reform this country
needed. In fact, I believe it is a setback that makes true
reform even harder to accomplish.
The first thing health reform should accomplish is to
stabilize or reduce the cost of health care. The number one
complaint people have about health care is the rising cost. And
yet the ACA has done little to decrease healthcare spending. In
fact, many Americans are paying higher premiums and deductibles
for health insurance and care as a result of the law. We can do
better.
We must make healthcare costs more transparent and give
people the freedom to choose the insurance that they want, with
the benefits that they value most, at a price that is fair.
More government bureaucracy, regulations, and spending never
successfully reduced the price of health care.
Yet that is exactly the premise of how health insurance is
regulated today with top-down mandates that empower Washington
and remove control over healthcare decisions from states and
small businesses and families and individuals. And this has to
be changed if we truly want bottom-up solutions that provide
better care at lower costs for patients.
Some of the free enterprise solutions that I believe would
truly help control costs and improve health care for all
include portability, more pooling options, strengthening
consumer-driven arrangements like health savings accounts, and
innovation through less Federal benefit mandates.
Employer-sponsored insurance is a critical part of our
healthcare system and must be protected, but for many their
health insurance is too closely tied to employment. People who
are laid off, fired, or have to quit working can find
themselves uninsured at a time when they can least afford it.
We need better options so patients can truly own a plan of
their choosing on the individual market.
Before the President's healthcare law, I introduced the
Small Business Choice Act, which would allow small businesses
to form private health insurance cooperatives to buy insurance
at lower rates while transferring catastrophic costs to a
larger insurer, and the bill helps make small employers offer
health insurance through a refundable tax credit of 65 percent,
and self-employed people would save $5,000 a year on health
insurance, and other small firms would save more than 34
percent.
Similarly, association health plans, AHPs, could allow
rotary clubs, professional associations, and other groups to
band together across state lines, form their own health plans,
increasing their purchasing power and lowering costs.
Health savings accounts should also be strengthened, and
these accounts allow individuals to save money in an account
they control, using the money to pay for everyday medical
expenses. Only when major medical expenses are incurred does
the insurance company step in after a high deductible paid out
of the HSA is met. HSAs encourage individuals to make smart
spending decisions, and cost them less over time than
traditional insurance.
We should never forget that innovation comes almost
exclusively from the private sector. New drugs, therapies, and
cures will only be developed if the companies that develop them
are able to commercialize them. Empowering Washington is not
the way we are going to promote innovation and invention.
So our hearing today will examine options to reform
insurance markets to better serve patients and examine better
paths forward.
My time has expired. With that I recognize Ms. Matsui, who
is filling in as ranking member, for 5 minutes for an opening
statement.
[The prepared statement of Mr. Pitts follows:]
Prepared statement of Hon. Joseph R. Pitts
The subcommittee will come to order.
The Chairman will recognize himself for an opening
statement.
Today's hearing will take a closer look at health care
solutions centered around patient choices and limiting, or even
ending, government's role as an insurance regulator to allow
insurance plans to innovate.
Health care is the most personal of any political issue.
When Congress gets involved in health policy, we are changing
peoples' lives. Decisions we make in Washington can have a
tremendous effect on the well-being of families and their
budgets.
A country in which 45 million people went without health
insurance was certainly in need of health reform. However, the
Affordable Care Act is not the health reform this country
needed.
In fact, I believe it is a tremendous setback and makes
true reform even harder to accomplish.
The first thing health reform should accomplish is to
stabilize or reduce the costs of health care. The number one
complaint people have about health care is the rising cost, and
yet the ACA has done nothing to decrease health care spending.
In fact, many Americans are paying more for health insurance
and care as a result of the law.
We can do better. Government bureaucracy and rules can
never hope to contain costs. We must make health care costs
more transparent and give people the freedom to choose the
insurance that they want.
I do not believe that more government bureaucracy,
regulations, and spending will ever successfully control the
price of health care. We have to put individuals and families
in charge of their own health care. They need adequate
information in order to make smart decisions and the freedom to
choose what works best for them. Some of the free market
solutions that I believe would truly help control costs and
improve health care for all includes portability, more pooling
options, consumer-driven arrangements, and innovation through
vibrant plan competition.
For many, their health insurance is too closely tied to
employment. People who are laid off, fired, or have to quit
working can find themselves uninsured at a time when they can
least afford it. Patients should be able to own their insurance
plan, and take it with them, even if they enter into the
individual market.
Before the president's health care law, I introduced the
Small Business CHOICE Act, which would allow small businesses
to form private health insurance cooperatives to buy insurance
at lower rates while transferring catastrophic costs to a
larger insurer. The bill helps small employers offer health
insurance through a refundable tax credit of 65 percent. Self-
employed people would save $5,000 a year on health insurance,
and other small firms would save more than 34 percent.
Similarly, association health plans (AHPs) could allow
Rotary clubs, professional associations and other groups to
band together across state lines and form their own health
plans, increasing their purchasing power and lowering costs.
Also, lack of consumer control has the effect of reducing
people's motivation to make their own responsible decisions.
There is little incentive to make wise decisions about when to
see a doctor or to make healthy lifestyle choices. Instead,
insurance companies try to reduce costs by requiring doctor
referrals and insurance pre-certification. A better way to help
people make responsible decisions it to transfer the motivation
to be frugal from the insurance company to the individual.
Health Savings Accounts (HSAs), created in 2003 by
Republicans but still under-used, allow individuals to save
money in an account they control, using the money to pay for
everyday medical expenses. Only when major medical expenses are
incurred does the insurance company step in, after a high
deductible (paid out of the HSA) is met. HSAs encourage
individuals to make smart spending decisions and cost them less
over time than traditional insurance.
We should never forget that innovation comes almost
exclusively from the private sector. New drugs, therapies, and
cures will only be developed if the companies that develop them
are able to commercialize them. We should not nationalize
healthcare and we should not weigh down innovation and
invention with unnecessary new taxes and regulations.
Our hearing today will examine options to reform insurance
markets to better serve patients.
Ms. Matsui. Mr. Chairman, I would like to reserve the time
for Mr. Green until he returns.
Mr. Pitts. All right. That is fine.
Does anyone else seek time?
All right. We will go to our chairman of the full
committee, Mr. Upton, for 5 minutes for an opening statement.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Thank you, Mr. Chairman.
Today's hearing is an important discussion on what Congress
can do to help Americans across the country access better care
at, indeed, a lower cost. Individuals and families across the
country are seeing growing premiums and deductibles, yet are
seeing provider networks narrow and restrict access to life-
saving medicines and treatments. Folks in my State, as well as
across the country, are frustrated. The healthcare system was
turned upside down. Promises were not kept. Costs have gone up,
while quality has often deteriorated.
So we have to chart a better path forward to reforming our
insurance markets so that they can better serve the patients.
That is what this effort is all about. We can strengthen health
coverage by expanding plan offerings that allow for real
choice, as well as incentivizing market innovation without the
mandates.
I have laid out a number of ideas to do this in the Patient
CARE Act that I authorized with Senators Hatch and Burr, and
our committee members have laid out dozens and dozens of ideas
that put the power to choose in the hands of patients.
So let's establish another point from the start. House
Republicans believe that no patient should be denied coverage
or experience coverage shortages simply because they are sick.
There are various ideas of how to accomplish our goals without
interrupting the health insurance market, including guaranteed
issue and continuous coverage protections. Continuous coverage
means that if a patient gets a new job or retires or switches
plans because their family moves, whatever, they will not be
charged more than the standard rates, even if they are dealing
with a serious medical issue or, as we know it, preexisting
condition.
Protecting our most vulnerable patients with preexisting
condition safeguards is just as much about helping them keep
health coverage as it is about creating an environment for them
to get health coverage. Continued enrollment can lead to lower
costs and stable markets, which gives consumers a pathway to
choose more innovative options.
So today we are going to talk about ways to achieve this
through market reforms instead of government mandates, by
encouraging States to lower costs through premium reduction
programs. Options like advanced high-risk pools can also open
new access points to the market while helping keep patient
costs down.
Headlines across the country confirm that patients are
paying higher premiums and seeing fewer options. Patients are
exiting the marketplace. Plans are leaving the exchanges. So
simply put, we are 6 years into the President's healthcare law,
and it is not working the way people thought it might.
One disturbing fact that confirms the need for reform is
that 19 of the 37 States on healthcare.gov--19 of the 37--saw
double-digit premium increases for the second-lowest-cost
silver plan. Even worse, three of those States saw benchmark
rates go up to 30 percent. And S&P reported Monday that
individual market costs jumped 23 percent in 2015.
That is why we are here today, to discuss the merits of
idea for increasing patient choices and incentivizing plan
innovation. I look forward to the witnesses' testimony and
would yield to any Republicans on my side. I yield back the
balance of my time.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
Today's hearing is an important discussion on what Congress
can do to help Americans across the country access better care
at a lower cost. Individuals and families across the country
are seeing growing premiums and deductibles, yet are seeing
provider networks narrow and restrict access to life-saving
medicines and treatments. Folks in Michigan and the country are
frustrated. The health care system was turned upside down,
promises were not kept, costs have gone up while quality has
deteriorated.
We have to chart a better path forward to reforming our
insurance markets so they better serve the patients. That's
what this effort is all about. We can strengthen health
coverage by expanding plan offerings that allow for real
choice--as well as incentivizing market innovation without
mandates. I have laid out many ideas to do this in the Patient
CARE Act that I authored with Senators Orrin Hatch and Richard
Burr. And our committee members have laid out dozens of ideas
that put the power to choose in the hands of patients.
Let's establish another point from the start: House
Republicans believe that no patient should be denied coverage
or experience coverage shortages simply because they are sick.
There are various ideas of how to accomplish our goals
without interrupting the health insurance market; including
providing guaranteed issue and continuous coverage protections.
Continuous coverage means that if a patient gets a new job,
retires, or switches plans because their family moves, they
will not be charged more than standard rates--even if they are
dealing with a serious medical issue.
Protecting our most vulnerable patients with pre-existing
condition safeguards is just as much about helping them keep
health coverage as it is about creating an environment for them
to get health coverage. Continued enrollment can lead to lower
costs and stable markets, which gives consumers a pathway to
choose more innovative options.
Today, we will talk about ways to achieve this through
market reforms instead of government mandates, like encouraging
states to lower costs through premium reduction programs.
Options, like advanced high risk pools, can also open new
access points to the market while helping keep patient costs
down.
Headlines across the country confirm that patients are
paying higher premiums and seeing fewer options. Patients are
exiting the marketplace. Plans are leaving the exchanges.
Simply put, we are 6 years into the president's health care
law and it is not working. One disturbing fact that confirms
the need for reform is that 19 of the 37 states on
HealthCare.gov saw double-digit premium increases for the
second-lowest cost silver plan. Even worse, three of these
states saw benchmark rates go up 30 percent. And S&P reported
Monday that individual market costs jumped 23 percent in 2015.
This is why we are here today--to discuss the merits of
ideas for increasing patient choice and incentivizing plan
innovation. I look forward to the witness testimony and I
encourage a thoughtful dialogue about ideas.
Mr. Pitts. The chair thanks the gentleman.
I now recognize the ranking member of the full committee,
Mr. Pallone, 5 minutes for opening statement.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman.
I believe we all share a common goal. We want a healthcare
system that is more affordable, accessible, and higher quality,
a system that works for all Americans.
Now, how we achieve this goal tends to be a topic of
intense debate, and it should be. The Affordable Care Act has
greatly expanded access to quality, affordable health insurance
in our country. There is, however, more that we can do to
improve our health system for everyone.
I believe the ACA has been a success. Twenty million more
people now have health insurance. Women, minorities, and young
people in particular have experienced substantial gains in
coverage. Since 2013, the uninsured rate amongst young adults
has dropped by 47 percent. And together we should be discussing
how we can build on this success to give even more Americans
the peace of mind that quality health insurance provides.
The law also put in place important consumer protections
that prevent insurers from discriminating against the most
vulnerable, and it eliminated out-of-pocket costs for important
preventative services, such as immunizations and cancer
screenings.
While we know the marketplaces still need time and room to
grow, we can't forget what the individual market was like
before the Affordable Care Act. Double-digit rate increases on
subpar plans were the norm. The ACA gave HHS and States the
tools they need to monitor insurers and put a stop to these
harmful practices.
This rate review program brings transparency to the
process, greater stability to the market, and protects
individuals from unreasonable price increases. It also resulted
in subpar plans simply no longer being sold if they don't cover
hospitalizations or prescription drugs or have limits on how
much health care will be covered in a given year.
The medical loss ratio ensures that insurers spend at least
80 percent of premium dollars on actual health care and not
executive bonuses or advertising.
The ACA also created an entirely new marketplace that
expanded coverage to individuals who prior to the Affordable
Care Act had little to no hope of finding affordable health
insurance. Our witnesses today will talk about giving consumers
more choices, but let's not lose sight of the fact that before
the ACA, millions of Americans with preexisting conditions had
no choices at all.
These marketplaces are still in their infancy and will
continue to mature over time as insurers become more accustomed
to calculating risk and as more individuals transition from
grandfathered and grandmothered plans to marketplace plans.
Creating a competitive and successful market in a system as
complex as our own is certainly no small feat. Millions of
Americans count on this coverage and therefore we should do
everything we can to make sure that these marketplaces grow
even stronger.
And this hearing has the potential to be a starting point
for a real discussion on bipartisan improvements that will
strengthen the systems already in place and bring us even
closer to high-quality, universal coverage. However, I also
recognize that this hearing has the potential to be a
continuation of a 6-year Republican assault against the
Affordable Care Act and the millions of Americans who benefit
from it.
The ACA's marketplaces put power back into the hands of
consumers, gave everyone the right to buy insurance, and forced
insurers to compete based on price and value. We can't return
to a time when insurers competed to find the healthiest, least-
expensive consumers and left millions of Americans to fend for
themselves. I think we have a duty to overcome partisan
politics and work together to come up with the best solutions,
and I am hoping that we will use our time today to do just
that.
And I would like to yield the remainder of my time to the
gentlewoman from California, Ms. Matsui.
[The prepared statement of Mr. Pallone follows:]
Prepared statement of Hon. Frank Pallone, Jr.
Good morning everyone and thank you to the witnesses for
being here today. I believe we all share a common goal: we want
a health care system that's more affordable, accessible, and
higher quality-a system that works for all Americans. Now, how
we achieve this goal tends to be a topic of intense debate, and
it should be. The Affordable Care Act has greatly expanded
access to quality, affordable health insurance in our country.
There is, however, more that we can do to improve our health
system for everyone.
The ACA has been a success. Twenty million more people now
have health insurance. Women, minorities, and young people in
particular have experienced substantial gains in coverage.
Since 2013 the uninsured rate among young adults has dropped by
47 percent. Together, we should be discussing how we can build
on this success to give even more Americans the peace of mind
quality health insurance provides. The law also put in place
important consumer protections that prevent insurers from
discriminating against the most vulnerable, and it eliminated
out of pocket costs for important preventative services, such
as immunizations and cancer screenings.
While we know the marketplaces still need time and room to
grow, we cannot forget what the individual market was like
before the ACA. Double-digit rate increases on sub-par plans
were the norm. The ACA gave HHS and states the tools they need
to monitor insurers and put a stop to these harmful practices.
This rate review program brings transparency to the process,
greater stability to the market and protects individuals from
unreasonable price increases. It also resulted in sub-par plans
simply no longer being sold if they don't cover
hospitalizations or prescription drugs or have limits on how
much health care will be covered in a given year. The Medical
Loss Ratio ensures that issuers spend at least 80 percent of
premium dollars on actual health care, not executive bonuses or
advertising.
The ACA created an entirely new marketplace that expanded
coverage to individuals who prior to the ACA had little to no
hope of finding affordable health care. Our witnesses today
will talk about giving consumers more choices, but let's not
lose sight of the fact that before the ACA, millions of
Americans with pre-existing conditions had NO choices.
These marketplaces are still in their infancy and will
continue to mature over time as insurers become more accustomed
to calculating risk, and as more individuals transition from
``grandfathered'' and ``grandmothered'' plans to marketplace
plans. Creating a competitive and successful market in a system
as complex as our own is no small feat. Millions of Americans
depend on this coverage, and therefore we should do everything
we can to make sure these marketplaces grow even stronger.
This hearing has the potential to be a starting point for a
real discussion on bipartisan improvements that will strengthen
the systems already in place and bring us even closer to high
quality universal coverage. However, I also recognize that this
hearing has the potential to be a continuation of a six year
Republican assault against the ACA and the millions of
Americans who benefit from it. The ACA's marketplaces put power
back into the hands of consumers, gave everyone the right to
buy insurance, and forced insurers to compete based on price
and value. We cannot return to a time when insurers competed to
find the healthiest, least expensive consumers and left
millions of Americans to fend for themselves.
We have a duty to overcome partisan politics and work
together to come up with the best solutions. I'm hoping that we
will use our time today to do just that. Thank you.
Ms. Matsui. Thank you very much.
The Affordable Care Act is improving millions of Americans'
lives. Thanks to the ACA, nearly 18 million previously
uninsured Americans no longer have to worry that they are one
illness away from financial ruin.
The Affordable Care Act is intertwined into the fabric of
our healthcare system. It is time to recognize the ACA as the
law of the land so we can move forward with the business of
ensuring that every American has the opportunity to live a
healthy life. As members of the Health Subcommittee, that
should be our mission.
Today we are talking about market reforms that increase
transparency and access for patients. Because of the ACA,
patients with preexisting conditions who never had a choice
when it came to their health care now have options. These
protections are particularly important for those over 30
million individuals in this country who suffer from rare or
serious chronic diseases.
The ACA has helped millions of families gain access to
quality, affordable coverage, and I do hope that our committee
can work together to continue this progress to improve the
health and lives of Americans.
I yield the remainder of my time back to the ranking
member.
Mr. Pitts. The gentleman's time has expired.
The chair now recognizes the ranking member of the
subcommittee, Mr. Green, 5 minutes for an opening statement.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman. And I will ask for
dispensation because I was actually speaking to Bill Flores,
the Chamber of Congress, and they asked too many questions. I
may have been the only Democrat they heard from that day.
I want to welcome our panel. Good morning, and thank you
all for being here today.
It has been almost 2 \1/2\ years since the full reforms of
the Affordable Care Act went into effect. The third open
enrollment period built off the successes of the first and
second, and there is even reason to believe that the fourth
open enrollment period will continue this trend. The
marketplaces created under the Affordable Care Act are in their
relative infancy. As with any other, almost every new market,
particularly in the healthcare space, there will be changes and
adjustments in the early years. Insurers will both enter and
exit as they navigate the new landscape of millions of new
consumers, protections, and requirements.
Medicare, when it was first created, experienced growing
pains, as did Medicare Advantage and the part D plans. You will
hear reports sounding the alarm that in 2016, 39 insurers left
the Federal marketplace. Maybe actuary reports fail to mention
that in the same year, 40 insurers entered the marketplace.
The number of issuers in every State has grown each year at
a year-over-year average of 8 in 2014, 9 in 2015, and 10 in
2016. Nearly 90 percent of consumers that had coverage in 2015
had a choice of three or more insurers for the 2016 coverage.
The unfiltered facts clearly indicate that the marketplace
is an attractive place for issuers to do business and for
consumers to purchase quality, affordable insurance, many for
the first time in their lives.
Health insurance is a product that Americans want and need.
The Affordable Care Act is creating a system that lends truth
to the principle that health care is not a privilege for the
few, but the right for all Americans.
The Affordable Care Act has been resoundingly successful,
but like any law, it is not perfect. As I have been known to
say, if you want something done perfectly, don't ever come to
Congress. That is why, after passing major reforms, Congress
has very often revisited the legislation and come together to
improve it.
While I don't expect us to agree on a lot of solutions
debated during this hearing, it is a welcome departure from the
politically motivated hearings we have had over the last 6
years which were only designed to score points and attack the
law rather than look for ways to improve the exchanges on
behalf of the American people. I am hopeful this is a genuine
step toward getting back to the business of legislating. I
thank the chairman for calling it.
The core strength of the ACA is that it puts power back in
the hands of consumers, contains key provisions, and requires
insurers to compete based on their ability to offer high-
quality insurance at an affordable price. In the pre-ACA world,
the individual market was unstable, unfair, and inaccessible to
many. Insurers competed to find the healthiest and cheapest
consumers, and those with preexisting conditions were largely
priced out. Women could be charged more just because of their
gender, annual and lifetime limits hindered patients' ability
to get care when they needed it, and people could be dropped
from their plan when they got sick and needed it the most.
In the post-ACA individual market, where everyone has the
right to buy insurance and choices are transparent and easy to
compare, consumers make issuers compete based on price and
value, and with any market, some insurers are adapting faster
than others to the new landscape. This is the nature of
competition.
Some insurers have already figured out how to succeed in
the marketplace and they are growing and expanding their
exchange business. Others will learn to adapt or else lose
market share to those who already have. These are the features
of a healthy market. This is the proof that ACA's market-based
reforms are working.
There are definitely ways to improve the ACA, to expand
coverage to more Americans, and to lower cost. I look forward
to exploring these with my colleagues. And, for example, my
friend and Texan, good friend Joe Barton and I have a
requirement for 12-month continuous enrollment in Medicaid and
CHIP. Continuous coverage brings down administration burden,
provides for continuous care, and keeps folks healthier while
bending the curve in the long run.
Again, I want to thank our witnesses for being here today,
and I look forward to getting back to the business of
legislating. Thank you.
Mr. Pitts. The chair thanks the gentleman.
As usual, all members' opening statements will be made a
part of the record.
I seek unanimous consent to submit the following document
for the record: a statement from the Committee for Economic
Development. \1\ Without objection, so ordered.
---------------------------------------------------------------------------
\1\ The statement has been retained in committee files and is
available at: http://docs.house.gov/meetings/if/if14/20160511/104905/
hhrg-114-if14-20160511-sd003.pdf.
---------------------------------------------------------------------------
Mr. Pitts. We have one panel before us today. I would like
to thank you for coming. And I will introduce our panelists in
the order of their giving testimony.
First, we have Dr. Scott Gottlieb, resident fellow,
American Enterprise Institute; Mr. Avik Roy, senior fellow,
Manhattan Institute; and Sabrina Corlette, research professor,
Center on Health Insurance Reform, Georgetown University.
Thank you for coming today. Your written testimony will be
made a part of the record. You will each be given 5 minutes to
summarize your testimony.
So at this point, Dr. Gottlieb, you are recognized for 5
minutes for your summary.
STATEMENTS OF SCOTT GOTTLIEB, M.D., RESIDENT FELLOW, AMERICAN
ENTERPRISE INSTITUTE; AVIK ROY, SENIOR FELLOW, MANHATTAN
INSTITUTE; AND SABRINA CORLETTE, J.D., RESEARCH PROFESSOR,
CENTER ON HEALTH INSURANCE REFORMS, GEORGETOWN UNIVERSITY
STATEMENT OF SCOTT GOTTLIEB
Dr. Gottlieb. Mr. Chairman, Mr. Vice Chairman, thank you
for the opportunity to testify here today.
My name is Scott Gottlieb. I am a physician and resident
fellow at the American Enterprise Institute. I previously
worked at CMS and FDA and have experienced and evaluated the
insurance market as a provider, as a policy analyst, and as an
investor in the space, and it is from three perspectives I want
to offer some thoughts today. We face some continuing
challenges with respect to our current insurance market and
some new pressures, and I want to focus not on how we got here,
but what we can do about it.
Improving the existing market for insurance inside the
state-based exchanges or transitioning to an entirely new
framework for how we pool risk and help consumers buy coverage
should include, in particular, four principles that I want to
outline today.
First, more rating and regulatory flexibility for insurance
products to enable more competition between different and,
hopefully, more innovative plans. I believe that regulatory
standards and how CMS is interpreting its own rules limit the
ability of plans to offer innovative designs.
Because health plans must adhere to a narrow formula to
fall within the discrete metal tiers, it leads to an
environment where plans are designed from the top down, off
actuarial targets, rather than based on a bottoms-up approach
to build off principles that may lead to more innovation and
coverage.
To these ends, insurers can be required to simply report
the actuarial value of their plans so long as they meet a
minimum level of coverage. Instead of making decisions based on
rigid targets that are tied to metals, consumers can make
choices based on the actual actuarial value of the plan.
I believe allowing more regulatory flexibility around
rating and plan design would enable a wider selection of high-
value options, such as value-based insurance designs or designs
that reduce premiums and other costs for consumers that stay
with an insurer over time.
Second, we need clear rules on open enrollment periods to
enable a viable risk pool while using incentives rather than
mandates as a way to keep people in the insurance market. We
absolutely must maintain some exemptions for people who
confront some discrete challenges obtaining coverage during
open enrollment periods. But carefully defined enrollment
windows can form a key element of rules that use incentives to
encourage people to enter the insurance market and stay
continuously insured, rather than relying on penalties to
enable these same outcomes.
Right now the lack of tightly defined enrollment periods,
verification requirements, and fluid exemptions largely
forecloses the ability to use the requirement for continuous
coverage as a way to create incentives for people to get into
and stay in the insurance market.
Third, subsidies need to be tied more closely to risk, and
risk adjustment must provide plans with incentives to enroll
and improve the health of people with chronic conditions. In
the plan that I helped co-author at AEI with my colleagues, we
advocate a system of tax credits. These are set initially as a
fixed-dollar amount based on age. Under our framework, older
individuals would get larger subsidies reflecting their
tendency to use more healthcare services.
Another option is to match the magnitude of the tax credits
more closely to the varying insurance costs that real
purchasers will face in a less regulated market. This second
option would make the tax credit amounts more open-ended
initially in response to the premiums that may vary with age,
geography, and perhaps some form of preexisting risk. This
initial floating cost subsidy structure could then be adjusted
in later years to set a ceiling on maximum tax benefits to curb
overspending and add additional subsidies for more economically
or medically vulnerable populations.
Any approach should be coupled to proper risk adjustment so
that health plans have an incentive to enroll individuals with
certain preexisting conditions and improve their health.
The credit the health plans receive can be adjusted
prospectively based on a defined set of healthcare conditions
and a methodology that the insurers agree to in advance, since
they are the ones who know best where the economic
sensitivities are.
Fourth, and finally, we need to contemplate policies that
offer incentives for new plan formation and alternatives to the
hospital-led consolidation of providers that are driving up
costs. With respect to health plans, there has been no new net
health plan formation since 2008. By this, I mean new health
carriers. I believe that a big culprit is the caps on the
operating margins, which makes it hard for new plans to enter
the market even with some of the concessions that are made
available to startup plans.
On the provider side, we need to consider policies to
create alternatives to the consolidation of physicians around
local hospitals, which is increasing in a number of markets and
is giving a single health system the sort of monopoly position
that is driving up costs.
Our healthcare reform should be aimed at increasing choice
and competition as a way to give consumers more options and
more opportunities to access affordable coverage. I hope that
these concepts I outline here today can advance some of these
goals, and I am grateful for the opportunity to testify before
the committee. Thanks a lot.
[The prepared statement of Dr. Gottlieb follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. The chair thanks the gentleman.
I now recognize Mr. Roy, 5 minutes for your summary.
STATEMENT OF AVIK ROY
Mr. Roy. Chairman Pitts, Ranking Member Green, and members
of the Health Subcommittee of the Energy and Commerce
Committee, thanks for inviting me to speak with you today. My
name is Avik Roy. I am a senior fellow at the Manhattan
Institute where I conduct research on health care reform.
In my remarks, I will focus on two areas. First, I will
discuss flaws in the design of the ACA's insurance exchanges.
Second, I will describe the principles and policies that
Congress should consider in order to achieve better reform.
The ACA has reduced the number of uninsured, but its
premiums on the exchanges have been so high that enrollment in
the exchanges has been poor. 2016 enrollment was around 11
million, far below the CBO's original 21 million estimate.
The exchanges were built on a theory called the three-
legged stool. First, the law would impose a raft of regulations
to transfer costs from the sick to the healthy. Second, it
would impose an individual mandate in order to force the
healthy to purchase this highly costly coverage. Third, it
would lessen the burden of the mandate for the poor using
subsidies.
The problem is that the legs of the three-legged stool in
the ACA were poorly designed. The regulatory leg is too long,
driving up the cost of nongroup coverage. The mandate leg is
too short, allowing healthier individuals to avoid buying
costly coverage. And the subsidy leg is too wobbly to correct
the imbalances of the other two legs.
By far, the law's most damaging regulation is its age-based
community rating, forcing insurers to charge their oldest
customers no more than three times what they charge their
youngest. This has more than doubled the cost of health
insurance for younger individuals in most States. Because the
individual mandate's fines are so small relative to the cost of
this coverage, young people are staying out. For most
Americans, the ACA's subsidies don't offset far higher
premiums. As a result, exchange enrollment for people with
incomes above 250 percent of the Federal poverty level is well
below 20 percent.
Furthermore, the ACA's subsidy system has proven to be
extremely convoluted. It requires people to estimate their
future income on a rolling monthly basis and then pay the
government back if the Treasury Department determines that they
have overestimated their eligibility.
In 2014, MI published Transcending ObamaCare, a health
reform plan that would cover more people than the ACA but with
far less Federal intervention than either current or prior law.
Here are some key concepts from that plan that Congress should
consider.
The most important thing Congress can do is to repeal the
ACA's three-to-one community rating age band, which makes
coverage unaffordable for young people. This discriminatory
policy is the single greatest driver of the exchange's poor
performance. Repeal of the age band can be paired with
transitional funding for the near-elderly such that current
enrollees can keep their current plan.
If the age band is repealed, a reformed system can preserve
guaranteed issue and prohibit medical underwriting. In other
words, it can protect those with preexisting conditions without
an individual mandate. The mandate can be replaced with late
enrollment penalties, a shorter open enrollment period, and the
option of insurance contracts of 2 to 5 years instead of only 1
year on the current ACA exchanges.
Congress should put patients back in charge of their own
healthcare dollars wherever possible. It should maximize
personal choice and improve the flexibility of health savings
accounts. It should repeal the ACA's tax increases, especially
those like the health insurance tax, the medical device tax,
and the drug tax, that directly translate into higher premiums.
Finally, Congress should replace the ACA's convoluted
subsidy system with transparent, means-tested, age-adjusted tax
credits. Some have proposed a uniform tax credit in which the
poor and the wealthy receive the same financial assistance.
That approach is unwise in my view because it severely limits
the amount of assistance we can provide to the poor.
In 2017, the average exchange subsidy per subsidized
enrollee, according to CBO, will be $4,550. By contrast, one
uniform tax credit proposal that has been widely circulated
would offer a subsidy of $2,100 to those in middle age
regardless of need. That difference would be highly disruptive
to the poor and the sick and result in millions fewer insured.
Instead, an ACA replacement should preserve a sliding scale
of means-tested tax credits but do so based on income from the
previous tax year. That way the IRS has verified income date
with which to base its tax credit calculations.
Based on our fiscal modeling, the reforms described above,
combined with others, could reduce Federal spending by $10
trillion over the next three decades and increase the number of
individuals with health insurance by 12 million over and above
current law, and they would reduce the cost of single health
insurance policies by 18 percent by 2021.
The ACA's shortcomings should not discourage Congress from
striving to achieve the law's stated goal, affordable health
coverage for every American. That objective remains as
important as ever.
Thanks again for having me. I look forward to your
questions and of being of further assistance to this committee.
[The prepared statement of Mr. Roy follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. The chair thanks the gentleman.
Ms. Corlette, you are recognized for 5 minutes for your
summary.
STATEMENT OF SABRINA CORLETTE
Ms. Corlette. Thank you, Chairman Pitts and Ranking Member
Green. Thank you for the opportunity to testify today.
I am going to make two primary points. First, the
Affordable Care Act has led to an unprecedented expansion in
access to affordable comprehensive health insurance. And
second, 6 years in, we have new opportunities to build on and
strengthen the law in order to ensure its benefits can be truly
universal.
The last time I sat before you, it was just after the
launch of the ACA's health insurance marketplaces. Many were
questioning whether the law would work. What a difference 2
years makes. Since the rollout of the ACA, we have strong
evidence of improved access, the ACA has expanded health
insurance coverage to 20 million people, and as a result, the
number of uninsured Americans is at its lowest level in 5
decades with almost 90 percent of people now covered, an end of
health status discrimination. Up to 122 million Americans with
a preexisting condition now have peace of mind that if they
leave work to care for a loved one, start a new business, or go
back to school, they will no longer be denied access to
affordable health insurance.
Improved quality of coverage. The ACA's reforms have
improved not only access to coverage, but the quality. The vast
majority of people newly enrolled are satisfied with their new
health insurance plan and the doctors in it.
And bending the cost curve. The ACA has contributed to an
unprecedented slowdown in healthcare cost growth. Further,
several of the payment and delivery system reform experiments
launched by the ACA are offering some hope that we can reduce
waste, lower costs, and maintain the quality of care for
patients.
To understand how far we have come, it is helpful to pause
and remember where we were before the ACA. Back then, the
individual insurance market suffered from a lack of access. As
many as 40 percent of applicants were denied coverage because
of a preexisting condition.
Inadequate coverage. Before the ACA, in most states
insurers were permitted to permanently exclude any preexisting
conditions, and many excluded maternity coverage, mental
health, and prescription drugs as a matter of course.
Deductibles of $10,000 or more were not uncommon, and many
policies came with lifetime or annual caps on benefits.
And coverage was often unaffordable. Before the ACA, 70
percent of people with health problems reported it very
difficult or impossible to find an affordable plan.
At the same time, none of the nightmare scenarios that some
ACA opponents predicted have come to pass. The ACA has not
caused employers to drop coverage for their workers, nor has it
resulted in reductions in employment. On the whole, coverage
trends for ESI have remained stable.
No law is perfect, and the ACA is not perfect. Six years
in, I encourage members of this subcommittee to consider some
pragmatic improvements, including providing incentives to
States to expand Medicaid. In 19 states, families just below
the poverty line are denied access to coverage because they
don't make enough money to be eligible for the marketplace tax
credits. Congress should adopt the President's proposal to
allow any state that expands Medicaid to receive a 100 percent
match for the first 3 years.
Fix the family glitch. Congress can and should clarify the
law to ensure that working families are able to access the tax
credits.
Improve affordability. Even with those tax credits and
cost-sharing reductions, many low- and moderate-income
Americans face very high costs when they purchase insurance. I
encourage Congress to reduce the amount of income families are
expected to contribute and to improve cost-sharing support.
Support outreach and enrollment assistance. As many as 16
million Americans are eligible for but not enrolled in either
Medicaid or subsidized marketplace insurance. Many just don't
know about the availability of these coverage options and the
financial help, and they need assistance through the enrollment
process. A relatively small investment in funds could ensure
that more people are enrolled in the coverage that is right for
them.
And make the plan shopping experience as easy as possible.
The marketplaces need a stronger infrastructure to support
eligibility determinations and the plan shopping experience.
This should include improved call centers and appeals
processes, as well as better Web-based tools.
The ACA has ushered in much-needed reforms that have
dramatically improved access to affordable, high-quality
coverage. In just 2 short years, these changes have helped to
reduce the percentage of uninsured to its lowest point in over
a generation, and that is a huge accomplishment. However, we
are also beginning to see areas in which we can build on and
improve the law to make it work better for more people.
I look forward to the discussion of how best to achieve
that. Thank you.
[The prepared statement of Ms. Corlette follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Pitts. The chair thanks the gentlelady, thanks each of
our witnesses for your testimony. You have each provided
thoughtful testimony. And so we will now begin questioning. I
will recognize myself for 5 minutes for that purpose.
Mr. Roy, we will begin with you. You have advised several
high-level officials and candidates on health policy. Would you
please describe some of the commonalities in the health reform
plans offered by conservatives?
Mr. Roy. Yes. So I was also a co-author of the plan that
Dr. Gottlieb mentioned that was published by the American
Enterprise Institute. So to take that plan as an example and
the plan that we published at the Manhattan Institute as two
examples, both of them the common element is replacing the ACA
with a system of tax credits in which patients control their
own healthcare dollars.
The challenge with the ACA is twofold. One, a lot of
discrimination against younger and healthy enrollees. And, two,
the fact that there is very limited choice in the type of
health insurance you can buy.
And so the key commonalities here are to offer tax credits
that help the uninsured afford coverage, but to make sure that
people have a much wider range of choices in how they purchase
coverage and the type of coverage they buy, and also to make
sure that they have the opportunity not simply to use insurance
to pay for health care, but to use health savings accounts.
Mr. Pitts. Thank you.
Dr. Gottlieb, in addition to being a physician, you have
counseled various healthcare companies and firms on Federal
policy. Would you please talk about any of the components of
previous or current alternatives to the Affordable Care Act
that you are convinced will increase choice and competition?
Dr. Gottlieb. I will just touch on one. I think in terms of
new health plan formation and new carriers entering the market,
probably the single biggest obstacle has been the caps on the
operating margins of plans, and I am talking here about the
caps on the MLR. Because a new plan is going to have to spend a
higher amount of its revenue on its overhead at the outset, and
by capping the operating margin, you are discouraging capital
formation, new carriers from entering the market.
If you look at what has happened since 2008, there has been
no new net health plan formation, and by that I mean new
carriers. So when we talk about new health plans entering the
market, we are talking about existing insurers just entering
exchanges with differently named products but not new health
insurers.
And the analysis I am talking about actually goes back to
last year, and it incorporated all the co-ops and the provider-
sponsored plans. A lot of those--some of those have exited the
market.
So I would submit that it is probably the case, that there
has been a net formation of new healthcare carriers since 2008.
Mr. Pitts. Would the result or the effect of such
components result in lower costs for patients?
Dr. Gottlieb. Well, I think the opportunity for new plans
to enter the market is going to result in more competition
between different insurers and ultimately is going to lead to
lower costs. I think when we look at premium costs, in
particular for individuals, we have to look at it on a weighted
basis, meaning that we look at the average premium increase,
but we need to look at premium increases on the basis of where
people are enrolling.
And it is the case that premiums are going up for the plans
that have the highest enrollment because they are the ones
facing the biggest losses in the market right now. I think by
creating more competition between different plans, ultimately
you are going to create more competition between premiums as
well.
Mr. Pitts. Thank you.
Ms. Corlette, you mentioned that, ``Even with the ACA's
premium tax credits and cost-sharing reductions, many low- and
moderate-income Americans face very high cost when they
purchase insurance.''
Absent more government mandates, more Federal spending,
what would you propose that would help these patients receive
care at a fair cost?
Ms. Corlette. Thank you, Mr. Chairman.
So one of the problems is that health insurance itself is
an extremely expensive product. The average family premium for
an employer-based plan is in the neighborhood of $17,000 a
year. So I think you are absolutely correct to point out, and
as I pointed out and others have in their testimony, the
Federal Government can't pick up that entire tab.
So the key is to get at what is driving that $17,000 cost
for a family policy, which is extremely expensive. And that,
frankly, goes to the fact that we have an inefficient delivery
system. We are spending 30 percent of healthcare DDP on
wasteful and unnecessary care.
So, frankly, my proposals for getting at cost containment
in health insurance would really target the delivery system and
the way we pay for the delivery of those healthcare services.
Mr. Pitts. Thank you. My time has expired.
The chair now recognizes the ranking member, Mr. Green, 5
minutes for questions.
Mr. Green. Thank you, Mr. Chairman.
Again, I want to thank our witnesses.
Mr. Roy, some of us were on the committee when we were
drafting the Affordable Care Act in 2008 and 2009. I know it is
something that somebody in academia may not understand, but we
actually have to legislate, even when it is a majority of
Democrats, just like a majority of Republicans.
The Affordable Care Act was built on our traditional
insurance system that was started during World War II and
continued, where in our country, unlike the countries we
rebuilt in World War II that created some type of national
care, whether it be Japan, Germany, France, Europe. And so we
were building on that. So free enterprise was involved in it.
And that is why the Affordable Care Act, it is not government--
of course we regulate insurance, but it is based on that. And
that was the decision made, that we would use this tried-and-
true method, even though I think it is not as effective as
other plans. But that is why we have this.
Of course my biggest issue in my home State of Texas is
that Texas has not expanded Medicaid, leaving more than 1.2
million vulnerable low-income Texans without coverage. In fact,
in our district, I have 50,000 constituents in an urban
district in Houston who would have Medicaid if the states
expanded it. I hope that my state will expand it, and I am
willing to work with them. I have said this for a number of
years. For every one dollar my home state would pay in Medicaid
expansion, it would earn back $1.30 in new economic activity.
But the hearing today is about private insurance and ways
to make it stable. It is clear that marketplaces are working,
and the individual insurance market increased in size by 46
percent in the first year of enrollment alone. We need to
continue to improve, however, and insurance markets function
best when there is a large number of customers to spread the
risk and keep costs down.
Before we consider revising or backtracking on the progress
we have made, one important thing we can do to stabilize the
individual insurance market is to grow it. The more people
enrolled, the greater the risk pool, the more stability we will
see. There are more than 10 million Americans who are uninsured
and eligible for marketplace coverage. Seven million of those
were eligible for tax credits to help them pay their premiums.
Ms. Corlette, initial research shows that Americans have a
wide variation in knowledge of the options available on the
ACA's exchanges and the assistance that can be made available.
Could you discuss some of the harder-to-reach marketplace
populations?
Ms. Corlette. Yes. Thank you.
So estimates are that we have between 29 and 31 million
uninsured Americans, and many of them are uninsured because, as
you point out, Congressman, they are in the Medicaid coverage
gap.
Mr. Green. So that includes Medicaid?
Ms. Corlette. It does. But also some are just simply
ineligible. They may be undocumented or they have other sources
of coverage.
But among those who are eligible for the marketplaces and
would benefit the most from the financial assistance that is
available, a recent study found that many live in families
receiving EITC or other public benefits, such as SNAP. Many
also have a school-age child in the home. These are avenues
that the Federal Government could take advantage of to do
targeted outreach, to educate these individuals not only about
the coverage that is available, but also the financial
assistance that can help make that coverage affordable.
Mr. Green. OK. One of the issues I hear, and I heard it
just this morning with a group of insurers, can you discuss the
benefits of the medical loss ratio? Of course, let me explain
my background. I managed a small business, and at one time it
was hard to even get companies to offer us insurance for our
small business.
But the medical loss ratio, the 80 percent of that premium
has to go to health care. And, to me, most employers would say
we are getting a return on our money. And could you talk about
the importance of that benefit?
Ms. Corlette. Yes. Sure. The medical loss ratio basically
says that of the premiums a health insurance company collects,
80 percent, or in the case of a large group 85 percent, has to
go back towards the benefits that they are supposed to be
covering. So it is an important consumer protection. Before
this standard went into effect, you would see in the market
companies with loss ratios of 50 percent, 60 percent. That
means the company was pocketing close to half of the premium
that they were collecting from the consumer or the small
business. So the medical loss ratio is really just designed to
bring more value to the purchaser.
Mr. Green. Thank you, Mr. Chairman. I will yield back my
time.
Mr. Pitts. The chair thanks the gentleman.
I now recognize the vice chair of the sub, Mr. Guthrie, 5
minutes for questions.
Mr. Guthrie. Thank you.
And these questions are for Mr. Roy. We have instances of
people purchasing health insurance under the ACA when they are
sick, and it distorts the market for other people
participating. Patients need to get access to care. That is
important. But we also want patients to keep their coverage.
There have been various ideas put forward about the best ways
to help patients keep care and give market stability.
Medicare part D incentivizes participation by using late
enrollment assessments. Patients are encouraged to join
Medicare part D during their initial enrollment period because
if they choose not to, their premium will be slightly higher.
Do you believe this same model would be useful in the private
health insurance market?
Mr. Roy. Yes, Mr. Guthrie, I think that that is one of the
points I was making in my prepared remarks where I discussed
the fact that we don't need an individual mandate to have a
system that works to protect people who have preexisting
conditions, expand access, and be nondiscriminatory towards the
healthy, while also discouraging people from dropping in and
out of the system just when they are sick.
If you have late enrollment penalties and other techniques,
such as a tight open enrollment period, perhaps longer
insurance contracts, those are all options on the table that
help incentivize people voluntarily to be involved in their
insurance continuously.
Mr. Guthrie. Similarly, and you have covered some of this,
but according to CMS, the part D late enrollment assessment is
1 percent of the national base beneficiary premium times the
number of full, uncovered months a beneficiary did not have
part D or credible coverage.
I think we can agree that Medicare part D is one of the
most successful Federal healthcare programs. Could this
reasonable guardrail also help improve private care programs?
Mr. Roy. Absolutely. So one of the reasons why that
particular provision is useful is that it modulates the late
enrollment penalty based on how far away you are from the open
enrollment period. So that way if you are really trying to game
the system or the economic equivalent of that, the penalty is
larger in that way. The penalty is well calibrated to the
severity of how much you are going in and out of the system. So
it makes the penalty as light as it needs to be but as
effective as it needs to be to discourage that dropping in and
out of the system.
Mr. Guthrie. OK. And then another question. Another market
lever to discourage people from only buying health care when
they are sick is waiting periods. Let's say a patient gets a
tough diagnosis and they rush to buy health care for the first
time. Could a one-, two-, or three-month waiting period for a
plan to become active encourage people to enter private markets
while they are healthy instead of waiting until they are sick?
Mr. Roy. Yes, it could. And, again, one thing that would
tie in with that is longer insurance contracts. So if you have
an open enrollment period every year, you still create a lot of
incentive for adverse election because people can change plans
every year based on their health status. But if they have the
option to, say, buy a 2-year health insurance plan or a 5-year
health insurance plan at a discount relative to what buying
five 1-year plans would cost, you can incentivize people again
to stay in a long-term relationship with their insurer where
the insurer then also has an economic incentive to work with
that patient over time to do things like wellness and
compliance.
Because the challenge is, if you have a 1-year insurance
contract, then the insurer worries, well, if I invest a lot of
time making this patient healthy, what if he signs up for
somebody else's plan next year? Then I don't really get the
benefit economically from having helped this patient.
So encouraging insurers to have long-term relationships
with their patients and long-term contracts with their patients
would do a lot to align the incentives of the patient and the
insurer.
Mr. Guthrie. Thank you. I appreciate the answers to those
questions.
And I yield back my time.
Mr. Pitts. The chair thanks the gentleman.
I now recognize the gentleman, Dr. Schrader, 5 minutes for
questions.
Mr. Schrader. Thank you, Mr. Chairman.
I appreciate the panel. It is nice to be talking about
something other than full repeal of the Affordable Care Act and
thoughtful discussions out here. So I like that.
I guess the first opening question would be, I would be
curious, actually the panel itself, Mr. Gottlieb in particular
perhaps, I know the age thing has been talked about, we talked
about that way back when we did the ACA, but what about
lifestyle adjustment for premiums? That was something we
considered very strongly early on. I know the President was
interested in that. There is smoking, exercise, bunch of
different variables. Sometimes hard to quantify, and we don't
want to be discriminatory as we do that.
Now, that seems to me another thoughtful way, to be a good
incentive, quality health care is a good result. Is there any
discussion on that in the academic circles at this point?
Dr. Gottlieb. Yes, a lot of discussion. I think a lot of
the approaches we are talking about here today aren't just,
frankly, prohibited by the law, they are prohibited by the
regulation.
The challenge isn't just some of the prescriptive
regulation in the law itself, but, frankly, the way the
regulations have been written by CMS I think have been overly
prescriptive in areas that would deem certain things like what
you are suggesting to be discriminatory.
Ultimately in the plan that we put forward with the
American Enterprise Institute, we move towards a system where
you could have subsidies based as a fixed percentage of the
cost of the premiums, and you would ultimately cede back to the
states more flexibility to allow plans to adjust premiums on a
whole host of things, such as age, geography, maybe even some
measure of preexisting condition. And then people, individuals,
would get a subsidy that would be a fixed percentage component
of that. And then you could go in if you wanted to as a matter
of Federal law and increase the subsidies for certain
individuals, including perhaps subsidizing certain kinds of
risk in the marketplace and certain kinds of individuals with
preexisting conditions.
But we would envision a more flexible framework that would
allow for what you are suggesting. I will tell you I think the
way the regulations have been written, in a very prescriptive
manner, there is very little that wouldn't be deemed
discriminatory.
Mr. Schrader. Ms. Corlette, comment on that?
Ms. Corlette. Yes. Sure.
So of course the Affordable Care Act already does include
rating provisions that allow insurers to charge smokers or
people who use tobacco up to 50 percent more than somebody who
doesn't. It also allows employers to charge up to 30 percent
more for people who don't meet certain wellness targets.
I would say that the research that is out there to date on
that suggests that linking achievement of a certain health
target or changing a behavior, linking that to an increase in
premium or a higher deductible is actually not very effective
in changing behavior. What researchers found is that people are
much more responsive to sort of more discrete short-term
incentives. You know, maybe it is a gift card or a discount at
the gym or something like that. Those tend to be much more
effective strategies for getting people to lose weight or
change other behaviors.
We would be happy to discuss other alternatives with you.
Mr. Schrader. Mr. Roy, a comment?
Mr. Roy. Yes. I am less enamored of lifestyle-based health
insurance pricing, and the reason why is that it is hard to
enforce. Are you actually going to check and see, is the
insurer supposed to check to see whether the patient is going
to the gym one time a week versus three times a week, or
smoking one pack a day versus half a pack a day?
I believe that those pricing mechanisms are very difficult
to do in a rational way, and I think it is simpler to have a
system where you have a means-tested schedule and an age-based
schedule. You can publish it in a table, in a book, and people
can know every year after they file their taxes exactly what
tax credit they qualify for, and you make it very simple for
people, very transparent for people, and that eliminates the
waste, fraud, and abuse that we are seeing in the way the
subsidies are administered now in the exchanges.
Mr. Schrader. Ms. Corlette, there has been a lot of
discussion about the special enrollment periods and people
taking advantage of that. CMS recently came out with some
rules. Do you think those rules get to at least a bunch of what
the concerns have been here recently?
Ms. Corlette. Yes, I think they do. Although I would just
say I think the solution is not fewer people taking advantage
of SEPs. It is actually we need more people taking advantage of
SEPs. One of the problems is that only 15 percent of people
eligible for these special enrollment periods are actually
taking advantage of them.
And there is nothing about the triggering events, right,
that would suggest this should be a sicker population. It is
people having a baby or getting married or leaving a job. That
happens to healthy people. It happens to sick people. But it is
the sicker people that are motivated, right, to find out about
the opportunity.
So I do think that, coupled with documentation
requirements, which I think are perfectly legitimate to ask
people to verify what is going on in their lives, but we also
need to be doing more aggressive outreach and education to all
people who are eligible for SEPs.
Mr. Schrader. I yield back. Thank you, Mr. Chair.
Mr. Pitts. The chair thanks the gentleman.
I now recognize the gentleman from Missouri, Mr. Long, 5
minutes for questions.
Mr. Long. Thank you, Mr. Chairman.
Mr. Gottlieb, last week I had a manufacturing tour in my
district back home and saw several manufacturing facilities,
which is vital to my part of the country. And we had a little
shoot-off with the Democrats yesterday, Republicans against
Democrats shooting skeet and trap. And one of the things I saw
was a clay pigeon mold that I have never seen before where a
lot of those are made to mold the clay pigeons right in my
district.
Another thing that I saw was DMP, Digital Monitoring
Products Company, bank-monitoring products. It is a 41-year old
company. A 41-year old company. They are adding 74,000 square
feet and doubling the size of their engineering department. So
manufacturing is really, really important in my area.
Another company that I went to see has done all of the work
on the new African History Museum that they are putting up here
on Washington, on the windows and all the structure there. They
have also done all the work up here on the Native American
Museum. They are doing one of the largest projects ever up in
Manhattan right now. All the tall glass you will see on all
those big new buildings going up in that section are coming out
of my district.
So manufacturing is huge in my district. So I will preface
my remarks with that.
Today large companies are able to use the size of their
workforce to negotiate better rates with healthcare plans. Many
healthcare thought leaders have suggested that individuals and
small businesses should have the same benefit. In fact, before
the enactment of the Affordable Care Act reforms, the Missouri
Association of Manufacturers was able to operate two health
consortiums providing quality health care to over 2,500 lives
spread among 81 businesses, large and small, just as those that
I described a minute ago on my tour last week.
On this issue of pooling, do you think that allowing
individuals to join together to increase their purchasing
authority would help lower costs?
Dr. Gottlieb. I think I would favor all kinds of pooling
arrangements, including allowing small business to band
together, including the concept of association health plans.
There is nothing inherently wrong with pooling on the basis of
state-based exchanges. I wouldn't want to see a marketplace
where that is the only way that people can pool together.
Just as an aside----
Mr. Long. Now, what do you mean, the only way they can pool
together?
Dr. Gottlieb. Well, right now, the way the law is trying to
force the market, the only way you can pool individuals is
either to self-insure or to go on the state-based exchanges.
The kinds of construct you are talking about or the kinds of
construct that the chairman introduced with respect to
association health plans wouldn't be allowable in today's
marketplace. There are really only two places to pool risk
outside of government programs: it is on the state-based
exchanges or if you self-insure.
There is now a secular shift toward self-insurance by small
businesses who previously probably were too small to self-
insure but are self-insuring to try to get out from some of the
mandates and the regulation. I think one thing that should
concern this committee and concern all of us is we are seeing
efforts on the part of CMS now to apply more of their
regulation to the self-insured businesses. And so you are
seeing CMS regulation in certain instances potentially supplant
ERISA law.
Mr. Long. Well, when you say small companies can self-
insure, pool, I guess they pool within themselves. But I am
talking about all these manufacturers in Missouri were pooling
among other manufacturers to come up with very good rates for
their people.
Would the concept of individual health pools, or IHPs, make
rates more competitive, in your opinion?
Dr. Gottlieb. Right. Absolutely. What it would do is it
would allow small businesses to band together and negotiate for
insurance contracts as self-insured businesses and put them on
par with a large business. A large business that employs tens
of thousands of people is getting better rates from the
insurance companies who administer their products. It would
allow self-insured small businesses to do the same thing.
Mr. Long. So just like corporations and labor unions do,
you think that they should be able to pool together?
Dr. Gottlieb. Yes. And just like small businesses are able
to pool together to purchase office supplies in the marketplace
and do other things like that, yes.
Mr. Long. And finally, could these individual and
association plans lead to more patients getting health care?
Mr. Gottlieb. I think that they would lead to more
businesses being willing to self-insure. We are already seeing
that in the marketplace, that businesses that are right on the
cusp of having enough employees in order to reliably self-
insure and take that actuarial risk are doing it. I think it
would lead to more businesses being willing to do that.
We are also seeing innovation in companies that are forming
to help very small businesses self-insure. So if you create the
mechanism you are suggesting, it is going to just expand the
ability of small businesses to do that.
Mr. Long. OK. Thank you.
I think for the first time in 6 years I have time to yield
back.
Mr. Pitts. The chair recognizes the gentlelady from
California, Mrs. Capps, 5 minutes for questions.
Mrs. Capps. Thank you very much, Mr. Chairman. I appreciate
our witnesses being here today for your testimony.
And I would like to just bring into this conversation more
of the California experience with health reform. As we have
seen time and time again, our healthcare markets hinge on the
buy end and efforts at the State level. The network has a
direct influence on the patient experience in finding and
getting quality affordable health insurance.
As of June 2015, 1.3 million people in California are
actively enrolled in health insurance, and our uninsured rate
has been cut in half. In a time where there is a lot of
rhetoric about how we must deregulate our health system,
California has used smart regulation--this is my opinion, but
they believe it too--to take a solutions-based approach to
health reform. Our state exchange has required health insurance
companies to build consumer tool that encourage participation
and transparency, and such tools help with outreach by letting
consumers compare plans in an apples-to-apples way by looking
at out-of-pocket costs and quality.
So in using all the tools at our disposal to regulate the
market and be active purchasers of health care, California has
emerged as the leader in this space and has succeeded in
providing important healthcare services to citizens.
Ms. Corlette, how do these state tools and others protect
consumers?
Ms. Corlette. Yes, absolutely. So California is leading the
way on many fronts, and I think is showing many of the other
state-based marketplaces how to do things that can really help
consumers have a better shopping experience.
So, for example, one thing California does is require the
benefit designs to be standardized, and that is good for two
reasons. One, it really helps consumers make apples-to-apples
comparison among the plans, and allows them to focus on price
and network and really important differentiators between the
carriers. The second thing it does is it really limits the
ability of the insurers to design discriminatory packages that
can discourage enrollment by sicker people. So, for example, we
saw in other States where insurers were putting all of the HIV-
AIDS drugs on the very highest specialty tier, including
generics. Well, that was clearly designed to try to discourage
those individuals from enrolling.
So standardized designs are used pretty commonly in private
exchanges, like Ayon and Mercer and Towers Watson, they require
benefit designs to be standardized because it helps consumers
make those comparisons. So California is doing that, and I
think they have found it very useful.
Mrs. Capps. Not that we are doing everything perfect in
California, that is for sure. But is there a way that we can--
and I will put it this way--we need to learn in California from
other states, and the successes that they are having. Are there
ways other states could adopt these same practices for states
who don't take these steps? What are their consumers faced
with? And should the Federal exchange be doing anything about
this? This is a lot to dump on you in one question, but if you
don't mind.
Ms. Corlette. Yes, sure. So a number of other states are
looking at, or have standardized benefit designs. They have
also been implementing things like out-of-pocket costs
calculators that not only tell you what your premium is going
to be, but if you are high risk or low risk or medium risk what
your total out-of-pocket spend might be during the year to
come. And that is really important for consumers to be able to
compare plans.
Another thing that the Federal marketplace is going to be
bringing online, which I think could be useful, goes to the
issue of network design and helping consumers discern whether
or not a network is narrow, medium, or broad, because right now
there is no easy way to tell. And many consumers are willing to
make the trade-off between price and the narrow network, but
you need to at least know what you are looking at, and so those
kinds of tools can really help.
Mrs. Capps. I still have a minute. And that question is a
little bit open-ended. Would either Mr. Roy or Dr. Gottlieb,
would you like to respond to that particular question?
Mr. Roy. Sure, I am happy to. Thank you. I have a bit of a
different view about the California experience. California
actually had the most robust nongroup health insurance market
in the country prior to the ACA, where individuals enjoyed a
broad range of choices and diversity in the kinds of plans they
could purchase. The reason why the uninsurance rate has gone
down in California is not because of the regulations that have
made health insurance in California cost more than double in
many cases what it cost before. The reason is the subsidies,
which, of course, help people afford these much higher
premiums.
So I think it is great that there is financial assistance
for the uninsured to purchase health insurance, but I think
that the regulatory scheme that California imposes has actually
dramatically increased the cost of health insurance. As an
example, I can give you specifically, in Kaiser, a plan in
Sacramento, that exactly the same plan with exactly the same
network, exactly the same cost-sharing provision, exactly the
same actuarial value, costs double as a result of the ACA's
regulations than it did before. So that is a big problem in
California. And, yes, people at below 200 percent of the
Federal poverty level are getting a lot of financial
assistance. But as you go up that income scale, the increased
premiums are pricing a lot of people out of the market, and
that is why enrollment in the exchanges nationally and in
California has fallen well short of expectations.
Mrs. Capps. Well, I am going to have another round since I
started that, Mr. Chairman. But I will yield back my time.
Mr. Pitts. The chair thanks the gentlelady and now
recognize the gentlelady from North Carolina, Ms. Ellmers, for
5 minutes of questions.
Mr. Ellmers. Thank you, Mr. Chairman.
And my questions are for you, Dr. Gottlieb. As you know,
plans are starting to exit the Federal marketplace. Namely, one
that has been highly publicized is United Health Group. United
will be pulling out of 26 States because they project a $650
million loss this year. Some supporters of the status quo have
tried to downplay this, arguing that United was not a major
player in the Federal exchanges. But their departure from the
marketplace has the potential to significantly limit
competition in some markets where patients may only have two,
or maybe even one option for plans to purchase.
So my question is, should consumer advocates be concerned
about this trend, or as this is happening in these markets, and
will it limit choice based on what is left in the market?
Dr. Gottlieb. And so, I don't think United's exit was
trivial, because United has the potential of dramatically
expanding its footprint. They lost over, I think, $1.2 billion
over 2 years, and they exit the market, and it is not growing
its footprint either. I think is what even more concerning is
the Blues who have dominated the market to date are also
experiencing losses, and we are seeing some signals that some
of the Blues' plans may exit.
The observation that is worth making in my view is that as
these plans do exit the market, the plans that are growing
their footprint in the market, and actually offering the best
price, and quite frankly, are the Medicaid plans. And I think
that is because this is becoming a much more Medicaid-like
benefit, where plans are competing on network design and
formulated coverage alone and trying to cheapen the benefit,
and the plans with the experience in the market of offering
cheap benefits, cheap enough to offset the high costs of the
regulation in this scheme are the Medicaid carriers, and they
are, in fact, the ones that are growing their footprint quite
dramatically. I think Molina doubled their footprint in the
market. Centene came close to that this year, and they are
also, frankly, making money, too. The few plans that are making
money are the Medicaid plans.
Mr. Ellmers. Thank you for--that is actually along my line
of questioning. And you point out the Blue Cross, and that is
going to be significant in North Carolina, where we do only
have a couple of insurers participating. And Blue Cross has
announced that they will be. I am very concerned about this,
because we have got to do everything we can for these patients
to get good healthcare coverage, and they are offering the
coverage that they have been satisfied with. They may have had
to have cancelled whatever plan they had before in order to get
on it, but they have become accustomed to it, and now, even
that is ending.
So that is my line of questioning here. Again, pointing out
that Centene and their Medicaid-like plan said they would be
likely turning a profit in the exchanges.
In fact, they say about 90 percent of Centene's exchange
enrollees are subsidy eligible and have incomes at the level
that leaves them moving in and out of Medicaid. So United, who
is offering broader networks and better coverage, has dropped
out of 26 States, while Centene, who offers narrower networks
and higher deductibles, has projected that they will be
profiting in the exchanges.
So there, again,--do you see this as a trend, or, in your
opinion, is this a trend? And does this not demonstrate that
basically, as I would put it, this current law is almost a race
to the bottom for patient coverage?
Dr. Gottlieb. Well, I think it is a race to a Medicaid-like
benefit. Not to oversimplify, but I think the issue is that all
the traditional tools--and I agree with--that it is a problem.
All the traditional tools that insurers use to try to manage
costs have largely been regulated away. Not all but many of
them. And the only way that insurers can manage costs in this
exchange market is to cheapen the benefit. The only way to
cheapen the benefit is either you own the doctors and you try
to regulate what they do very closely, or you network with very
few doctors, very cheap doctors, doctors who don't see a lot of
patients in the community, and you offer a closed formulary and
you start tightening up your formulary design, and the plans
with the experience doing that and the plans that have the
cheap networks are the Medicaid carriers, and that is why we
are going to see them continue to grow their footprint.
Mr. Ellmers. I have only got a limited time left. So,
basically, what this is going to do is limit care, limit access
to care?
Dr. Gottlieb. And limit choice of plans, unfortunately. And
I think the real thing that should concern individuals are when
the Blues plans are experiencing losses and start pulling out
of this market.
I raised this issue with folks in the administration about
the Medicaid carriers growing their footprint, and the response
was, well, they haven't really dominated the exchanges. It has
been the Blues plans that have dominated the exchanges. And
that is true, but we are seeing a lot of pain on the Blues plan
as well. And when they start dropping out, I think that really
is going to signal a downward spiral here.
Mr. Ellmers. Thank you.
And I yield back the remainder of my time.
Mr. Pitts. The chair thanks the gentlelady.
I want to apologize to the gentlelady from California, Ms.
Matsui. I missed you in the queue. You were here. You should
have been recognized earlier.
The chair recognizes Ms. Matsui for 5 minutes for
questioning.
Ms. Matsui. Thank you, Mr. Chairman.
And I want to thank the witnesses for coming here today.
The passage of the Affordable Care Act eliminated exclusion
of over 129 million Americans living with preexisting
conditions from receiving affordable health insurance. These
preexisting conditions include not only rare diseases, but also
common diseases, like asthma or diabetes.
Ms. Corlette, can you talk about the experience of those
with preexisting conditions attempting to purchase insurance in
individual markets before the ACA?
Ms. Corlette. Sure. Absolutely. I will just say that the
individual market was a very inhospitable place before the ACA.
People with preexisting conditions were frequently denied
access, up to 40 percent were denied outright a policy. It was
frequently unaffordable, because rating factors related to
their health status or gender or age, could sometimes be as
much as nine times the amount of the unhealthy person. They
found it often unaffordable to get a plan, and then that
coverage was what we used to call Swiss cheese coverage;
preexisting conditions were often excluded.
So, for example, a breast cancer survivor would be told
that no oncology services would be covered under the plan. Or
if you had incidences of asthma, you would be told that no
upper respiratory conditions would ever be covered under the
plan. Those are the kinds of things that are now thankfully in
the past.
Ms. Matsui. Thank you. I also want to consider this,
because protection against preexisting condition discrimination
is important for the over 30 million individuals in this
country who suffer from rare or serious chronic diseases, and
they are in another situation too, which is even more
difficult. These diseases can be debilitating, not only to the
patient's health, but also to a family's financial stability,
especially when diseases inhibit the ability of a patient to
work. Patients sometimes need to rely on the goodwill of third-
party nonprofit charity organizations to help them access the
care they need. We need to preserve the ability of patients to
rely on third-party payments from charities. And I am working
with CMS to do that.
The ACA has been very good for millions and millions of
Americans, and we are looking to see how we might improve that,
too. And this is an area we are looking at because of the
serious financial instability of the patient's family. So I do
hope that we can work with you as we move forward on that. And
thank you.
And I yield back the rest of my time.
Mr. Pitts. The chair thanks the gentlelady and now
recognize the gentleman from New Jersey, Mr. Lance, 5 minutes
for questions.
Mr. Lance. Thank you very much, and good morning to the
panel.
I am concerned about the fact that exchange participants,
based upon their 2015 plans, did not necessarily continue for
2016. A recent study, as I understand it, has found that only
one-third of exchange participants kept their plan year to
year. And I think this reveals significant market instability.
Could the panel comment on that?
Mr. Roy. Yes. So I would say it is not entirely about
market instability. If you are going to have a 1-year insurance
contract, people are free to shop year over year for the plan
that is the best plan for their needs, and it might be that the
prices have evolved in a different way. Just like you might not
fly the same airline next week as you did last week, you might
have a different plan next year than you did this year.
So much of this is quite natural. But I do think that
instability is important insofar as, again, the insurance
company does not reap the economic reward from making you
healthy over the long term if you are switching plans year over
year over year.
So maybe it is good for some people to have plans where
they switch year over year, because that helps create the price
discipline, that encourages insurers to compete for your
business and be held accountability for the premiums they
charge, but it would be nice for there to be an option in the
individual market for people to shop for plans with longer time
horizons so that, again, for a discount, perhaps those insurers
would say, ``Hey, if you sign up with me for 5 years, your
insurance would cost 20 percent less, but we will be able to
work together to make sure you stay healthy in the long run.''
Mr. Lance. Would anyone else in the panel like to discuss
this? Yes, Ms. Corlette.
Ms. Corlette. Yes. Sure. I think the factor to keep in mind
is historically the individual market was called the residual
market, and that is simply because the primary source of
coverage for most people under 65 is through their employer.
Mr. Lance. Yes.
Ms. Corlette. And, certainly, for people of lower income,
they may come in and out of Medicaid. So one of the reasons we
are seeing a lot of transition in the marketplaces is because
people might be gaining coverage because they get a job, or
because they dip below the poverty line and so they are then
eligible for Medicaid. So that is just an important factor to
keep in mind when you think about these marketplaces.
Mr. Lance. Thank you.
Doctor.
Dr. Gottlieb. I think your observation reflects the fact
that the plans that experience the largest enrollment are the
ones that increase their premiums the most in a subsequent
year, because they are the ones that experience the biggest
losses. And that is why when we are looking at the premium
increases over the course of this year, we really should
enrollment-adjust them, and think about the premium increases
on enrollment adjustment basis, because it is going to be the
case that the plans that take the biggest premium increases
will be the ones that have the biggest enrollment, and then
that is going to cause a subsequent churn that you are talking
about in the subsequent years.
I think the other trend that is worth watching is that this
is becoming a market that is increasingly narrow to a very
narrow income demographic, and that is people who are eligible
for the cost-sharing subsidies because of the high costs. We
talk about the premiums and the subsidies for the premiums, but
the out-of-pocket costs are very, very high in a lot of these
plans.
And so, the only people for whom this is economically
attractive, if you will, increasingly are going to be those who
fall around 200 percent of Federal poverty level who qualify
for the cost-sharing subsidies. And I think we talked at the
outset about there hasn't been, sort of, the dumping, if you
will, from the employer market into the exchanges. I think we
are going to start to see that, start to see people who work
for large employers who fall within that income range find
themselves in the exchanges, and lose their employer-provided
coverage, and it could, potentially, make the American health
care less egalitarian overall.
Mr. Lance. Thank you. And would anyone else on the panel
like to comment on what the doctor has just said regarding the
narrowed market?
Mr. Roy. Yes. One thing I might add, too, is that we have
been talking a lot about preexisting conditions, and there's
been an enormous amount of disruption of the individual market
for health insurance because of the claim that we needed to do
all the disruption to protect people against preexisting
conditions. And that is not actually true. It turns out,
actually, the CBO did a study where they asked the long-term
uninsured why they didn't have coverage. Seventy-one percent
said it was because the insurance cost too much, the premiums
were too high. Only 3.5 percent said that because of a
preexisting condition or other health status-related issues
were denying them coverage.
We also have the evidence from the Affordable Care Act's
own preexisting condition insurance program, a high-risk pool
that was designed to be a bridge between the enactment of the
ACA and 2014, when the guaranteed issued regulations came into
effect. That provision allowed anyone who could demonstrate
that they had been denied coverage by an insurer because of a
preexisting condition, anyone, any person who could prove that
could sign up for this program. Only 250,000 people in the
entire country signed up for this program. And we disrupted
health insurance for 300 million people, allegedly, because we
needed to fix health insurance for these 250,000.
So it is really important to understand that we should
address the problem of preexisting conditions, but there are a
lot more efficient ways to do so that don't disrupt coverage
for the people who had it under the old system.
Mr. Lance. Thank you.
My time has expired.
Mr. Pitts. The chair thanks the gentleman. I now recognize
the gentleman from Maryland, Mr. Sarbanes, 5 minutes for
questions.
Mr. Sarbanes. Thank you, Mr. Chairman. Thanks to the panel.
Just on that last point, there is a distinction between
people that were being outright banned or denied coverage based
on a preexisting condition, versus people whose premiums were
being adjusted significantly or a lot higher based on the fact
that they had a preexisting condition. So the observation by
90-something percent that it was the cost that was the barrier
to them could still be linked to the preexisting condition
situation, I would imagine, in a lot of cases.
The question I have, and I will start with you, Ms.
Corlette, is I have heard some increasing discussion about the
high-deductible plans and the impact that is having on the
affordability, but also a discussion of how there is a wide
variation in the kinds of benefits or services or products, for
example, drugs, that are exempted from the deductible, and how
that can affect affordability and behavior and access and so
forth.
And I think, for example, California is an example--is a
state where they have been pretty proactive in looking at that
issue of where the exemption should be for certain kinds of
services to try to make the coverage more affordable and more
useful, frankly.
So could you start a discussion among the panel about that
deductible issue, because I think it has implications
potentially for some improvements that we could do with
guidance in that area?
Ms. Corlette. Yes. I am so glad you asked that question. So
two quick points about deductibles. One is I find it ironic
that a lot of people who right now are complaining about the
high deductibles on the marketplaces are the same people who
have been calling for more high deductible health plans
generally.
The second thing is, we have to think about where we were
before and where we are today. Pre-ACA, deductibles were as
high as $10-, $15,000 sometimes. So the financial protection
that exists in the marketplace right now is way better than it
was previous to the ACA.
But to your point, when you tell a lower income family that
they have a $5- or $6,000 deductible, it doesn't matter, right?
That is still a huge amount of money for them to lay out before
they can get healthcare services.
There are a couple of things that are really helpful and
important. Number one is, of course, the ACA provides first
dollar coverage for preventive services and important
screening. But, interestingly, California is a State that is
doing this and other States are looking at it as well, is
encouraging, or in some cases, requiring insurers to cover
important primary care services, generic drugs, some urgent
care before somebody has to pay up the deductible. So that
allows a consumer to get more upfront value than they otherwise
would, and I think that is an innovation that we should be
looking at more broadly.
Mr. Sarbanes. Anybody else?
Mr. Lance. Yes. So, Ms. Corlette thought it was curious
that people might critique the high deductible in the ACA. So
let me try to explain why people do that.
The problem is that, in theory, high deductibles are good,
because if you have the option of a low deductible and a higher
premium and a high deductible and a lower premium, some people,
naturally, might want a lower premium and a high deductible. If
people are truly trying to seek protection from bankruptcy due
to medical bills, the most affordable way to do that is through
a high-deductible plan combined with a health savings account.
The problem with the ACA is the deductibles are higher, and
the premiums are higher, too. So people are paying 50 percent
more for their monthly premium and the deductible is 2,000,
$3,000 higher than it was before because of all the regulations
and mandates in terms of how those insurance products have to
be designed. And this is why the regulatory scheme of the ACA
has been a major focus of criticism, because it is directly
responsible for the fact that people are not only just paying
higher deductibles, they are also paying higher premiums.
Dr. Gottlieb. So I will just comment. I think the idea of a
high-deductible plan, some sort of a conservative theology, if
you will, was that the high deductible was tied to a lot of
consumer selection on the more routine care. And here you have
a regulatory scheme that mandates a lot of first dollar
coverage for ordinary, routine care, but still is coupled to a
high deductible, and that is not really a high-deductible
consumer-driven plan. And what is happening is because the
insurers have to cover first dollar of a lot of the routine
stuff, and they can't take premium increases; they can't offset
those costs in other ways, they are offsetting it by, in my
view, narrowing the coverage for the catastrophic fees. Exactly
a place we want the most generous coverage. And that is being
coupled--as you mentioned, drug formularies that is being
coupled, for example, and it is manifesting in the form of
closed drug formularies, where you have very narrow lists of
drugs on formulary, and all the drugs that aren't on the
formulary aren't covered at all. And what consumers spend out
of pocket for those medicines doesn't count against your out-
of-pocket maximums, so their deductibles are completely on
their own.
And I would say, I think all the silver plans on the
Affordable Care Act are closed drug formularies. I have gone
through and I have looked at 30, 40 plans, and published this
data, and they were all closed plans, and I just assume that it
is almost all the silver plans are closed formularies. That is
really a new development in the marketplace. We never saw
closed formularies used so predominantly. The only place we
really saw that was in Medicare Part D and Medicare Part D
coupled it with a lot of regulations and modeled formulary
protected classes.
And I will just sum up by saying I don't think the health
plans are doing anything wrong. I think they are taking
flexibility where they still have it. A lot of the flexibility
that they have to or they have traditionally used to try to
manage costs have been taken away from them, and the few places
that it is left, they are exercising it.
Mr. Sarbanes. Thank you.
Mr. Pitts. The chair thanks the gentleman, and recognize
the gentleman, Dr. Murphy, 5 minutes for questions.
Mr. Murphy. Thank you, Mr. Chairman.
It is a sad thing to me when I look at, as we reflect on
this committee, and also the subcommittee on Oversight and
Investigations has looked over the last few years of the kind
of spending we have had on the Affordable Care Act. We have had
it for advertising, Web sites that didn't work. I think Oregon
spent a couple of hundred million and finally, they decided
since they didn't sign anybody up and it was filled with
political corruption; it wasn't going to work. We have seen
half the co-ops fail, administration costs. Secretary Sebelius
went back to the insurance companies and said, Hey, we need
some more money from you to donate to keep it going. And none
of that money went for even a single Band-Aid. Nothing helped
there. So we have got to find a different approach on how we
are handling health care.
Now, one of the things I want to talk about are the high-
risk pools, and particularly, invisible risk pools. I think,
Mr. Roy, you have talked about these things. I want to see if
you can elaborate. So are high-risk pools still today a fair
pathway for helping to cover some of our sickest friends and
neighbors?
Mr. Roy. They can be, but they face a lot of limitations.
And I think that to the degree that we have talked about high-
risk pools, we have to understand the risks of high-risk pools.
So, for example, the AEI proposal proposes giving States
funding for high-risk pools as a bridge for those who are very
sick and don't get coverage for the traditional market. The
challenge is that once States, State governments, just like
State exchanges can be messed up, if State governments are
running high-risk pools, they have incentives, an incentive to
overpromise and underdeliver. They say, Oh, we are going to
expand this high-risk pool to everyone because the politicians
will have to pay the bill for that and the voters will have to
pay for----
Mr. Murphy. I understand.
Mr. Roy [continuing]. Or 20 years down the road. So----
Mr. Murphy. So where would they pay that, on the back end,
then.
Mr. Roy. Well, yes. So if you sign people up, but most of
the health costs happen 10 years down the road as those
patients age, and have higher medical costs as a natural
combination of their aging and their health care. Once the
government is actually determining the price of a risk, a lot
of things can go wrong. I would argue it is actually simpler to
preserve guaranteed issue, but get rid of the distorting and
discriminatory regulations in the ACA exchanges that make
guaranteed issue unaffordable. So you can actually preserve
guaranteed issue in a very simple way that doesn't require the
use of high-risk pools, have everyone in the same insurance
market, and that way, the people who are high risk, the people
with diabetes, people with chronic conditions, have a broader
choice of health insurance plans than they would have on the
high-risk pool.
Mr. Murphy. Dr. Gottlieb, do you agree with that approach?
Dr. Gottlieb. I think we talk about high-risk pools as an
interim step. My view is that I think with proper risk
adjustment, that would be able to be done prospectively, and a
subsidy structure, that you allow some adjustment for risk, you
can achieve what you are aiming to achieve with high-risk pool
and help underwrite the increased risk of certain individuals
with chronic conditions much more effectively in a viable pool.
Mr. Murphy. Let me ask this, too, then: As someone who has
identified, so we know that people who are healthy are trying
to avoid buying insurance, and then they start to get sick and
they want to buy insurance, the same as people who have cars.
They don't want to buy insurance until they get in an accident.
But what happens here also is when you look at the incredible
cost if these are not managed. So Medicaid, 55 percent of
Medicaid spending goes to 5 percent of the population. And
according to multiple reports, one of them Tom Insel, former
head of NIMH, he said virtually all of them have mental
illness. And yet, what happens is we maintain a system where
medical records are kept separate but equal, which means you
can't get information and know the higher risk, but the person
who has a chronic illness and depression, for example, doubles,
triples, quadruples the cost, if it is not treated. And so I am
concerned about what we are talking about here is just a
mechanism to pay for this, but not a mechanism to change this.
And how do we look upon this? If someone is identified then
with a chronic illness, with a mental illness, they are really
beginning to coordinate and integrate care, which I think is
the absolute key to deal with it more cost effectively.
Mr. Roy, Dr. Gottlieb, and Ms. Corlette, if you could
comment on that.
Mr. Roy. Yes, I mean, they are all related, because the
reason why we don't have a patient-centered healthcare system
in which hospitals and doctors and insurance companies would
have the incentive to really cater to the patient's needs in
those regards, is because the patient doesn't control the
health care dollars. In every other sector of the economy, the
consumer controls the dollars, and that is why businesses go
out of their way to cater to the consumers' interests and the
consumers' needs. In health care, the government controls the
dollars.
Mr. Murphy. But they are concerned about their own health.
I think in these cases, if it is not explained to them that you
really have to coordinate these services together and enforce
the position that they would be talking to each other across
boundaries.
Mr. Roy. Sure. But insurance companies and healthcare
entrepreneurs, healthcare IT companies that integrate their
patient records across providers, they can provide those
services. And part of the challenge is that we have a culture
in this country of patients who aren't engaged in their health
care and the value of their health care because they are not
paying for it directly. If they are paying for it directly, if
they are choosing their own insurance plan and paying for care
through, like, HSAs and able to shop, yes, you are not going to
deal with the person who is like the schizophrenic who really
doesn't have the necessary mental capacity and there, you need
more of a role of the state to help navigate the healthcare
system for those individuals, but a lot of the inefficiencies
with those high utilizers is driven by the fact that they have
zero economic incentive to save that money.
Mr. Murphy. I agree to some extent. But I know I am out of
time here. But I would also like to opine this, that you are
right to some extent, but it is also an issue of if it is not
managed by these companies, if there is no incentive for those
companies to really manage and coordinate that person's care,
then you end with increasing costs, the state or Federal
Government is just going to pick up. And this is where I think
we look at ways of financing this program inefficiently, but
not really fixing it.
I know I am out of time, Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman. Now we are going
to recognize the gentlelady from Illinois, Ms. Schakowsky, for
5 minutes of questions.
Ms. Schakowsky. Mr. Roy, I don't even know. I am not going
to spend my time disagreeing with you, because the idea that if
only people had more control, that we would dramatically
reduce. People can't afford the health care that they need, not
that government is controlling it. But I am not even going
there with you.
According to a 2014 study done by HHS, the rate review
requirement included in ObamaCare saved consumers nearly $1
billion on insurance premiums in 2013. However, currently, the
Secretary of HHS only has the authority to review rate
increases, not modify, approve, or deny them. Many states have
taken the extra step of enacting legislation to provide their
insurance department with the authority to deny or modify
unreasonable health insurance premium rates.
Evidence shows that when insurance regulators have the
authority to do so, consumers pay less. I am from a state that
does not have that authority. In 2013, the Maryland Health
Commission used such authority to modify the proposed rates for
all nine carriers, who submitted plans for the Maryland health
connector. The commissioner reduced the propose rate increases
of all existing plans, one by more than 66 percent. And that is
why I have introduced the Health Insurance Rate Review Act,
which grants the Secretary of Health and Human Services the
authority to deny or modify unreasonable premium rate increases
in the states where insurance regulators don't have the
authority.
So, Ms. Corlette, here is the question: Would expanding
rate review authority help to control the cost of premiums?
Ms. Corlette. Thank you, Congresswoman, for that question.
So the evidence is really strong that having an independent
reviewer of insurers' rates, proposed rates, the assumptions
they are making, the claims they are making about trend and
cost, et cetera, is a critical consumer protection, and it has
saved consumers millions of dollars.
And it is a particularly critical function in areas that
there is not a lot of competition among insurers. I would say
that there are a number of states that are doing a really,
really good job of this, but others where they either lack the
authority or the resources to do it, and in that case, the
Federal Government can be an important backstop.
Ms. Schakowsky. What states would you cite as examples of
who is doing a good job?
Ms. Corlette. Who is doing a good job? I think that in
Rhode Island and Oregon and Washington State, those are a few
that come to mind immediately. Maine also has a good track
record that are very proactive in how they are looking at
insurers' claim.
Ms. Schakowsky. Let me also ask you this: I also strongly
support creating a public option to be offered in the
marketplace. We discussed this during the development of the
Affordable Care Act, and we actually passed one in the House. A
robust public option would increase marketplace competition,
lower premiums for consumers, lower the Federal deficit, all
this has been documented. It is estimated the consumers would
save between 5 and 7 percent on their premiums through a public
option health plan; moreover, the Congressional Budget Office
previously estimated a public option would save $158 billion in
Federal spending over a 10-year period. I introduced
legislation in the Public Option Deficit Reduction Act, which
would create a publicly administered insurance plan that would
be available in every marketplace, would be designed to include
robust provider networks, and more affordable deductibles.
So, again, Ms. Corlette, would availability, in your
opinion, of a public option provide consumers with a more
affordable plan and help to create more competition in the
marketplace?
Ms. Corlette. Yes, I think that the public option could
really help keep costs lower, not only would it likely have
lower administrative costs than a commercial insurance company,
but it could also use its market power to ring lower prices out
of providers. And also could be a really important backstop in
rural or underserved areas where it is hard to get insurers to
come in and compete. So for those reasons, I think it is
definitely worth bringing back on the table.
Ms. Schakowsky. OK. And I yield back. Thank you.
Mr. Pitts. The chair thanks the gentlelady, now recognize
the gentleman from Illinois, Mr. Shimkus, 5 minutes for
questions.
Mr. Shimkus. Thank you, Mr. Chairman. This has been a great
panel, so I appreciate you all coming. I think people know that
we have a system in place. Some people think it is the best
thing since sliced bread, some people have concerns. I think
everybody believes there are changes that could be made. So I
think this is going to be a start of, hopefully, a lot of
discussions.
There was a section of our citizens that got help, and that
was the Medicaid expansion for people who didn't have access to
care. But I am told all the time, it is never refuted, that
people are paying more and getting less coverage now than they
had before, if they had a standard policy beforehand. I
acknowledge that Medicaid expansion did cover some uninsured.
And even those who have it--and also the promise to hospitals
who are part of the negotiations, was that they would save
costs, and there would be less access to emergency rooms. Now
they have more people going to emergency rooms, and it is
because of these high deductible plans.
So there are a lot of problems and promises that were made
that weren't kept on, what, $2,400 a year savings for a family
of four, premiums would go down, copays would go down. If you
like your policy, you keep it. If you like your doctor, you
keep it. All those were not satisfied.
So we are talking about tweaking and trying to fix--part of
this is the cost sharing issue that we have been talking about,
too, and how you incentivize. I am not a big supporter, and I
am not a supporter of federally mandated plans without
flexibility. But I do know that the cost sharing is based upon
the silver and 60 percent amount.
Dr. Gottlieb, would it make sense to shift that bronze to a
50 percent, and not based upon the silver percentage? Would
that help at all?
Dr. Gottlieb. Well, I note that people have also talked
about creating a copper plan for younger healthier people. It
is probably going to be the case that a lot of the bronze plans
end up pulling out of the market and insurers ship more towards
the silver plans this year for a variety of reasons, not the
least of which is the bronze plans ends up having to pay back
the most amount of money because they ended up attracting the
healthiest individuals.
I think the problem stems from the rigid regulatory
structure around the rating system and the fact that you can't
vary the actuarial value more than 2 percent up or down from
these metal tiers. I think what we should be thinking about
doing is providing much more rating flexibility to the insures
so they can offer wider variety of different kinds of plans and
offer different schemes, things like value-based insurance
designs.
Right now what they do is they try to develop a plan to
meet an actuarial target, rather than to develop a plan that
sort of optimizes a set of circumstances.
Mr. Shimkus. And even in part of the value-based, or even
the hospitals are going to be now incentivized to have quality
care and quality care measures, which financially would be a
value-based system. Would it not be?
Dr. Gottlieb. I think as providers take actuarial risk, we
are moving toward that. And that is maybe one of the good
benefits of the consolidation that is underway of the
healthcare system. I have been critical of consolidation. With
respect to the rating and the tiers and the metals, there was a
view that by having discrete metals, it would make it easier
for consumers to understand actuarial value. But, in fact, I
think the evidence shows consumers don't necessarily understand
actuarial value in relation to the metals. And we should think
about conducting some real vigorous research around whether or
not consumers can be educated around just what the actuarial
value means so we can provide number the number to the
consumers, not just the metal. I think the Healthcare.Gov Web
site is doing a better job of translating what actuarial value
means in some practical settings. There are better tools to
help people understand that. We can move towards a more
flexible framework.
Mr. Shimkus. And let me end up with this statement saying
to you, Dr. Gottlieb: This auto enrolling debate, helpful,
harmful, or is there an incentive to, if you auto enroll,
people are losing idea of cost and coverage by just letting it
roll? If you auto enroll one policy down because they weren't
engaged in making the decision, would that force a closer
scrutiny of the policy?
Dr. Gottlieb. Well, we talk about auto enrolling in the
plan we put out through AEI. What we do is we provide a minimum
subsidy level that is going to be sufficient for states to be
able to auto enroll individuals in a basic plan. We give the
flexibility of states to do that.
Now, the reality is in our scheme, you are going to end up
being auto enrolled into a basic healthcare plan that is only
going to provide catastrophic coverage, so a lot of people are
not going to like it. But we do talk about the concept in our
plan.
Mr. Shimkus. I talk about catastrophic coverage all the
time, and I think that is where we need to be.
Thank you, Mr. Chairman. I yield back.
Mr. Pitts. The chair thanks the gentleman, and now
recognizes the gentleman from New York, Mr. Engle, 5 minutes
for questions.
Mr. Engel. Thank you, Mr. Chairman. I thank you and the
ranking member for holding today's hearing.
Let me just say, you know, when you take a massive bill
like the Affordable Care Act, of course, there are going to be
problems with it. Major bills like this, whether it was
Medicare or Medicaid or other large bills, you see how they
work, and then you tweak them. You change things. You improve
things. But, unfortunately, we haven't been able to do that.
The majority seems to be more intent on trying to get us to
repeal it 62 or 63 times, which really wastes everybody's time.
We really should all put our heads together on both sides of
the aisle and do some commonsense fixing. Not repeal it,
because we really believe this Act is here to stay, and we
believe that this is something that benefits people, because
Ms. Corlette's testimony is a very apt reminder of the
practices that were routinely employed prior to the passage of
the Affordable Care Act.
Let's state them, again: Denying insurance for people with
preexisting conditions, forcing certain populations to pay
exorbitant rates, applying lifetime limits to care. These
practices, if you are under 26, you couldn't stay on your
parents' plan. These practices were once commonplace in the
individual insurance marketplace.
So we have made this point numerous times, and I think it
is important to, again, remind ourselves what the status quo
used to be and how it affected people, people like our
constituents, our families, and our friends. And as Ms.
Corlette mentioned, like any law, the ACA is not perfect. But
it has made a world of difference for those millions of
Americans who were once denied coverage or couldn't afford it,
and I think we need to keep working to ensure it continues to
make a difference for millions more.
Ms. Corlette, you notice that the ACA has allowed states to
implement new delivery systems reforms, a space which New York
has been tremendously successful. New York's delivery system
reform incentive payment program is laying the groundwork to
ease payers' and providers' transitions from a fee-for-service
system to one in which reimbursements are based on value, not
volume. Through this program, often referred to as DSRIP, New
York will be able to allocate more than $7 billion in Medicaid
savings towards improvements to its healthcare system over the
next several years.
So would you talk a little more about the kinds of delivery
system reforms that have been spurred by the ACA, and how those
reforms might benefit the health system as a whole?
Ms. Corlette. Yes, absolutely. I mean, I talked earlier
about how health insurance is such an expensive product. And
one of the reasons health insurance is so expensive is because
the delivery of care and the way we pay for care is often
irrational. So some of the things that the Affordable Care Act
did was really launch some experiments, primarily using
Medicare, but also Medicaid, and I think Covered California is
an example of how a state could maybe use its marketplace to
also get at some of these payment and delivery system issues.
So some examples are encouraging expansion of patient
centered medical homes, where care is truly coordinated and
there is a real emphasis on primary care for people with
chronic conditions, bundling payments for a particular medical
procedure, so that, in some cases, providers are actually
taking on some risk if they overdeliver services. That is
another example. ACOs, accountable care organizations, again,
where providers are taking on some risk; if they are over
budget and not delivering quality of care, then they take a
financial hit.
So those are just a few examples of some of the
demonstration projects and other things that are being
launched, and New York is a great example of a state that is
taking it up and running with it.
Mr. Engel. Thank you.
Mr. Shimkus had asked a question to one of the other
panelists about actuarial value. I am wondering if you would
like to comment or respond to that question?
Ms. Corlette. Yes, sure. So the actuarial value targets are
built around the bronze, silver, gold, platinum level plans.
And, I mean, we talked a little bit earlier about how consumers
are making trade-offs, right, between higher deductible, lower
premium, higher premium, lower deductible. And that, it
simply--these are signals for consumers to be able to help them
make those trade-offs in a clear and understandable way. And as
far as I can tell, they are working. Predominantly, people are
enrolling in the silver level plans, but, you know, with 86
percent of people reporting satisfaction with their coverage in
the marketplaces, it sounds like I think people are generally
happy with their choices.
Mr. Engel. Thank you.
Thank you, Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman. I now recognize
the gentleman from Indiana, Dr. Bucshon, 5 minutes for
questions.
Mr. Bucshon. Thank you, Mr. Chairman. This has been a
productive discussion today. I was a cardiovascular and
thoracic surgeon before coming to Congress, so, obviously, it
is near and dear to my heart. The one thing we are not talking
about, though, is the cost of the product, itself, is too
expensive. I mean, that is not what this is about. You
addressed some of that.
The only way that we are going to get a handle on this is
we are looking at ways to cover a product that continues to be
too expensive itself, and so in some future hearings, hopefully
we can address that. There is no price transparency in health
care, very minimal from a consumer perspective, and it is
third-party payer. The consumer doesn't care what things cost,
essentially, because they are not paying the bill for the most
part.
Quality transparency, which is improving. The Society of
Thoracic Surgeons, my society, has had a database for almost 25
years that I participated in. The expansion of has is leading
to some consumer-driven type health care, Healthy Indiana plan
is the way we are covering our Medicaid population that is
leading to decreased cost in that space, because consumers have
a little bit of their own skin in the game. And we need to
further incentivize preventive care by paying for it better
because the people don't get sick, it doesn't cost you any
money.
So that is my lead-in. I would also like to say some of the
mentioned problems in the marketplace that were just mentioned
were recognized by both sides of the political aisle. Everybody
recognized preexisting conditions was the problem. Everybody--
all of those--it is everything else that the ACA did that was
the issue. We could have solved those problems in a different
way, in my opinion.
The average Federal exchange premiums jumped 12.6 percent
for bronze plans, and this is 2015; 11.3 percent for silver
plans. Deductibles were up by $500 in the silver plans. The
reality is the people I talked to, healthcare costs are going
up for everyone. And I think even though, in fairness, there
are many people that are happy with their insurance coverage,
there are also complaining about the costs.
The Gallup Poll recently said that healthcare costs are at
the top of American families' financial concerns, number one.
So that said, a lot goes into rates: experience, trends,
reinsurance, taxes, benefits, medical loss ratio, many of which
are mandates in the ACA.
Ms. Corlette, in your testimony, you note Congress should
approve affordability. I think we all would agree with that.
You say that we can achieve that through premium cost-sharing
arrangements. Can you identify--and this would be for the full
panel, but I will start with you. One, government mandate that
could be eased today that would alleviate costs? You may not be
willing to mention, to say----
Ms. Corlette. Yes, I have to take a minute to think about
that. But I would happily cede to my counterparts while I am
thinking about it.
Mr. Bucshon. Yes, I mean, I think since I am one of the
last to ask questions, some of them have been answered, right?
The 3-1 age premium limit is a big one, the MLR is a big one.
Others?
Ms. Corlette. I would only point out that by expanding the
age rating you would be lowering costs for younger people, but
raising them for older people. So, there are winners and losers
when you do that.
Mr. Bucshon. Except for the fact that that is limiting the
ability of younger people to enroll because the costs are too
high for them to enroll in the plan in the first place. So--Mr.
Roy.
Mr. Roy. Correct.
So in my written testimony, I provide a written
illustration of this fact that, actually, the narrow age spans
in the ACA end up increasing the cost of health insurance for
older individuals as well, because the younger people don't
enroll, which increases premiums for everyone in the end
through adverse selection. So I definitely would highlight
that, as you mentioned.
One thing I would bring up, since the goal is--you started
in your question talking about, well, there are things in the
ACA that we should change, and there are things that we should
change, and there are things we should change to reform the way
we pay for health care, and we absolutely do that as the core
problem.
But one area that I would highlight that we haven't talked
about today that is outside the scope of this today's hearing,
but I would encourage you to consider is hospital
consolidation. The fact that hospitals are consolidating and
taking market power in a particular locality and using that
market power to basically dictate prices to insurance
companies, which insurance companies and Medicaid is simply
forced to pass on in the form of higher premiums. That is a
huge problem. There's a lot we could be doing to address the
problem of hospital consolidation.
Mr. Bucshon. I am running out of time.
Yes, and we are not even talking about the tax treatment of
hospitals and the more complicated situation that we are in.
Hospitals and insurance companies are building all the new
glass buildings in every city that I visit, including my own.
And it is getting harder and harder to justify to the
constituents that their costs are going up, but yet, it appears
that some of the providers of those things are doing quite
well.
I am out of time. I yield back.
Mr. Pitts. The chair thanks the gentleman, now recognize
the gentleman, Mr. Cardenas, 5 minutes for questions.
Mr. Cardenas. Thank you very much, Mr. Chairman. And I
really appreciate the opportunity to have this hearing. I hope,
and it appears to me that maybe we are starting to speak more
about how we can legislate and improve on the environment that
we have post-ACA instead of just talking about how we should go
back to a world before ACA. But here we are. So thank you very
much, Mr. Chairman and colleagues.
I am baffled that we would point out that healthcare costs
keep rising, but it is my understanding--forget about my
understanding. Could you answer the question, prior to the
Affordable Care Act being passed, were healthcare costs going
up in the United States in overall consumption, overall GDP, et
cetera, et cetera? Was it on the rise before the Affordable
Care Act even got enacted?
Mr. Roy. Healthcare costs have risen every year since time
immemorial, but one thing that is important, I think the
question, sir, that you are trying to get at is, has the rate
of growth in healthcare costs increased or decreased? And
there's been, since 2003, a decline in the rate of growth in
the increase of healthcare costs and healthcare spending that
has continued with accelerated and exacerbated by the global
recession. And so, now we are starting to see just in the last
year, actually, the growth in healthcare spending and
healthcare costs have turned up again. So there has been a
significant increase in the growth rate of healthcare costs
since the ACA's spending provisions went into effect.
Dr. Gottlieb. I would just add to that and echo that. When
you look at the analyst reports being put out and what the
healthcare companies are reporting right now, they are
reporting clearly at the end of what we call an underwriting
cycle, where healthcare costs declined as consumption, but yet,
it declined during the recession and now you are seeing
healthcare consumption go back up, and costs are going back up
with it, and that is what the insurers are reporting. So that
should be concerning. I think we are going to see an
acceleration in healthcare inflation in the coming years.
Mr. Cardenas. But weren't we seeing double digit year over
year healthcare costs going up prior to the Affordable Care Act
being enacted? Go ahead.
Ms. Corlette. Yes, sir. Before the Affordable Care Act was
enacted, we were seeing double digit cost increases year over
year, and since the ACA was enacted, we have seen lower costs
growth year over year.
Mr. Cardenas. And before the ACA was enacted, what would
happen to somebody if they had a precondition? Say somebody had
previously cancer, and it was in remission, and then all of a
sudden they found themselves out of the insurance market? Say I
want to get insurance. What would happen before the ACA was
enacted? Would somebody likely, really, honestly, be able to
get insurance with that precondition? Go ahead.
Ms. Corlette. Likely not. And I would point out, too, that
there's been a lot of discussion today about how much more
expensive these health insurance products are post-ACA. Well,
one reason health insurance was cheaper before the ACA is they
didn't cover sick people. So, yes, you can offer cheaper
product if you don't allow any sick people----
Mr. Cardenas. If you legally exclude sick people.
Ms. Corlette. Right. And if you don't cover benefits and if
you don't cover mental health or prescription drugs, yes, the
product will be cheaper. Will it provide the kind of financial
protection that you and I and all of us with employer-based
coverage are used to and expect? No.
Mr. Cardenas. Also, let me ask you a follow-up. Prior to
the Affordable Care Act passing, say somebody did get cancer
and they wanted treatments and, thank God, they actually were
cured, what was the likely deductible that that family or
individual was likely going to be saddled with, with a full-
fledged chemotherapy, maybe even some operations removing some
tumors, et cetera, et cetera, et cetera? What was the
likelihood of that individual or family being saddled with
their own portion of the costs, even if they had insurance?
Ms. Corlette. Financial stress is one of the biggest issues
for cancer patients and their families, and not only can lead
to medical bankruptcy and those kinds of things, but it also
can really lead to worse health outcomes because of the trauma
and stress of dealing with those financial costs.
Mr. Cardenas. But what were the likely costs? Was it
$5,000, maybe $10,000, $20,000?
Ms. Corlette. No. If you have a cancer that it could be
tens of thousands, hundreds of thousands of dollars depending
on the kind of----
Mr. Cardenas. Now, since the ACA has been passed, that same
scenario, how much would that person be saddled with after all
of that remediation and all of the treatments?
Ms. Corlette. I am really glad you mentioned that, because
one thing we haven't discussed is that the ACA provides a
critical financial protection in terms of an out-of-pocket
maximum----
Mr. Cardenas. We are running out of time. What is that?
Ms. Corlette. It is roughly $7,000 a year that it would be
maximum you would have to pay.
Mr. Cardenas. Thank you. And also, look, I have a daughter.
She is educated. She is a professional, so is her husband, both
working. And when they had to go out and buy their own
insurance, they were complaining. And when I asked them how
much they were paying for this healthy couple, young couple,
they were in their late 20s, they were complaining about the
costs. And having been a former employer myself, I said, what
are you complaining about? How much would it be? It was like a
couple hundred bucks a months for them to get that coverage
with a maximum deductible, $7,000, et cetera, et cetera, et
cetera.
And I was sitting there going, you know what, complaining
about your health care cost is a matter of perspective, and
some Americans are so dammed spoiled, including my own family,
that they don't even get the fact that we are in such a better
place today.
Thank you, I yield back.
Mr. Pitts. The chair thanks the gentleman. I now recognize
the gentleman, Mr. Bilirakis, 5 minutes for questions.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
Thank the panel for their testimony today as well.
Mr. Roy, in your testimony, you mentioned the convoluted
tax credit system leading of incidents of waste, fraud, and
abuse.
Today, we have more confusion during tax time as people
need more tax forms. A means-tested tax credit that penalizes
midyear pay raises, and as recently as January, the IT report
that CMS can't, they cannot verify premiums paid before paying
premium tax credits to insurance companies.
Can you elaborate on some of these problems, and what we
should do? Is there a better alternative to the current tax
credit based-premium assistance program, the system? Is there a
better way?
Mr. Roy. Absolutely. And you correctly highlighted some of
the examples of how problematic that system is.
One thing you often find is that people whose incomes are,
say, 200 percent of the Federal poverty level, their incomes
are volatile. They are often working odd jobs and being
freelancers, so their income goes up and down.
So if they have to estimate what their income might be for
the next month, and then it turns out they estimated that
inaccurately and the subsidy they received is inaccurate
because of that, theoretically, by law, the Treasury Department
is supposed to go after them and recover what excess subsidies
they received and vice versa.
That is an incredibly cumbersome system, and it also
incentivizes people to underestimate their income in order to
receive subsidies, knowing that the Treasury Department doesn't
really enforce that clawback provision as often as they should.
So this is a serious problem, and the best way to deal with
it is through a statutory change that, as I discussed in my
written and oral testimony, would use the previous year's
taxable income as the basis for whatever assistance you
provided in the following year.
Now, that of course would not 100 percent match with your
daily or monthly income, but that is the tradeoff for a system
that is much more easily enforced where there would be very
limited waste, fraud, and abuse, compared to the system we have
today where there is enormous--as you mentioned, the OIG
reports and other reports have estimated that there have been
billions of dollars of misplaced subsidies and misallocated
subsidies as a result of the very cumbersome, technocratic
system that the ACA imposed.
Mr. Bilirakis. Dr. Gottlieb, do you have any thoughts on a
better premium system, subsidy system?
Dr. Gottlieb. This is the reality of--look, we have never
done this before. We have never tried to provide middle class
consumers a subsidy based on income that changes as their
income grows. And trying to create that framework is going to
lead to very odd structures like the clawback, and people might
underestimate their income just to get the float for the coming
year, not to mention what Avik mentioned with respect to the
fact that there isn't real enforcement in terms of clawing back
that money, so you are getting a lot of wasteful spending.
This is why we advocate an age-based subsidy and a subsidy
structure that allows the subsidies to be tied to a looser
rate-setting environment where premiums can adjust based on
risk. And I know there is a lot of criticism of an age-based
subsidy because people who are in lower-income brackets might
not get enough of a subsidy to be able to go into the market in
as robust of a fashion as they are under the current scheme.
These are the tradeoffs. I mean, an age-based subsidy and a
risk-based subsidy will eliminate the need to have these really
odd tax consequences that we have right now that I think aren't
going to be fully enforceable.
Mr. Bilirakis. Thank you for those suggestions.
Dr. Gottlieb, you testified here in 2014 about the problems
of narrow networks in the ACA. At the time, I used a very real
example of the Moffitt Cancer Center, which is just outside my
district--the only NCI-designated cancer center in Florida, by
the way--only being available at that time in 1 out of 12 ACA
plans in Florida.
It seems to me that the people most disadvantaged by the
law may be the sick patients with serious, chronic, complex
medical conditions. Unfortunately, the problem of narrow
networks seems to be growing, unfortunately.
Can you talk about the growth of closed pharmacies, the
continued narrow networks, and how we may build a system with
more patient choices?
Dr. Gottlieb. The insurers are doing what they can to try
to control costs in the marketplace that I think where the pool
has ended up much more skewed than what people anticipated. So
they are trying to cheapen the benefit, and they are doing that
by continuing to narrow the networks and close drug
formularies.
CMS is starting to apply more oversight on the networks and
network adequacy right now. They are not applying as much
oversight on the formularies. And so you are seeing very
restrictive formularies. I went through and systematically
looked at about 25 plans for the coverage around drugs for
multiple sclerosis. I found that most plans excluded 6 or 7 of
the 12 top drugs that you use to treat the disease, and that is
a disease where you want to provide maximal flexibility to
patients in treatment selection.
I think these are just the consequences of a very
prescriptive regulatory scheme that takes away a lot of the
other tools insurers might have to try to manage costs. They
are going to manage costs through the only vehicles they have,
and this is all that we have left them. And so I think you will
continue to see increased ratcheting down to the extent that
CMS is going to allow it under regulation.
Mr. Bilirakis. Mr. Roy, any thoughts?
Mr. Roy. Yes. So I think that it is part of a continuum of
problems with when you have a cumbersome system and you don't
have the right enforcement, what are you going to do? You
basically have to go through various complicated--the IRS
doesn't audit people's monthly income statements.
So, again, the simplest way to deal with this is, if you go
by the previous tax year's income, and then you have an age-
adjusted subsidy along with it, then what you can do is--it is
very transparent. People can know ahead of time, OK, here is my
age, here is my income in the previous tax year, here is the
assistance I am going to get.
And then you pair that with a regulatory system that gives
people the flexibility so that insurers have the freedom to
offer young people and healthy people plans that are affordable
to them that accurately represent the expected healthcare
consumption they might have in a given year.
Mr. Pitts. The gentleman's time has expired. Thank you.
That concludes the questions of the members present. We
will have some additional questions from members. We will
submit them to you in writing. I ask that you please respond.
Terrific panel today. Thank you so much.
Members have 10 business days to submit questions for the
record. That will be close of business on Wednesday, May 25.
Without objection, the hearing is adjourned.
[Whereupon, at 12:02 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]