The Future of Health Insurance: Stabilizing the Individual Insurance Market

8:30 – 8:45 a.m. Registration and Light Breakfast

8:45 – 9:00 a.m. Welcome and Introductions

• Marilyn Serafini and Sarah Dash
  Alliance for Health Reform
• Mark Hayes
  Ascension
• Glen Stream
  Health Is Primary

9:00 – 9:45 a.m. The State of Play: Challenges and Issues in Health Insurance

• Sen. Tom Daschle
  The Daschle Group
• Thomas A. Scully
  Welsh, Carson, Anderson & Stowe
• Reed Tuckson, Moderator
  Tuckson Health Connections

9:45 – 10:45 a.m. Stabilizing the Individual Insurance Market

• Karen Bender
  Snowway Actuarial & Healthcare Consultants LLC
• Ed Haislmaier
  The Heritage Foundation
• Chris Holt
  American Action Forum
• Peter Lee
  Covered California
• Tom Miller
  American Enterprise Institute
• Sarah Dash, Moderator
  Alliance for Health Reform

10:45 – 11:00 a.m. Break

11:00 a.m.-12:00 p.m. Medicaid Moving Forward

• Josh Archambault
  Foundation for Government Accountability
• Trish Riley
  National Academy for State Health Policy (NASHP)
• Diane Rowland
  Kaiser Family Foundation
• Judith Solomon
  Center on Budget and Policy Priorities
• Marilyn Serafini, Moderator
  Alliance for Health Reform

12:00 – 12:30 p.m. On the Ground Considerations and Implications

• Michael D. Aubin
  Wolfson Children’s Hospital
• Andy Chasin
  Blue Shield of California
• Kisha Davis
  Casey Health Institute
• Kirsten Sloan
  American Cancer Society
• Noam N. Levey, Moderator
  Los Angeles Times

PLEASE NOTE: This is an unedited transcript. Please refer to the video of this event to confirm exact quotes.

SARAH DASH: Thank you so much everybody. And thanks again to Senator Daschle, Tom Scully, and Dr. Reed Tuckson for the previous enlightening panel. So we now have one hour to fix the individual market. We have until 10:45. So, we have a really terrific panel today. We’re going to focus, as Marilyn said, on stabilizing the individual insurance market, what that means in the short term and in the long term. And of course, while this market covers fewer than 10 percent of Americans under 65, it obviously has an outside focus in today’s health policy debate. Concerns about stability have arisen and they’re interconnected with questions about affordability, subsidies, access, and incentives to be in or out of the market. So really, we have a fantastic panel and I want to just briefly introduce them, and then we’ll get into our questions.

To my left is Karen Bender. She is President of Snowway Actuarial & Healthcare Consulting. And she is currently the Chairperson for the Individual and Small Group Committee of the American Academy of Actuaries, among many other qualifications. If you want to know how to be an actuary, you can come talk to Karen after. Welcome. We have Peter Lee, to her left. He is the Executive Director of Covered California, the first health exchange created after enactment of the Affordable Care Act. And he previously held leadership positions in the Obama Administration working on healthcare delivery, reform, and quality improvements. Next, Tom Miller is a Resident Fellow at the American Enterprise Institute, where he studies healthcare policy, including health insurance and market-based alternatives to the Affordable Care Act.

Ed Haislmaier is Senior Research Fellow in the Center for Health Policy Studies at the Heritage Foundation. And has worked on a vast array of health policy issues, including alternatives for the ACA. And finally, and last but not least, Chris Holt is Director of Healthcare Policy at the American Action Forum. And spent almost seven years on Capitol Hill, most recently for Senator Scott Brown. So, thank you all for being here. So let me just kick off with an easy question. Is the individual market in crisis? Why or why not? And how did we get here? And I’ll ask anyone who wants to start it off, to jump right in.

KAREN BENDER: I guess I’ll start something. In 2017, there’s certain packets that have limited choice in the country. With some of the announcements that have already occurred, with Humana pulling out and with WellCare pulling out, it makes 2018 potentially more problematic.

PETER LEE: Let me build on that. We may be in crisis, and we’ll know in the next six weeks.

KAREN BENDER: That’s a good way of putting it.

PETER LEE: Across the nation, there’s 400 health plans making decisions on, do they participate or not next year? And if they do, do they participate by raising rates 10 percent or 50 percent? And that’s all in play on three big decisions that are really before the Trump Administration and Congress right now. And I think the prior panel is great, is insurers are about spreading individual risk, but they aren’t about insuring about political uncertainty in risk. And if they’ve got big uncertainty, they’re going to step back and not play. They aren’t going to be rolling the dice. So, they’re looking for the signals that they have enough certainty to play next year.

KAREN BENDER: And also, the insurers need to be able to make money. They can’t consistently lose money. And for the statistics that are pretty well in for the first three years of Obamacare and in the individual market, a lot of insurance companies have lost a lot of money in the individual market. Not all, not all.

PETER LEE: A lot of plans made a lot of money.

KAREN BENDER: Yeah.

PETER LEE: But the place where I’d agree strongly with this is the plans that four years ago were ready to lose some money, on a long term bet, are not willing to lose anything next year. Because the year after next year, or after that, are even more uncertain. So I think that every plan for 2018 is saying, “If I don’t see a way to make money this year, I’m leaving the market.” And one other thing I’d just note is that plans are doing just fine on Medicare and fine on their employer, just fine on Medicaid, which is 90 percent of their business. So a plan can walk away from the individual market, and do just fine. And if they’re going to lose money in the individual market, they’ll walk. And if we policymakers give them that uncertainty, they’re going to walk and it could be a really bad year.

TOM MILLER: Well, that might be part of the triage for the emergency room. Look, if you want a crisis, you’re going to have to do better than this. What we have is a chronic condition. We may have braindead health policy, but it doesn’t mean that it’s physically dead. We move the rubble around and we move onto something else. It’s been going on for a long period of time. What the language of crisis usually is used to do, is to encourage worse policy. Saying, “Well, we couldn’t do any worse than this next policy.”

ED HAISLMAIER: I come back to the point, I’m sort of a one-note-Johnny on, which is that there are really two markets that we’re talking about here. One is the subsidized market in the exchange. The other is the unsubsidized market, the vast majority of which is outside of the exchange. And the part that is inside the exchange really should be counted with that. The exchanges – the subsidized market is continuing its path to what I saw years ago, as its natural equilibrium state. And its natural equilibrium state is basically a giant high risk pool for Medicaid-like population with maybe one or two insurers covering it in a state. Maybe more than that in a bigger state, like Texas or California or Florida or New York. And so, we’re seeing that very clearly.

Will that continue? To Peter’s point, yeah, I think it’s quite possible that that will continue. Is that a catastrophe? No, because basically, if it gets to that point, you can just recognize it for what it is, and bid it out to somebody. And as long as you’re willing to subsidize it enough, they’ll take the whole package, just like you do with Medicaid and Managed Care. The other market is the nonsubsidized individual market, and that’s the one I worry about more. And that’s the one where we are in the early, but disturbing phase of a crisis.

And by that, I would give the example of Wellmark in South Dakota and Iowa, which was never on the exchange. Even though they’re the Blue Cross carrier, even though they’re the biggest carrier in those two states, to Peter’s point, they don’t need that individual market business. They were never on the exchanges. Yet the spillover effect is such that as of last fall, they announced – and they were advertising, by the way, that “Hey, you can come buy ACA-compliant coverage off the exchange from us and it’s just as good or better.” They’ve now changed that.

So as of this year, they’re out of ACA-compliant coverage, off the exchange. They’ll still continue grandfather plans. They’re out in South Dakota. They went into the exchange this year in Iowa, but only in 40 of the 99 counties, only where they had a link-up, a subsidiary with the local hospital monopoly. They’ve even now pulled out of that. That was the announcement the other day, that they’re pulling out in Iowa as well. That’s what worries me.

PETER LEE: So if I can build on that, I think they are two markets. But the whole point of what the ACA is trying to do and say is make them one market. And by subsidizing lower-income healthy people, it benefits people that aren’t subsidized.

ED HAISLMAIER: Right, and that was the theory.

PETER LEE: That’s a theory, and in many places, it’s worked and in many [unintelligible]. So California, the average rate increase over the last four years has been seven percent. That’s far lower than double digit increases. And the main beneficiaries of that are not the subsidized people, because they get a subsidy. It’s the one million people that aren’t subsidized.

ED HAISLMAIER: And that’s where you have to look through and say to the extent, did that work? And it may have, for other reasons, worked in California. But it clearly seems to have failed in a lot of other places. And actually in a lot of other places, the solution is to unwind that and to separate those markets. Otherwise, you have a situation where the anchor is pulling the boat under, like I said, in South Dakota or Iowa.

SARAH DASH: Right. So let me give Chris a chance to jump in, if he wants to. And then I want to follow up a little bit on this inside-outside issue, so Chris.

CHRIS HOLT: So, Peter beat me to it. But I was going to say, you know, I think going back to what Peter said. It’s not just that we’ll find out in six weeks, if we have a crisis. I think there are areas of the country, where we have real problems right now. We know that. There are additional areas where we could have more problems. And that Peter would tell you, there are areas of the country that are doing very well. So I think we need to keep that in mind, when we’re thinking about the individual market. It’s different depending on where you are. And then I was also, just building on what Ed was saying. I mean, this is really one market. And this is going to become an issue when we talk about how to deal with a lack of offering in exchange.

And one of the proposals that has been put out there is to allow subsidies to go to non-exchange compliant plans, or non-exchange plans that are still QHP’s. In some cases, they aren’t going to be there. So, that’s an issue that we haven’t really figured out how to address yet.

SARAH DASH: So, let me just – so a point of clarification. So I mean, the ACA required that the inside and outside of the exchange plans be counted as a single risk pool. But the rules of the road for the plans inside and outside of the exchanges, did the states make those decisions, the exchanges? In California, you had a very specific rule about plans being sold inside and outside the exchange being similar. So, talk about that.

PETER LEE: Identical.

SARAH DASH: Identical. And how did that affect the adverse selection or not?

PETER LEE: Well, I’d ask some of the others to speak to other states. But there’s federal rules that plans on exchanges are generally offering their same products, same prices off-exchange. But they can offer a whole range of other products off-exchange. But they’re still with the standard actuarial value rules. They’re still with the standard essential health benefit rules, etc. And so the markets, the common risk pool markets that are pulled on and off-exchange are offering broadly with the same package. Now in California, it’s the exact same product, exact same price, exact same networks and that’s what’s covering 95 percent of Californians, whether they get subsidies or not. And so, I mean, that’s the broad mix.

ED HAISLMAIER: And I specifically note that D.C. and Vermont eliminated off-exchange sales. So you can’t buy off the exchange.

TOM MILLER: The ACA theory is premised on the old advice of President Eisenhower which is, “If you can’t solve a problem, enlarge it.” The problem is they just created a bigger problem.

KAREN BENDER: You have a valid point. And the differences between any benefits that you can sell on and off the exchanges are minimal, very, very minimal. I would say initially, the more distinguishing factor was maybe off-exchange, you had more wider networks being available than you did on-exchange. And the on-exchange may be focused more on narrower networks. I’m not sure if that’s the case anymore, because as experience has gone out, a lot of the companies have sort of streamlined their benefit portfolio.

PETER LEE: And importantly, there’s a lot of discussion and argument about which of The Three R’s: risk corridors, reinsurance, and risk adjustment made sense. Risk adjustment is across the entire market, on and off-exchange, subsidized, unsubsidized. And if people off-exchange are getting healthy people, they’re contributing whether it’s on or off-exchange, to plans that are getting [unintelligible]. I think that’s a healthy thing.

TOM MILLER: Except when risk adjustment doesn’t work as designed, as we’ve seen happen.

PETER LEE: Yeah but Tom, I mean, the notes of, here’s the reality we are today. Is there’s a lot of really healthy discussions about how to change things for two years out, whatever. We’re in the reality, where there’s 20 million Americans in the individual market, of which 30 percent may have no insurance. And this isn’t a created crisis. This is health plans making individual decisions in a bunch of the country on whether or not to play or not. And I didn’t create this crisis.

TOM MILLER: There’s only one thing we do well, which is kick the can down the road and move the cost to someone else. We’re not solving anything.

PETER LEE: I think we’ve got real solutions. And I mean, and it’s sort of good sound bites of kicking the can down the road. But the people we’re kicking down the road are four million Americans that you’re taking their insurance away from. That’s not a can I want to kick. That sounds like [simultaneous conversation].

TOM MILLER: Well, that was set in motion several years ago by other people.

SARAH DASH: So, let me jump in here. I should have sat between those two.

TOM MILLER: If you had tied people to the railroad tracks and called them hostages, I suppose you can get your money.

SARAH DASH: So let’s just backtrack for a second. So again, we heard Senator Daschle talk about this collage, right, of healthcare that we have in this country. And again, the individual market, it’s always been the trickiest market to fix. We have the employer market, you know, pretty stable. We talked about Medicare and Medicaid pretty stable, in terms of the actual provision of coverage. So I mean, what were the problems that the ACA was trying to fix, in terms of access, in terms of cost, affordability? So that’s the first question is, what are the problems we’re trying to solve? And then, did they solve them? How well did they solve them? And then, what do we need to do from here?

ED HAISLMAIER: And this gets back to the point that I’ve made all along. In fact, I was making these points before the ACA, which is that there were issues in the individual market that needed to be addressed. My criticism is that what they did was, instead of using a scalpel, they used a sledgehammer. And so, and in the process made things worse. So if you go back to HIPAA and the portability rules, the portability rules were good and have worked for group to group portability. They were not so good for group to individual portability, but at least there was something there. That needed to be improved.

Then, where they were lacking was the lack of, what we called individual to individual portability. And that’s where I started working on this, actually here in D.C. with the then Commissioner, when the GW health plan went away. And people who were self-employed and bought that for years and years were now being treated as if they had just come in off the street and had no prior coverage, and now they were older and sicker. And that’s the wrong – I mean, aside from it not being fair, you’re not putting the right incentives there, if somebody who has done the right thing, can now be treated as if they had never had insurance. So that was what needed to be fixed, but you had a template. You had HIPAA. You know, with some tweaks, you could have extended it and that would have addressed some of the biggest problems.

What they did was one, they just took a sledgehammer to it and said, “No PRE-X under any circumstances.” And thus lost the benefits of continuous coverage requirements and needed to come up with some other way – and that’s where the mandates on the individual and the subsidies came in – to get people to buy coverage. So that was a mistake. And then, they decided to load onto this market, because it’s a small market, a lot of weight that it couldn’t bear. We were now going to make this small market the vehicle for covering people with subsidies. And we’re going to regulate it and turn it from being a financial service product for self-employed middle class people, into a social welfare program for low income people. And that was the thing.

And that’s the problem with linking the two markets together. How do you get out of the benefit mandates and all the other stuff that made it a social welfare program for lower income people, and give those middle class self-employed people back what they wanted, which is basically a financial service product that doesn’t cost them an arm and a leg?

SARAH DASH: So, let me push on that a little bit. So when you say a financial product, you know, what do you mean by that?

ED HAISLMAIER: They want protection – you don’t have to cover everything through insurance. You don’t have to have low copays and deductibles. I just want something – you know, I’m self-employed. I’m middle income. I want something that in case I get hit by a bus, it covers me. That kind of thing.

TOM MILLER: People would like it more if someone else would pay for it.

ED HAISLMAIER: Well yeah, but – and you know, the illustration I have also on this is if you take two people who are in their 20s and have low incomes. And one has low income because they’re middle class and they’re in graduate school – they come from middle class – and the other has low income because they come from a poor family, and they’re maybe working part time at minimum wage, you know, the first group. I get this all the time. The parents saying, “Look, I just want to make sure my kid in grad school has some basic catastrophic coverage in case something happens.” It’s not a question of, can they afford to go to the doctor? If they need to go to the doctor, they’ll go to the doctor. And if I need to, I’ll pay for it, you know. The kid from the poor background doesn’t have that. So if you design the whole thing around the one group, and not the other, they’re really two different groups with two different needs.

KAREN BENDER: The unique feature in the individual market pre-ACA, and sometimes we forget about this, is that unlike any of the other markets, the individual is paying 100 percent –

ED HAISLMAIER: Right.

KAREN BENDER: – of the premium and 100 percent of the cost-sharing, whatever cost-sharing you have. So prior to the ACA, I remember this statistic. The average actuarial value purchased in the individual market was about 50 percent. It varied, again. You know, I mean it varied dramatically from state to state, and all that. But it made sense, because these are people who – I mean, they’re paying both sides. It’s not like in your employer-sponsored insurance when the employer’s paying you, their 70 to 80 percent of the premium. And you’re paying the 20 percent, but then you have all the cost-sharing. Here, you’re paying the whole thing. So, people elected to have lower cost policies with higher cost-sharing, because you’re paying it either way.

ED HAISLMAIER: And the point I would simply make is, for that 55 percent of the individual market that’s not subsidized today, for the – you know, there’s about eight million subsidized in the exchange. And there’s 10 million outside, nonsubsidized. For that 10 million that’s nonsubsidized, none of that has changed except their premiums have gone through the roof.

PETER LEE: Well, and they’re not – let’s go back to what were the problems being addressed? I mean, to my mind, there’s three problems that we’re trying to be addressed. Is number one, affordability. For the people in the individual market, they get no financial help, so all they could afford was really cheap products. Everyone else in America – and you may disagree with it – get federal tax support to buy healthcare. You have employer-based coverage, 30 percent is covered by federal tax dollars. So this one slice got no help. So it’s affordability.

Number two, the issues around excluding people that have had prior health problems. How you address it and whether you can fix it, but people with prior conditions were getting excluded from coverage. The third problem, and it comes back to we as [wonks], and I mean this as a compliment, talk about 50 percent AV. But that 50 percent AV meant people were buying products that weren’t covering a whole bunch of stuff, and many times, they were surprised. They had products that didn’t cover cancer, that had exclusions for hospitals, that had a lifetime cap at 100,000.

I mean, these are the extremes. But the ACA tried to address that by saying, “Let’s have people understand what they’re buying.” You know, we can say that, let the market determine that. But those were three problems that the ACA tried to address. Then we can argue how they addressed them. But those were – people were getting bankrupt who had coverage, because the coverage didn’t cover a lot of the stuff they got sick for. And so, that was part of what the ACA tried to address.

TOM MILLER: There are two other problems you left out. The very high loading costs, the nature of the market. Most of that was marketing expense as opposed to profits. And then, just the nature of the individual market.

PETER LEE: And underwriting.

TOM MILLER: No, not even underwriting. It was really marketing if you want to [push through the figures].

ED HAISLMAIER: Right.

TOM MILLER: And the other problem was a majority, at that time, wanted to take more political control over the healthcare system. And this was the route to leverage these other problems into accomplishing that.

ED HAISLMAIER: Yeah, back though, and this is where again, it’s a question of degrees. It’s not so much binary. But Peter pointed out that people didn’t know what was in it. There’s a difference between providing transparency. So for example, if you say you have to tell people what the actuarial value is, if you say you have to tell people what the loss ratio is, if you say you have to tell people what the fuel economy is on the car, that’s different than saying, “Okay, and now, we’re going to have a minimum for each of those things.”

And so, just as you distorted the automobile market, and killed off the station wagon and brought in the SUV because of the fuel economy rules, which didn’t apply to trucks. So if you put the same thing on a truck chassis, you know, you’re distorting the market by saying, “Well, there’s a minimum AV that you must meet.” I mean, which made it impossible for example, [for its Patriot Plans].

KAREN BENDER: Let me also insert one other thing. I don’t have the exact number of states. It might have been 35 or 38, but did have high-risk pools for those that could not pass [health underwriting]. The problem in my opinion – and this is just my opinion. I’m not representing any organization here – is that was the funding for those high-risk pools. And because of, there wasn’t any external funding, so they became very, very expensive. And a lot of times, there wasn’t any funding to help people with premium support for them. So, there was access. Then, there were several states, where you had, that the Blue Cross Blue Shield plan was the carrier of last resort. So, there were ways for people that had high-risk conditions to get insurance, but it was affordability and a funding issue.

ED HAISLMAIER: And pre-ACA, I was working with states, you know, like Massachusetts and Utah on this. And when you took those things, you say, “Well, how could you improve that?” And one of the recommendations is to say, “Well, instead of segregating people, you know, give them the HIPAA kind of rules in the individual market. And then instead of a separate high-risk pool, have a risk transfer pool. But apply it beyond the individual market to the whole commercial market.”

SARAH DASH: So, let’s talk about this issue of risk. Because we’ve talked about access for healthy people. We’ve heard kind of the arguments that we should take away regulations to make it easier for younger, healthier people to buy into the pool. But then the questions is, what does that do? Are we just shifting more cost to sicker people, and people with chronic conditions, etc.? And so, how do we create a stable marketplace that creates affordability for people who are healthy, and maybe they do just want a product that helps them in case they break their leg skiing? And then, but the people who have serious chronic illnesses, of which there are many – we’ve seen public health statistics that, I mean life expectancies even decreasing across the country. So, what is the balance and how do you do that?

TOM MILLER: The economics are you can transfer and pool similar risks. The politics are, we don’t want to do that and we like to hide the other costs under a different bushel. The main way to bring that down is some type of external funding. If you simply transfer those costs across the individual insurance market, you’ve still got the same problem. The people who can’t afford policies just have their premiums go up as well. Now, the halfway step, which is the reinsurance under ACA is to put a tax on everybody who is covered. And states have done this mostly as their main funding source for high-risk pools. But the better approach is to dive into broader, general revenue, in a way in which you’re using the larger tax base, which is both more progressive and widely distributed, than trying to load that onto the premium cost. We’re reluctant to do that politically, because it’s too transparent.

ED HAISLMAIER: I’m reluctant to do that for policy reasons, too, Tom.

TOM MILLER: [unintelligible]

ED HAISLMAIER: No. Oh, no.

SARAH DASH: Let’s let Peter –

PETER LEE: Well, I just want to take an opportunity to join arms with Tom. I just totally agree. Because you said you’d sit between us, because you don’t always agree. But I mean, it’s absolutely right is that in the individual market, it is a somewhat sicker pool than the employer market. People retire early, etc., and what do you do about that? There are two major vehicles talked about. One is set up high-risk pools, segregate them and fund them separately. The other is reinsurance is spread, lowering the costs for everybody, and it’s a partial measure. But it actually worked really well in the first few years of the Affordable Care Act.

And I would note that the American Healthcare Act proposed a $15 billion a year fund for ’18 and ’19 to do just that, to stabilize the market. But it is taking money from someone else, to lower the costs for everybody. And who do you take it from? That’s the political issue. But to stabilize the market, that’s exactly what you need to do.

TOM MILLER: The problem with most of these reinsurance proposals is, the reason they want them to be invisible is they don’t want to actually see what the costs are. And the other problem is, they tend to do it ex post rather than ex ante. So, you’re not getting real reinsurance, which is when you go to a private reinsurer, it gets priced and you actually pay your premium for it, in order to handle that extra risk and volatility. Instead, it’s just another way to try to spread this across other people, who don’t know what’s going on.

PETER LEE: The place where I may disagree, and I’d ask the actuary to come in, when it being priced for. I mean in California, we sit down with our health plans every year, as they’re developing rates. And we knew exactly what reinsurance was worth in 2014, ’15, and ’16. And if there was a $15 billion pool, that would be worth, next year, 15 percent coming off premiums because plans priced for it. Because it’s covering certain people with certain risk and what it costs. And so, you can price for it, and is it visible where it’s coming from?

ED HAISLMAIER: I think Tom’s point was pricing, in the sense of a classic private reinsurance contract, as opposed to pricing in the value of a subsidy.

TOM MILLER: One price is the risk. The other price is the result.

ED HAISLMAIER: The value of the subsidy, yeah. My disagreement on that, or my concern on this is that it becomes a giant game of tag. And you’ve now set up the government slash taxpayers “as it.” And so, it creates incentives for carriers to shift costs onto there.

PETER LEE: That can be handled.

ED HAISLMAIER: Well, I know. But I’m just saying it raises some issues. Because at some point, you have the potential where, as the public cost grows, for the response to be, “Okay, I’ll tell you what. We’re not going to let you just submit any and every claim. We’re going to control the price, or we’re going to decide whether this is a legitimate service” or stuff like that. And so, you’ve got a whole set of issues with public dollars. Look, the answer broadly is yes, you broaden this. So there’s two ways to broaden this.

One is if you had given, instead of a very narrow and very substantial tax benefit, which is what the ACA did. It gave it to a very narrow slice of the population and it was quite substantial. In fact, for most single people, the value of the ACA tax credits went to zero at about 250 percent of poverty. So it was really between 100 and 250 percent of poverty, a very narrow slice of the population, and very substantial amounts. Instead of doing that, do less and spread it over a larger population. If you had just given everybody sort of like through the Republican proposal, a basic tax credit, that would have addressed some of the issue.

The other thing is, and this was the work I was doing pre-ACA, is to say, “Look, if you adopt these kinds of HIPAA rules in the individual market, you will have some costly effects.” So for example, the big one, and you’ve seen this in the ACA is now, individual market coverage becomes preferable to Cobra coverage. And so, you will have a selection effect. The answer to that is your risk pooling needs to encompass not just the individual, but the commercial – at least the commercial employer group market. And I would do it on the backend with a retrospective adjustment to really focus on, did anybody get an outside of the norm distribution of risk?

TOM MILLER: The wider the rug, the more we can put under it.

ED HAISLMAIER: Well yeah, and the obstacle to that would be, you know, folding in the self-insured employer market, which is a federal law obstacle. If you were to fold them in, they would have to – I mean, anybody you bring in, to pay for it, has to have the same rights to seed risks into it as well.

KAREN BENDER: If you want to lower the costs for the individual market – or I shouldn’t say the costs – lower the premiums, because there’s a difference between cost and premiums.

ED HAISLMAIER: Right, yes.

KAREN BENDER: You’re absolutely right that that funding has to come from external of individual market.

TOM MILLER: That’s Alaska. They use the external state money in the [unintelligible].

KAREN BENDER: Yeah. Because otherwise, if you’re just pooling among the – even if you do it nationally, you’re just trading dollars. The cost for the whole pool will not be lower, if you’re just –

CHRIS HOLT: It’s just not a big enough pool of people.

SARAH DASH: So it’s not a big enough – so and the other thing –

TOM MILLER: You don’t need a pool. We need an ocean.

ED HAISLMAIER: Great line.

KAREN BENDER: But the other thing that we have discovered, and I think none of us expected. We’re seeing a lot of really high claims, much higher than we anticipated in this individual pool. Much higher than I’ve seen in group policies. Now obviously –

TOM MILLER: What reform might have caused that to happen?

KAREN BENDER: Well, one of it was the elimination of the lifetime maximum, because we’ve been seeing that before, you know. And there’s probably other factors, but I’m not going to try and guess. But I mean, this pool is sicker than we thought it was going to be.

ED HAISLMAIER: Is now, yeah. The other thing –

TOM MILLER: Or billable.

ED HAISLMAIER: Well yeah, that’s the other part.

SARAH DASH: So let’s – go ahead.

ED HAISLMAIER: Yeah, because this is the problem. There were these other dynamic effects where you allowed people – by doing the wrong things or by not being as careful – you now create a worse situation where people can jump in and out of the market. That’s a big problem. Whereas, if you would have adopted the HIPAA rules, you could have prevented that sort of behavior. So you know, that’s a big driver of cost. And then, you also had this situation, where you’ve actually had a migration of people who had coverage elsewhere but were high cost, into this subset of the market from elsewhere, such as Cobra.

SARAH DASH: Let me jump in a minute. Because I mean, are we essentially just playing a big game of hot potato with people, who are really sick and have high need, high cost? And how do we address that? Because as Senator Daschle I believe earlier said, most people can’t even afford a $400 unexpected medical expense. I mean certainly, they couldn’t afford a $2 million claim. So, how do we get to the –

PETER LEE: But I think the important thing is, it’s a small number of people. It’s absolutely the case that because of the removable of lifetime caps, there are some multimillion dollar claims bigger than in the past. But the vast majority of people that get coverage across every marketplace are not using healthcare that much. They’re not that different from the bell curve distribution you get in employer-based markets. And one of the things we need to make sure is that we get and keep healthy people in.

TOM MILLER: Because we want to get money out of them, even though they’re not getting anything for it.

PETER LEE: No. What do you mean they’d get nothing for it? Insurance is about covering uncertain things that may happen in the future. And if people don’t have it, we’re going to back to having the number one thing for personal bankruptcies being healthcare. That’s not a great thing.

TOM MILLER: Are those uncertainties for lower cost conditions that you’re talking about?

SARAH DASH: So, let’s talk about the uncertainties for lower cost conditions. I mean, so we’ve heard arguments that if deductibles are too high, people can’t go and access primary care. They can’t access the things that should be at the bottom of that pyramid. And there have been analogies made to, you know, you don’t buy insurance for your car’s oil change. You buy insurance for the car crash. But is health insurance different? And Peter, in California, you created standardized benefit plans that did not create an access barrier to some of those preventive services. So is that what we need to do?

PETER LEE: There’s a reasonable policy argument that insurance shouldn’t be about insuring things like preventive care, and I’ll get into that argument. That’s a reasonable one. But the argument around deductibles, to me, is a hooey argument. So, you don’t need to have a deductible between you and your doctor. Even at a Silver plan, which yes, it’s got a $2,300 deductible. But in California, we’ve priced it, so no outpatient services are subject to the deductible. So, whenever you hear someone say, high deductible, the first question you’ve got to ask is, what is subject to the deductible?

Every health plan can design a Silver product, where you have no outpatient care: drugs, tests, specialty visits, primary cares. And in California, our Bronze plan, which has a much higher deductible, you get four office visits a year, not subject to a deductible. And the issue is – and you can argue saying, you don’t want people to go to the doctor. It’s a choice. I want people to see their primary care doc. I want people to get actively treated regularly, so they avoid more expensive care. And if you have a big deductible in between someone, in getting their care, they are not going to get it.

And I mean, I really want to challenge everyone. Whenever you say deductible, ask what is subject to the deductible? No insurance plan at 60 percent and above, needs to have everything subject to the deductible. Seventy percent, no outpatient care needs to be subject to the deductible. Now, I’ll note and the right question, there are winners and losers. There are a small number of people that get hospital care that will pay marginally more. But the reality is, you show up in a hospital, you’re going to hit your maximum out-of-pocket for that year no matter what. So on the margins, I don’t care that much.

TOM MILLER: But you’re talking about where you move the donut hole around. And then by the time you’re finished, the donut hole is closed and you’re just having [unintelligible]

PETER LEE: Wait, this is where you – the sound bites of donut holes. I’m talking about two and a half million Californians that don’t have a deductible between them and their doctor. That’s not a donut hole. That’s people having access to doctors.

ED HAISLMAIER: Yeah, but see Peter, I’m sitting here listening to this. And you know, and Sarah, when you guys were sort of having a brainstorming session. We had the doctor from Qliance there. And here you have direct primary care, where you go in and it’s $99 a month, okay? And it’s retainer medicine. There’s no deductible, because there’s no fee-for-service.

TOM MILLER: Not insurance.

ED HAISLMAIER: And it’s not insurance, no. But where is it written that you have to run primary care through insurance? I mean see, that’s the thing. I’m looking for these innovations, where you get out of this box. So, one of the things they do do – and it is allowed under the ACA but nobody really beyond them have developed it – is to say, “Look, we’re going to have primary care paid for on a retainer basis, just flat out. It’s patient self-capitation really. You know, the old HMO bottle was, you pay the HMO and then they capitate to the primary care doc. This is the patient self-capitating and the insurance covers the non-primary care stuff. It covers the specialty care, the hospital care, etc. So these models are out there and they could work. It’s a totally different way of doing it.

PETER LEE: Well, but I think that the need for innovation in benefit design, absolutely. And I could be one of the people that –

ED HAISLMAIER: Yeah. I just want to make sure that in setting all these rules, because you’re concerned about, you know, can people pay their deductible? That you don’t inadvertently create a barrier to benefit design.

KAREN BENDER: And I think there is a barrier and for AC for what you just described. I think now, you have to cover a minimum of some outpatient and in – so I wouldn’t be able to, as an insurer, really [unintelligible] I would only be offering the services would be the hospital services or those services that weren’t covered by this.

ED HAISLMAIER: Right, and the specialists.

KAREN BENDER: Yeah. And I’m not sure if that would be –

ED HAISLMAIER: Well and see, that’s the problem when you start saying, well then, you have to match this essential benefit. You have to have this preventive service.

KAREN BENDER: And then, how do I verify that this individual really did go and buy or enroll in these primary services that you were talking about? I have no way of verifying that. So then, you’ll have someone that will just buy – maybe there’s nothing wrong with that. I don’t know.

ED HAISLMAIER: I mean, there’s no need for the insurers to do it.

SARAH DASH: So let’s bring this –

CHRIS HOLT: Can I ask Peter a question really quick?

SARAH DASH: Yeah, go ahead.

CHRIS HOLT: So, when you talked about how your deductible works, where does the deductible hit, to Tom’s point?

TOM MILLER: Nowhere. We just want to keep moving until we don’t find it.

CHRIS HOLT: In the California plans, where is it that I, as enrollee, is –

PETER LEE: Basically, your deductible applies when you go to the hospital.

CHRIS HOLT: Okay.

PETER LEE: And so basically, and it actually parallels largely your out-of-pocket maximum. And so, it does hit some people. But it’s the seven percent that go to the hospital. But those people again are largely protected from the catastrophic by their maximum out-of-pocket cap.

KAREN BENDER: But the other thing we have to remember is – I don’t have the statistic maybe exactly right, but so humor me a bit – five percent of the population counts for 50 percent of the total cost. And maybe it used to be like 15 percent accounted for 85 percent. So it’s really, the people who are driving the cost, they’re really sick people. But you know, they’re a small percentage of the people that everyone else is paying for.

PETER LEE: But that’s a great – I want those 95 percent that aren’t blowing through the cost, to get the right care at the right time, and not have [disincentives]. And I want to come back to Ed’s note about needing innovations. I mean, one of the things that’s talked about a lot is the benefits of health spending accounts. Put it with the consumer. I mean, we’re going to be looking at it, in California, for 2019, funding health spending accounts in Bronze with cost-sharing reduction funding, assuming cost-sharing reduction exists. But the idea of actually giving low income people a spending account, if they don’t have the money, it’s meaningless. But are there innovations we need? Absolutely. Are there ways to give consumers better incentives and tools to be in control of their dollars? Absolutely. But let’s not have them be the footballs we’re playing with.

SARAH DASH: So, I want to get to the question of cost-sharing subsidies, because we’ve talked a lot about affordability. We’ve talked about affordability. We’ve talked about deductibles. But you know, for all those people under 250 percent of the federal poverty level, the CSR’s have been an important affordability tool, to the point where there’s a lot of concern of what happens if those go away? So I want to talk about those and then, maybe ask another couple questions before we give our audience an opportunity to ask some questions. So Karen, do you want to start us off? What is the effect, if the CSR’s go away, what’s going to happen and what do you think needs to happen soon?

KAREN BENDER: We need to know. Again, I’m an actuary, so we’re pricing right now, as we speak, for these policies. And if the cost-sharing reduction subsidies or those payments are not going to be made to the insurers, we have to build that into our premiums right now as we speak. Because the insurance companies do not have the margins to absorb this loss of revenue. And when the ACA first came about, it was our understanding that these were going to be paid by the federal government, an external source, and another external source, and we priced our products accordingly.

But now, if we have to continue to pay these benefits without any external funding source, we have to increase our premiums. And just to give you an idea – and then there’s different ways of increasing them. Do we increase them throughout the whole pool, spread it across the whole pool? And that could result in – I’ve seen some rough figures, anywhere from seven percent to 12 percent increase right then and there, across the whole pool, maybe a little higher in some areas. Or is it just going to be in the Silver plan – and not to get too wonky, as you were saying – but in the Silver plan?

That would mean that the Silver plan rates, and I’ve seen estimates are going to go up 15 percent to, in some cases, more than 20 percent. That’s before any other adjustment. That’s before trend, before adjustment for what’s going on in the risk pool, aging, etc. And it would also mean that the Silver plan would probably be higher cost than the Gold plan. For those that are on subsidies, premium subsidies, it probably won’t have too much of an impact. But for the 40 percent that are not receiving premium subsidies, how you price this makes a big difference. Because all of a sudden, if you spread it across the whole thing, all the plans are going to go up.

So even those that are not getting any benefit from it will have to pay it. So whenever you raise rates – if you were going to say, how do we get a better pool? Low rates get better pools, simple as that. The lower the rate that you can have, while still be meeting your cost, that’s the key. You need to have lower rates. This is going to push the rates up. I would expect to have some adverse selection as a result.

PETER LEE: So, can I build on that because I think – and even Senator Daschle’s brilliant – but there’s some confusion is that the cost-sharing reduction subsidy will be in place in 2018 for plans that stay in the market. It is baked into the law. The question is, how is it funded? And that’s what you said. And so, it’s either going to be funded directly by the federal government, by a check written, or it’s going to be funded by the federal government by paying more premium tax credit. Because premiums go up 17 percent at Silver and the premium tax credit goes up.

So let’s be really clear, as the federal policymakers, the decision to not directly fund the cost-sharing reduction subsidy will cost the federal budget about 30 percent more, about $2 billion more to fund the same thing. But not funding it will mean some plans will say, “This is yet an additional uncertainty for me for pricing. Maybe this means I don’t play at all.” To cover it, you’ve got to add 17 percent. And that’s more uncertain on the off-exchange, Ed’s half the people that don’t get subsidies. If that adds a factor, it means health plans have more uncertainty to deal with. It’s just bad math. I just don’t get it not funding it directly.

TOM MILLER: There are a couple of other factors we’re sliding over, when we talk about this, which is give me the money right away and just close your eyes. It’s a crisis. First, the subsidies were illegal. Small detail, actually a court decision. I hate to mention that but they weren’t appropriated by Congress. Now, the Congress should put up or shut up. They can try to hold onto their constitutional point and say, now we’ve decided to appropriate it. That’s a political decision, which this Congress is probably not capable of doing. Or it could change those cost-sharing subsidies in a different manner.

Again, the problem is how do you legislate in the current environment? Maybe they shouldn’t be structured the way they are. The other issue that Karen was talking about, in terms of how is this spread in terms of the cost, if you start loading these costs onto other parts of the market, you’re going to lose people. And so, those calculations are more dynamic. It’s not just, we’ll just stick the costs over here, and everybody will just pay it. You’ll end up with fewer people going into those plans.

ED HAISLMAIER: Sarah, can I just simplify? I mean, because the economics are pretty simple. This is simply a backdoor premium payment, okay? So the reality is, if you take a 70 percent actuarial value Silver plan, and you make it 94 percent, the actuarial calculation is you have to raise premium by about 30 percent to cover that. What they did is they said, “Well, we’re not going to have you charge 30 percent higher for that variant. We’re going to have you charge the old price, and we’ll give you the extra 30 percent in the backdoor.”

So, the obvious answer is you can just let them charge 30 percent higher for that particular variant, and give them the extra 30 percent through the front door. In other words, and what that really means is you’re giving an extra 30 percent to the enrollee in subsidies to buy that plan, because it’s 30 percent higher than others. So, there are ways economically to do it that are pretty straight forward.

KAREN BENDER: I guess what I’m saying though, we need to know now.

ED HAISLMAIER: Oh, yeah.

CHRIS HOLT: Right. So this is interesting conversation about what should happen, or what would happen if we – but the reality to Tom’s point is, I don’t see an Administration that wants to continue to prosecute this, okay? So at some point, they’re going to drop this case. They don’t want to continue to argue –

ED HAISLMAIER: They’re cross-pressured.

CHRIS HOLT: But I mean, it’s bad optics for them to be defending an Obamacare lawsuit, right?

ED HAISLMAIER: Oh yeah.

CHRIS HOLT: So, I don’t think there’s a lot of desire to do that. They’ll do these delays as long as they can. There’s a lot of, I think good language from the Hill about yes, we should appropriate this. But I don’t see any way that they can do that. And the window is closed. So I mean, the reality is we’re facing what Peter’s talking about, which is, you know, the premiums being adjusted to –

ED HAISLMAIER: What I think you do is you tweak it and you tweak the law that simply says –

CHRIS HOLT: But you have to be able to pass a law to do that.

TOM MILLER: Yeah, that’s right.

ED HAISLMAIER: Well, this is a small and [unintelligible]

TOM MILLER: [A stupid law].

ED HAISLMAIER: Yeah.

PETER LEE: I want to keep on coming back. Some of the discussions we’re having are great philosophical discussions. But out in the sticks, we got a six-week timeline.

CHRIS HOLT: Yeah. We’re running out of time.

PETER LEE: And that six week is when health plans are making decisions. And I just want to note is that –

TOM MILLER: They’re going to price for it.

PETER LEE: No, but they will, but if they price for it – some won’t price for it because some will say this gives us that additional factor of uncertainly. We just won’t play. So, those decisions are play or not, and price for it. If Congress doesn’t act in the next six weeks on this, there’s going to be more counties with no health plan.

ED HAISLMAIER: Through the exchange at least.

PETER LEE: And a lot more counties with 30 and 40 percent rate increases that are going to be a problem. And the other issue, it will cost the federal government more. I mean, I just need to keep on repeating this. And I understand that –

TOM MILLER: Not when people drop out of the market.

PETER LEE: Well, then it’s going to cost us more on uncompensated care, because they’re going to show up at hospitals and not have care –

TOM MILLER: That’s actually a net profit.

SARAH DASH: So, I’m going to open this up to the audience for questions. But while folks are getting organized, let me ask you. I mean, most people don’t wake up every day, and say, “Oh my God, what’s going to happen with reinsurance and CSR?”

KAREN BENDER: They don’t?

SARAH DASH: Maybe, I don’t know. Maybe I do.

PETER LEE: Sadly, I am.

SARAH DASH: You guys do, and maybe everyone out here does.

TOM MILLER: And we never talk about actually treating people so they’re healthier.

SARAH DASH: But I think our friends back home probably not so much. But there are people kind of waking up every day, and saying, “Is my insurance going to be affordable?” I mean, what should people be expecting, asking out of their elected officials in the immediate future, to make their healthcare more affordable?

PETER LEE: I’m going to echo Senator Daschle. And maybe this is my pipe dream, because I live on another coast, and I don’t live in Washington. But as bipartisanship, is that in the next six weeks, is funding CSR’s on an ongoing basis. And Congress, assert that you’re going to appropriate, own it. But it needs to be their act to appropriate. That’s number one. Number two, this Administration needs to enforce the penalty. I know it sticks in the craw. But to not do that, health plans will price for it. And number three, follow the AHCA’s lead, the Republican proposal to have a risk stability fund for ’18. $15 billion would provide huge stability, would show that if we can’t repeal and replace in six weeks, we at least aren’t going to let things collapse. And that’s a great opportunity for bipartisanship.

KAREN BENDER: The AHCA did include funding for the CSR’s for ’18 and ’19 as well.

PETER LEE: As well, absolutely.

ED HAISLMAIER: The problem with that, Peter, is it’s a one way bipartisanship. Because essentially, you’re asking the Republicans to give. So I think if it’s really going to be bipartisan, the flipside of that is the Democrats have to give on this as well. They have to recognize this as a failure. They’ve got to delink the other markets. They’ve got to remove the restrictions on subsidized –

PETER LEE: And in six weeks.

ED HAISLMAIER: Well, but that’s your problem. Because that’s not bipartisanship. That’s capitulation and I don’t see that politically happening.

CHRIS HOLT: We have [simultaneous conversation] recess and then we have to fund the government, which isn’t going to sort of illicit a lot of bipartisanship feeling anyway. And so, I mean the things that are coming up now – unless somehow CSR funding is put into a CR –

ED HAISLMAIER: Which is a possibility at the end.

CHRIS HOLT: That is about the only way this, yeah, that you slip it in at the end, and that’s about the only way.

ED HAISLMAIER: I think that’s probably the only way that it, yeah.

TOM MILLER: [Are] referring to the better definition of bipartisanship, which is when the evil party and the stupid party agree on something. It’s bipartisanship. [Otherwise], it’s probably evil and stupid.

ED HAISLMAIER: It’s probably, yeah.

SARAH DASH: So we’ve all heard that the world is divided into people who think they’re right, right?

ED HAISLMAIER: Those of you who think you’re right, really annoy those of us who are.

SARAH DASH: All right, so does anyone out there have a question? There’s a question back there, and I’m not going to be Reed because I’ll probably trip.

ED HAISLMAIER: Have we stunned the audience into numbness?

SARAH DASH: All right, we have about 10 minutes left in the panel, so if you could keep your question brief. And my friends up here on the panel, keep your answers as brief as possible as well.

AUDIENCE: Hi. I’m Sarah Thomas with Deloitte Center for Health Solutions. So I have a lot of questions. But my first one is, if AHCA had passed and people could have subsidies on or off the exchange, what could an exchange like Covered California have done to preserve all the work it has done to create an exchange?

PETER LEE: Well so, right now, I’m living in the reality of where we are, which is I’m worried about ’18. So interesting, theoretical question. And I’m looking forward to a lot of discussion about what’s coming next, including what you buy on and off-exchange. The reality is in California, the market is working both on and off the exchange, because consumers know what they’re getting. They’re getting value and premiums are being held in check, because consumers are driving prices lower, by picking higher value, lower cost plans. And I think that would continue happening. And the role of an exchange in that is we show value, because we help consumers shop and we help the market create better products.

SARAH DASH: Any follow-up, any other questions? Yes, there’s a couple up front. Thank you.

AUDIENCE: Hi. My name is Bobby Avary with Hurt, Norton and Associates, and we represent some design firms that focus primarily on small businesses, particularly on health reimbursement accounts. Where we have found that it’s helped a lot of small employers to be able to offer some type of health and plan. Fortunately, in the Cures legislation, we were able to get renewed standalone health reimbursement accounts. What is your opinion on expanding that as a bipartisan vehicle, to get more folks into the marketplace?

TOM MILLER: Well, we got that in the 21st century Cures Act, which I thought was going to be the 22nd century Cures Act, and then they got it through in December. And that’s basically for the below 50 market, which was to do deal with the IRS ruling which would put a hurdle in their way. The argument is if an employer wants to provide some type of benefit to you, as much as they can afford, why restrict it? We got into the desire to try to keep people only getting certain types of group coverage, and the various rules that attached to that, it was a rather contorted argument.

So, when the HRA’s first came about in 2002, 2003, by regulatory interpretation, it was seen as possibly a way to open up the market. Which is basically you could use that money to go for a lot of different type of things to be more creative. And then, they got hemmed in under that interpretation. So, I think it would be a good thing, but it runs afoul of the schemes of folks who want to make sure that you only have certain types of configurations of coverage, which creates, you know, that you’re following these rules and everybody kind of stays inside that box.

ED HAISLMAIER: Basically, it allows employers to define contribution, employees into the individual market on a tax favored basis, which is conceptually something that I’m in favor of. The problem is that it achieved that right at the point, at which the individual market became unattractive place to go. So, that’s where you are today is that as a practical matter, do you want to do that, given what’s going on in the individual market right now, with the costs and the coverage?

TOM MILLER: But the employers would say, small employers, they’re cost constrained.

ED HAISLMAIER: Yeah. No, I understand.

TOM MILLER: They can’t step up to the entire – the [employer mandate] doesn’t mean anything to them anyway.

ED HAISLMAIER: Right.

TOM MILLER: They’re exempt and it doesn’t mean a lot to a lot of other employers.

ED HAISLMAIER: No, I’m just saying that the –

TOM MILLER: Yeah. We have to have a different market.

ED HAISLMAIER: The unfortunate timing is, is we gave you a solution right at the point, at which it no longer became a great idea.

SARAH DASH: All right, let’s move on. We have time for one more question from the audience. I see a hand right there.

AUDIENCE: Hi. Heather Foster from the Association for Community Affiliated Plans. And there was a mention earlier of pulling the self-insured employer market into the risk pool, and if that might help to bring down some of the costs and spread the risk. I was hoping we could talk a little bit more about that. As well as, potentially are there other products that are not in the risk pool that ought to be included in it, such as some of the grandfathered plans or Cobra or others? If we pulled more into that, might that help with prices and dropping premium [simultaneous conversation]?

SARAH DASH: And let me expand – thank you, Heather. Let me expand on the question, just because we didn’t get to very much of talking about the long term, because there was so much going on in the short term. But I mean, is the individual market – I’ll just ask a provocative question. Is the individual market something that should be saved? Should it be expanded to create a bigger risk pool? Or should it be kind of dissolved into other things, like more employer coverage? I mean, stuff like that.

KAREN BENDER: Be careful of what you wish for.

ED HAISLMAIER: Yeah.

KAREN BENDER: You know, because you might just manage to destroy the small group market, which is a little fragile anyway. So if you take two fragile markets and merge them together, it does not necessarily mean you’ll get a better market. You could get an even more fragile market.

ED HAISLMAIER: Yeah, we had that issue in states, where they went to a group of one-laws, where you effectively did that.

KAREN BENDER: Yes.

ED HAISLMAIER: Is it important? Yes it’s – I mean, the problem is that the individual and small group market are, from a health insurance perspective, fairly marginal markets, as Peter pointed out. The problem economically is that they happen to cover the people who are the most dynamic part of our economy. And so, that’s why they’re a value. They’re a value, not so much from healthcare, as you will have a real dampening effect on job creation and economic –

TOM MILLER: [unintelligible]

ED HAISLMAIER: Well yeah, Nancy Pelosi’s street buskers. But you will have a real dampening effect on job creation, if these people do not create these kinds of businesses. Because one of the obstacles is, “Well, if I leave the big corporate, I can’t get healthcare, or I at least can’t afford it.”

KAREN BENDER: But the other thing you have to be careful, like in that small group market, there’s really two small group markets. That’s what I would call the micro market. Maybe that makes sense, to merge the two.

ED HAISLMAIER: Yes, yeah.

KAREN BENDER: But the ones that are like, you know, whether you define the micro market as under 10 or under 15, we don’t have to decide that. But that other one –

ED HAISLMAIER: We’re running out of time. I wanted to get back to the – because I was the guy who raised the issue. I think it’s fair to answer the question. The ACA effectively did that by taxing self-insured enrollees –

TOM MILLER: The belly button tax.

ED HAISLMAIER: —right, the belly button tax or whatever you want to call it – to fund the reinsurance program. The other way that I was suggesting is that in a backend risk transfer mechanism, what you’re really trying to do is, you’re trying to see if any one insurer got a distribution that was significantly skewed, a claims distribution that was significantly skewed relative to the market as a whole. You could expand the market as a whole to encompass self-insured plans. If you did that though, you would have to do it with the same terms and conditions. Which means that they would benefit – so for example, the firm of coal miners would probably get a subsidy out of that, because they have a higher, more skewed [simultaneous conversation].

TOM MILLER: But inevitably, they’ll come under the same regulations.

ED HAISLMAIER: Yeah, that’s right. Theoretically, it works. Politically, I don’t think it’ll happen.

PETER LEE: But I’d actually like to touch on a few things about that. I want to just agree really strongly that we do that through the HIT. That is – but I think one of the things we always say is that the self-insured folks aren’t benefitting. And they’re benefitting a lot in the sense that – I know the next panel is talking about Medicaid – but the incredible reduction of the uninsured is leading to huge drops in uncompensated care. And we’ve seen a $5 billion decrease in uncompensated care. And we can argue the issues about, do hospitals really cost shift?

For 10 years, I’ve represented large employers and boy, do we believe there’s cost shift, you know. And so, large employers are today benefitting from having more people covered. And so, it’s not just a one-way deal of having the HIT, the belly button tax supporting the individual market, which is more dynamic, which needs it. It is – there’s real benefits to having everyone covered.

CHRIS HOLT: [Before we run out of time], can I just say one thing on this?

SARAH DASH: Yeah.

CHRIS HOLT: One thing that a lot of people expected, and certainly on the right, was that you would see employer drop, right?

PETER LEE: Yeah.

CHRIS HOLT: And because the ACA came in. And it didn’t happen. And it didn’t happen, because the individual market was a mess. And I don’t think any of these other populations are going to go willingly into the individual market right now. So whether it would be helpful or not, it becomes a political problem, because –

ED HAISLMAIER: Well obviously, we [unintelligible] that in the data and I published this. There is some employer dropping. What’s happened is that the commercial fully-insured group market has dropped significantly. Some of that went into self-insured. Some of that went into the individual market.

TOM MILLER: But the bigger lesson of the ACA is, get a job. Keep a job. Keep health insurance. Or get poor. We’re working on both right now.

SARAH DASH: All right, let me ask you to do in 30 seconds or less, in one word, what is the thing that needs to happen right now, to stabilize this market?

KAREN BENDER: Well the short term, it’s predictability of CSR funding, predictability of the rules, I mean from an actuarial perspective. You know, if I’m going to have to rate these plans, I need some predictability.

PETER LEE: I noted my big three that are short term, which is the CSR funding long term now, the enforce the penalty, and risk stabilization funding. But I just want to note, this has been all short term. One thing we haven’t gotten to talk about, which Tom Daschle cued up at the beginning, is we aren’t talking about underlying costs yet. None of this discussion is about what’s driving healthcare costs. None of this discussion is about, why does America spend 20 percent more than any other country, 50 percent more than many, to get not as good quality? And I look forward to that next panel.

TOM MILLER: I agree with Peter on some of that. But I’ll just return to the words of former New York Knicks’ guard, Micheal Ray Richardson in the 1980s, during a long New York Knicks’ losing streak. He said, “The ship be sinking.” The reporter asked, “How low can the ship sink?” He said, “The sky’s the limit.”

ED HAISLMAIER: Hard to top that one, so to speak.

CHRIS HOLT: Tom should have gone last.

ED HAISLMAIER: Yeah, Tom should always go last. Look, the reality is for the 2018 plan year, aside from the cost-sharing reduction subsidies, which we all agree needs to be done. And I think, per Chris, is probably going to – when all the sturm and drang is over – wind up as an item tucked into the omnibus or whatever they do to fund the government. Everything else is in the Reg that the Administration published. Because the reality is nothing Congress does, even if Congress had addressed this on January 1 or January 3rd, when they took office, nothing that they can do really makes a difference in 2018. It’s all about 2019 and beyond. So, you know, what can be done is being done. That’s the way to put it, I guess.

SARAH DASH: Thank you. Chris.

CHRIS HOLT: Yeah, I mean, looking at the 2018 market, right, what needs to be done: Insurers have to have some idea of what they’re going to see in 2018. And the opportunity to give them that certainty is fast closing. So yeah, I mean I think Congress needs to figure out a way to allocate funds for CSR’s in 2018. And then everything becomes about 2019, if there’s still enough insurers participating by then.

ED HAISLMAIER: And Sarah, I just want to say and this is going back to the beginning with you and Marilyn. I think you have the makings of a reality television show. You know, Policy-[Wonk] Food Fight. We took a group of policy analysts, gave them a broken market, and one hour to fix it. Let’s see the results.

SARAH DASH: Wow. Our ratings are going to be through the roof. Thank you so much to all of you.