Coverage and Affordability in the Private Insurance Market

12:00 p.m. – 12:05 p.m.          Welcome and Introduction

• Sarah J. Dash, MPH
  President and Chief Executive Officer,
  Alliance for Health Policy
  @AllHealthPolicy

12:05 p.m. – 12:45 p.m.        Panelist Opening Remarks

• Sara Collins, Ph.D.
  Vice President, Health Care Coverage and Access,
  The Commonwealth Fund
  @SaraCollins_
• J.P. Wieske
  Vice President, State Affairs, Horizon Government Affairs
• Peter V. Lee, J.D.
  Executive Director, Covered California
  @CoveredCA
• Korey Harvey, J.D.
  Vice President, Deputy General Counsel, and Assistant Corporate Secretary,
  Blue Cross and Blue Shield of Louisiana
  @BCBSLa

12:45 p.m. – 1:30 p.m.      Question and Answer Session

*Please note, this is an unedited transcript. Refer to the event video for direct quotes.*

SARAH DASH:  Good afternoon, everybody.  Thank you so much for joining us today.  I’m Sarah Dash, I’m President and CEO of the Alliance for Health Policy.  How many of you are not familiar with the Alliance?  Okay.  Wow, that’s awesome, thank you.  And I’m really grateful to our partners at the Commonwealth Fund.  How many of you are not familiar with the Commonwealth Fund?  We have a regular crowd here, that’s fantastic.

We’re here today to talk about coverage and affordability on the individual health insurance market.  Still quite an important topic for many people who are seeking health insurance.  So today’s briefing will be on the record and you can tweet if you like at the hashtag #allhealthlive.  During this session, our panelists are going to react to trends in commercial health insurance enrollment and affordability to inform a discussion about policy options to support access to affordable coverage through the individual marketplace.  And we have typically held everything on this topic just about every summer, right as the rates for the exchanges and individual market plans are starting to come out so it’s timely and hopefully we’ll offer some perspectives on what the trends are.

I want to just point out a couple of things.  You all are pretty familiar with us, but thinking about your questions to write on your green card so we have a great Q&A session, and then if you do have to head out a little early, make sure you fill out your blue form before you leave and fill it out at the end if you could stick with us the whole time, which we hope you can.

So I’m going to go ahead and introduce our panelists and then we’ll get started.  First we are delighted to have with us Sara Collins.  Sara is Vice President for healthcare coverage and access at the Commonwealth Fund and Join the Fun in 2002.  She’s led the Fund’s national program on health insurance since 2005 and conducts regular research on this topic, so we’re looking forward to hearing what the latest is.

Next, we welcome JP Wieske.  Did I do right?

JP WIESKE:  Close enough.

SARAH DASH:   Okay, close.  You had one job, Sarah.  He was Vice President of State Affairs at Horizon Government Affairs.  Prior to joining Horizon Government Affairs, he served as Deputy Insurance Commissioner for the State of Wisconsin, where he supervised the regulatory public information and administrative functions of the Office of the Commissioner of Insurance.

We are going to have Peter Lee here, he is on his way over from the House side, so I always say, it’s one thing to cross party lines, it’s another thing to come from the House side or the Senate side, or vice versa.  But I think you all know Peter as the Executive Director of Covered California.  And here he is.  So Peter, I don’t have walk up music for you, but welcome.   You are going to tell us what’s going on across the country.

And finally, I’m pleased to introduce Korey Harvey, who is Vice President, Deputy General Counsel and Assistant Corporate Secretary at Blue Cross and Blue Shield of Louisiana.  Prior to joining Blue Cross, he served as the Deputy Commissioner of Health, Life and Annuity at the Louisiana Department of Insurance from 2014 to 2018, and last month was appointed by the Louisiana Governor, John Bell Edwards, to the gubernatorial task force on protecting individual market coverage in Louisiana.

So we have a great perspective of states from across the country, and Sara is going to give us the national overview.  Take it away.

SARA COLLINS:   So I’m going to start us off this afternoon with some really high level perspective on where things stand nationally on insurance coverage generally, in the individual and employer group market in particular.  The latest federal data on health insurance coverage shows that the significant gains since the Affordable Care Act was passed, have begun to flatten out pretty significantly.  And even begun to slightly erode.  The uninsured rate is about 13 percent, and there are about 30 million people who are currently uninsured.  This is up just a little bit in the last couple of years.  The Congressional Budget Office projects that that number will climb to about 35 million people by 2029, and that’s largely because of Congresses repeal of the individual mandate; Trump Administration changes to the marketplace in particular, allowing the — loosening the restrictions on short term policies and other non-ACA compliant plans.

We’re also continuing to see increases in the share of people who are insured all year, but have such high out-of-pocket costs and deductibles, that they can be considered under insured.  People with individual market coverage are the most likely to be under insured, but we’ve also seen significant growth in the share of people in employer-based plans, where most people get their coverage in the United States, are under insured.  The passage of the law also led to nationwide gains in access to healthcare.  Both federal and private surveys have shown increases in — or decreases — in the share of people who report not getting care because of cost.  But those gains have also stalled.  This is associated with stalled coverage gains and also increases in the share of people who are underinsured.

In the individual market, premium growth stabilized in 2019 as insurers have adjusted to the ACA’s market regulations and have gotten used to, and understand the risk pools much better.  But premiums are going to continue to be affected by external factors like uncertainty regarding — especially uncertainty regarding congressional, executive, and judicial actions.  But so far, premium increases reported by states for 2020 are modest.  The premium tax credits have been a key stabilizer for the marketplaces; 80 to 90 percent of enrollment in the marketplaces is subsidized.  The affordability trouble is concentrated among people with incomes just over the threshold that makes them eligible for the tax credits, about $48,000 for an individual.  And as you can see from the map, the people with incomes just above that level, premiums can comprise well over ten percent of people’s incomes, even for bronze level plans in many states.  And the reason I highlight the 10 percent level, is because that’s the most that people pay if they have subsidies in the marketplaces.  Ten percent is the top amount that people have to pay, if they are eligible for the subsidies.

In response to federal action and also federal inaction in improving the marketplaces, many states have taken matters into their own hands.  For example, seven states have implemented reinsurance programs.  About five states are considering it.  Twenty-four states have imposed limits or bans on short term policies, and more than half the states have passed laws aimed at protecting insurers from surprise medical bills.

Looking forward to the 2020 plan year and all things being equal, we’ll likely see continued marginal erosion in coverage and access to care, with significant variation by state.  But there are some wild cards that might change this forecast.  First, we don’t know which way the Circuit Court of Appeals will go in the Texas versus U.S. court case.  Oral arguments being heard today.  We’ll have somewhat of a better idea of where things are headed in that case.  If the plaintiffs were ultimately to prevail, the impact would be extremely far-reaching, throwing about 20 million people off of coverage and disrupting the delivery system nationwide.  But the immediate implication is just ongoing uncertainty for the 2020 plan year among both insurers and consumers.  And second, we don’t really know how many people are going to buy limited plans or limited benefit plans like short term policies, and what effect that will have on individual market premiums and enrollment in the marketplaces.  There are a number of federal options that could increase coverage and lower costs in the marketplaces.  Premiums could be lowered by lifting that threshold for eligibility — subsidy eligibility in the marketplaces, which again is about 48,000 for an individual.  Lifting the threshold would have the effect of capping the most anybody would pay in the individual market, at 10 percent of income.  This has a natural faze out, this policy option.  As people’s incomes rise, premiums take up a smaller and smaller amount of their income.  So fewer and fewer people are eligible as income rises.  Reinsurance is clearly another proven way of lowering premiums.  The seven states that have set up reinsurance programs have seen big declines in their premiums.  And out-of-pocket costs could be lowered by funding and extending the cost sharing reduction subsidies, further up the income scale.

Rand has modeled a few of these options, and modeled them both before and after three major congressional and executive branch changes to the Affordable Care Act, including the elimination of the individual mandate penalties, and the federal payments to insurers for the cost sharing reduction payments, and loosing restrictions on short term plans.  So you can see in these three different options:  Lifting the 400 percent of poverty cap, a standard reinsurance which is essentially the final year of the ACA’s reinsurance program, and generous reinsurance, which would be the reinsurance program under the Affordable Care Act in its first year of implementation.   But what these options would do, it would increase coverage, lower premiums, and in some cases — in the case of insurance, even result in that deficit savings for the Federal Government, because the cost of the tax credits goes down as premiums fall.  But I think what’s notable about these estimates is that with the changes that have been enacted since 2017, the cost of each of those policy options goes up significantly.

The marketplaces usually get most of the attention and we’re going to spend most of our time talking about that today, but we’re also seeing growing affordability problems among the 158 million people who get their coverage through an employer.  Healthcare cost growth is driving premium growth, and employers have long tried to temper that growth by increasing the cost of the amount of cost that they share with employees, particularly through higher deductibles.  This analysis of federal data found that middle and lower income people, covered by employer plans, especially people living in the south, are spending an increasingly larger share of their income on premiums and deductibles.  Policymakers also have several options to address the rising costs for people in employer based plans.  Premiums could be made more affordable for many middle income families by fixing the so-called family coverage (indiscernible) in the Affordable Care Act, but pegging unaffordable coverage in employer plans to family policies, rather than single policies, and employers could be required to adjust employee premium contributions based on income, just like the Affordable Care Act does for marketplace policies.  And out-of-pocket costs could be lowered a number of different ways:  One that’s getting lots of bipartisan attention right now is fixing the surprise medical bill problem.  So helping consumers not have to worry about that and pay for that when it happens to them.  But clearly these policy options can help consumers by lowering their costs, but the major driver and the thing to always keep in mind is rate of growth in overall healthcare costs.  So we really need to get at the root of those drivers in order to make these policy options affordable over time.  And I will stop there.

SARAH DASH:  Thanks, Sara.  JP?

JP WIESKE:  So when I started with the Department in Wisconsin, it was prior to the ACA, which seems like a lifetime ago, and we were able to say at that time that individuals could choose in the individual market a national plan, or a local plan.  They could choose a PPO, they could choose an HMO, they could choose a wide network, they could choose a narrow network, they could choose a for-profit company, they could choose a non-profit company.  Unfortunately, over time, what we saw was a significant change there and we’ve seen this across certain states, but not all, across the U.S., that premiums have become very high, as was just highlighted.  Consumers have far fewer choices, and I think the interesting thing, at least in a number of states, is that we’ve got a huge number of small employer plans that are still in pre-ACA policies.  You know, this how many years later, which is a bit of a surprise.

It’s important to note, I think when we take a step back and we look at what the individual market is, and who is in it, that the vast majority of people do not get their coverage in the individual market.  Only about five percent of the overall state population that coverage in the individual market.  A lot of it is people who temporarily are in jobs without insurance.  They may be in the gig economy and I think that’s a growing piece of this.  You’ve got part time workers, you’ve got others.  But functionally, I think the message is, the individual market is a residual market.  It is where everybody goes where they cannot get other coverage.  Right?  and so that’s sort of the cause of a lot of the issues that we see in the individual market.  I think there are a variety of ways people get coverage.  They can get it on exchange, they can get it off exchange, those are functionally the same.  You are certainly seeing people move into different sorts of coverages off that are not ACA compliant because of affordability issues.  That’s certainly concern it’s impacting the market.

In Wisconsin, I think to highlight what we sort of saw as a problem, is we saw increasingly companies exiting the market, a worsening risk pool, the average age was much higher than the age nationally.  We saw extremely high medical loss ratios and these medical loss ratios are after all the different risk adjustment reinsurance programs federally that happened.  So there were significant losses.  And in the individual market, there were $500 million of losses in Wisconsin alone, in the individual market.  It’s important to separate out the issues of the insurance company profits generally, and the profits in the individual market.  I think that’s something that often gets missed.  Certainly the other lines in some cases are profitable, but they don’t want to have to subsidize the individual market.  The net result was that by and large, most of the national insurers left, and we were left with — we still had 13 insurers, but we were left with far fewer choices in Wisconsin.  We eventually, as we saw people exit the market, we eventually, in 2019, passed a 1332 waiver very quickly in Wisconsin.  We passed it — the governor announced it in January, we passed it by late February and we had it implemented by June, which was lightening pace, by the way.  And we did see significant changes.  The net rate decrease was 11 percent from where the rates would otherwise be.  The rates were actually five percent lower than where they were the year before.  So we had a net drop.  It wasn’t everywhere.  We did see a company re-enter the market as well, which added to choice in and around the thumb of Wisconsin, that they expanded, where there was only one carrier.

Now most state waivers have been focused on re-insurance functionally.  And it’s important to note that these waivers are politically difficult.  You are sort of taking a leap of faith when you are proposing a waiver.  You’ve got to pass it and you’ve got to talk to your legislature and get them to pass a waiver.  You’ve got to explain that yes, this federal pass through money is real.  It is in fact, coming.  You have to have that sort of argument.  And you have to sort of be able to understand as to whether or not the Federal Government is going to accept your waiver.  Because if you go through this whole process and you find out later that the Federal Government does not accept your waiver, you’ve got some pretty significant political (indiscernible) — your opponents do.  And I think that’s been part of the issue, is that this has been a fairly big left for states.

So to address at least some of these concerns that states are seeing, there was a new guidance issued in October related to the 1332s.  There were a number of significant changes and we are arguing about whether or not they make any sense.  I think the first piece was important because it no longer required a state to pass a specific state law.  If your state already had the authority to do what it wanted to waive, you were allowed to move forward and apply for a waiver.  On comprehensive affordability and coverage, I think the issues are basically the same, that they are looking at this a little bit differently.  They are looking at access to coverage broadly, rather than the specifics of whether or not people enroll in coverage.

The federal deficit neutrality remains a very big issues for states.  But there was a little bit of flexibility that if the courts of your waiver indicated that there was — it was federally deficit-neutral, that there was some availability, it didn’t necessarily have to meet the test both year by year and over the course of the waiver.

They also included some sample waiver concepts that were interested in looking at from a construction standpoint.  The first is state specific premium assistance.  If you look at what Iowa, for example, did.  Or tried to do before they withdrew their waiver.  One of their concerns was if you look at the way the subsidies are meted out, and you’re looking at folks in the 27, 28, 29 range, with the same income level as somebody who is 60, 62, 63, they are paying the exact same rate because of the way the subsidies work.  And there is a feeling amongst the folks in Iowa that that was not something that provided value to consumers who were 28, 29, and had largely not been part of this market.  Whereas in a 62, or 63-year-old, he’s getting value.  Now, they are certainly at the same income level, but there is some discussion about how you get there.  Adjusted plan options — this is probably the most controversial.  It would allow subsidies for non-ACA compliant plans.  Secretary Verma has come out and — excuse me, Mr. [name?] came out and made some modifications to that, but there are some limits there.  Count-based subsidies is an interesting process.  How do you sort of take a look at this from a different perspective and allow people a little bit broader choice?  And lastly, relooking at some of the risk stabilization mechanisms that are already in play.

So I think from a state perspective, I think it’s important to note that there is still some significant concerns.  A lot of states still would like more flexibility than they currently have.  Deficit-neutrality remains an issue.  If you have a really, really successful program that’s going to enroll a ton more people, you are not going to meet deficit-neutrality requirements.  There’s no way you’re going to meet those.

Federal passthrough funding, it needs to be predictable.  In the case of Wisconsin, we found that when we had the actuarial analysis, we were expecting that our passthrough rate was going to be in the 80^th percentile.  It ended up being the 65^th percentile.  That obviously meant significantly more dollars out of the state.  Luckily, Wisconsin has a significant surplus and so it wasn’t as much of a political issue as it would be in other states.  But that remains an issue and funding of these 1332 remains a huge issue.  There’s also some interest in looking at 1115 waivers and combining these two as an issue, and finding a way to sort of allow a market that works a little bit better, especially for those that jump in and out of the Medicaid piece.  And you will not be able to read that slide, quite obviously.

I think the broader message on the HRA issue is that HRA’s health reimbursement arrangements and some of the new rules that came out, will potentially have a significant impact on the individual market.  Small employers, as you highlighted, have some issues with affordability.  They are continually moving this discussion.  There is a possibility, as time moves on, that employers look at dropping out of that market and jumping into a defined contribution approach.  Now that’s a sort of double-edges sword, because the question becomes, you know, how do you sort of protect that market?  There is guarantee issue in the individual market, but what happens if that happens?  That does make the individual market bigger, which may make it less of a residual market, but by the same token, who jumps in and jumps out?  Is it the high cost employers who jump out?  Or is it others — is there a dumping?  Is there some other issues?  But I think that is something to watch.  With that, I will stop, and there’s my contact info.  Thank you.

SARAH DASH:  Great thanks.  Peter, your turn.

PETER LEE:   Great, thank you very much, and I will take JP’s extra minute. So first, I think it’s ironic that we’re here while once again Repeal and Replace is on the agenda right now in the 5^th Circuit.  And what I’m going to be talking about is how states that had been on the front lines of implementing the Affordable Care Act are still doing that.  And I’m sort of sandwiched between Wisconsin and Louisiana, which are in many ways poster children, if I could, of states that relied on the Federal Government and have leaned away from the Affordable Care Act.  I have with me, Pam McKuen — raise your hand please, Pam — from the State of Washington, runs their exchange.  And Audrey Gustier from Massachusetts. Two states that have leaned in to make the Affordable Care Act work in every way possible.  In many ways, the nation is a tale of two cities and they are very different stories.  Part of the framing though, I think it’s spot on from what JP noted.  The individual market in California, six percent of the market.  And that’s more than in most states.  But even though it’s only six percent, the individual market is a churn market; people move in and out of it.  So one of six Californians has been in the individual market since the Affordable Care Act got started.  And that’s true in most places.  People don’t have job lock anymore.  They know they can go someplace if they can afford to.

The other thing I’d flag, before I go to my slides, is you’ll hear a lot of people talking about stability.  As I talk, think about what stability means.  In a place like California, Washington and Massachusetts, we have stability with a lot of competition and often exchange unsubsidized people able to afford coverage.  Healthcare is not cheap in America.  But able to afford coverage.  In much of the nation, stability means unsubsidized people are in a, in essence, high-risk pool.  The only people afford to buy in to many states are people that are sick, if they don’t get subsidies.  That’s not a stability that’s a healthy proposition either, for the consumers of those states or for marketplaces.

So when I talk about those two cities, one is states that have leaned in, the other is states that have in many ways leaned away.  I would note also that 1332s, JP is absolutely right.  Many states are going to say, the only way to do a 1332 waiver is if you’re sure it’s not going to work by getting more people insured.  Because if it gets a lot more people insured, you don’t win a deficit-neutrality, it doesn’t make sense for you.  So you’ll see a lot of states are not stepping up to that.

So let me go through — I’m not going to talk about the federal actions that you’re familiar with.  There have been big federal actions though that Sarah walked through:  Removing the penalty, providing more non-compliant plan options, which basically says people get insurance out of the marketplace, meaning worse risk mix in the marketplace.  Federal marketplace not doing advertising and marketing.  A range of things.  States are doing things.  I will talk about those in a moment.  What has this meant though in the two cities?  This is the average premium increase in the first five years of the Affordable Care Act.  The black bar is states served by the federal marketplace.  Thirteen percent average annual premium increases.  In our three states — Washington, Massachusetts, California, about half that — 6.8 percent.  What did that mean over five years?  It meant that premiums rose in federal marketplace states 85 percent.  That’s an almost doubling of premiums.  What happens if you get subsidies, you’re shielded from those increases.  So subsidized market is still fine, but if you don’t get a subsidy, you’re dropping out of coverage.  Millions of Americans have been priced out of coverage in states that haven’t used the tools of the Affordable Care Act.  Now, one solution is to let people buy non-ACA plans, which risk underwrite, which deny some people coverage, which are thinner coverage because they are cheaper product.  That’s a solution that in many ways this administration is leaning on.   A lot of the flexibility is to allow states to offer different products.  The Affordable Care Act said, get everyone in one risk pool with good benefit design.  That’s what states like us have done.

So what have we done in California?  Well, we prohibited short term plans.  State of Washington makes short term plans truly short term — only three months.  Why?  People can get short term coverage in the Affordable Care Act coverage through Cover California.  Through Washington.  But if you let people go outside of those and be risk underwritten, denying people pre-existing conditions, sick people are going to be going to the marketplaces raising premiums.  So that’s a policy choice.  Informing consumers about non-ACA complaint plans.  What does that mean?  Sharing ministry plans.  About a million Americans are said to have sharing ministry plans.  These plans deny people coverage if they have pre-ex. They deny things like mental health coverage.  Some deny particular types of care.  It’s like old coverage, but it’s not even insurance, it’s pooled risk.  We in California are making sure our insurance agents tell people what they are getting; sign a disclosure.  We negotiate on behalf of our consumers.  We have 11 health plans.  That negation works, as I will tell you about in a moment.  We have patient centered benefit designs.  States like Washington are doing that also; have standard designs.  Now there is a lot of discussion about more innovation and more choices better.  I will tell you, we have a very price sensitive market, because when consumers are picking between Blue Shield and Kaiser, they know it’s because of the networks, not because of some obscurant and benefit design that no one understands. They know that the standard designs are — it’s subject to a deductible for most of our people.  It’s because you’re going into a hospital.  Outpatient care not subject to a deductible.  Standard across plans.  Not hidden.  Not secret.  We spend $110 million a year on marketing and outreach and promotion.  Why?  We get a healthier risk mix that lowers cost to everybody.  We aren’t stupid in terms of saying:  Let’s throw away $100 million.  It comes from premiums.  It the premium assessment.  It’s because it lowers cost.  But what have we done this year?  Two big things:  We’ve instituted a penalty, a mandate, and new subsidies.  Not through a 1332.  So first, penalty.  It was a core part of the Affordable Care Act.  It was repealed as part of the tax bill last year, it went away in 2019.  Nationwide premiums went up a lot.  In California they went up an additional two to five percent because of the penalty going away.

California has reinstituted a state-based mandate.  It’s the law in California, like it is in Massachusetts and was before the Affordable Care Act.  In addition though, California is implementing new subsides, and in particular, subsides to provide financial help to people that are above the cliff of the Affordable Care Act.  As you all know, the Affordable Care Act provides financial help to people up to 400 percent of poverty.  That means for an individual, someone who makes $50,000.  Well, I’ll tell you, you make over $50,000 and you are a 61-year-old living in the Bay Area, you could be spending 25 percent of your income for premium alone.  That is not affordable.  What we’ve done in California is say:  We’re going to provide state dollars to provide help to almost a million Californians.  600,000, almost 700,000 currently get federal tax credits.  They are going to get a little bit bigger tax credit with financial help of a state subsidy — about $15 per person.  More who enroll, it’s more affordable for people 200 – 400 percent of poverty.  But what is historic is almost a quarter of a million Californians that are middle income Californians making, if they are individual, from $50,00 to $75,000.  A family from $100,000 to $150,000.  Financial help to buy healthcare.  This is going to lower those people’s costs on average over $170 a month.  For some, it will be $500.  It will mean their costs are dramatically lower.

Now, I’m going to talk about those people in a minute, but I want to note that what do these policies mean for the unsubsidized?  Penalties coming back — meaning that there is going to be more people insured, a healthier risk mix.  New subsidies, meaning more people insured, meaning that we announce today that the 2020 premiums will go up .8 percent in California.  A less than one percent premium increase.  Now when you look around the nation and hear someone is announcing a good premium increase, the first thing you should ask is:  What was it last year?  Because in most cases you’ve seen low premium increases.  The prior year they overpriced, and it’s a rebound effect.  California is not a rebound effect.  Last year we had an eight percent premium increase of which most of it was because of the penalty.  Our plans have rolled that back and the beneficiaries are unsubsidized Californians who are seeing a less than one percent premium increase.

But what does it mean for people who are in that over 400 percent?   I know it’s sort of hard to read the slide here, but that dark blue line where it’s tall is the federal subsidy for a 55-year-old living in Alameda County.  There premium is about $900.  But the federal tax credit means they are only paying $300.  The federal tax credit picks up $600.  But the moment they make a dollar more than 400 percent of poverty, what does it mean?  They are spending $900 a month, over 20 percent of their income.  With the state subsidy that’s in place, as of 2020, that person will have half of their premium covered — $450 a month.  That makes it more affordable, more people will sign up, more people will keep their coverage.  And this is a conscious act of Governor Newsom in California and the state legislature saying:  Will all due respect, Washington, you should be doing this.  Building on the Affordable Care Act.  It wasn’t perfect when it was launched.  The cliff was not the right policy.  It’s not there to have some people who are not with employer-based coverage needing to spend 30 percent of their income to get health insurance coverage.  California’s program is a three year time limited program.  So the clock is ticking.  Washington, it’s on you folks to actually change the Affordable Care Act and build on it, and make it better.  Right now, states are doing that.

The other slides you can look at are some of the more detail about expanding subsidies, how it impacts, but I want to close with some of the other things we’re doing in California.  So when you hear about these two worlds, tale of two cities:  No competition, one plan counties, two plan counties, two plans in a state.  California has 11 carriers across the state.  A national plan, Anthem, has come back to California to serve more of it.  It didn’t leave entirely, but now we have 99.6% of Californians with two or more plans.  87% with three or more plans.  Consumers drive the market.  Competition drives health plans.  But we drive the health plans to think about price and cost.  These are elements of our — next slide — elements of our contract requirements on our health plans.  When we negotiate with plans, it’s not only about what your rates are.  It’s about:  Do they contract with patient-centered medical homes?  How do they address disparities?  How do they give consumers transparency tools to pick the right doctor or provider when they get treatment?  These are the sorts of things that marketplaces, public and private, need to do.  Because if we don’t get our arms around healthcare costs, we are all screwed.  That’s a technical term.  So we’re doing that in California by having a marketplace that isn’t just about putting one or two products on the shelf at unsupportable cost for too many people, but putting good prices, driven by competition, but holding health plans to account for delivering better quality and better cost.  Thank you.

SARAH DASH:  Thank you, Peter.  And now we will pleased to hear from Korey Harvey.

KOREY HARVEY:  Yes, thanks, Peter.  Because if you’re dealing with JP and myself, we’ve had similar career paths, someone had to give the bright spot on the panel, so I’m glad you were here.

So I spent time —  I work for an insurance company now, I spent time as a state regulator, worked for state legislatures, worked — you know, I’ve kind of run the gamut in terms of government and public policy and we had a discussion earlier today and just it’s always good to warn you that I’m a bit jaded from all of that.

So the first slide, I thought it would be good to just give you a cost comparison.  If you took say, a 40-year-old male — not that the gender matters — after the ACA, the price would be the same either way.  But in the state capital, if they are in the individual market, the monthly premium would be almost $540.  You take that same person, drop them into the small group market, which would be employers between one and 50 employees in size, you see what it would be — just under $350. Exact same person, same health, same risk, you name it.  But that’s how the separate risk pools work.  As far as I know — JP probably knows — as far as I know, there is no state that’s merged.  There are a couple states, maybe, that have merged the individual and small group risk pools, which is great if every insurer is in both risk pools.  But if you’re a company that in the individual market and you’re trying to compete for group business with a company that doesn’t have an individual block, they have an advantage over the morbidity and the risk pool.  An advantage over you.  So it’s not a perfect solution.  But anyway, that’s how different the pricing is.

In Louisiana, which is — for me, it’s kind of like one of those median states in terms of population and whatnot.  And so it’s — I think what you will see here is what has happened in many states.  2013 was the year before the Title I market reforms took effect.  We had 15 companies in the individual market, somewhere around 175,000 in (indiscernible) and as we got to the current year, we are down to two companies left in the individual market, and that enrollment number is terrible.  It was 76,000 at the end of March, I can promise you it’s shrunk by a couple thousand since then.  So that’s what the enrollment has looked like over time, along with the market participation by insurers.  And below that, you see what the rate increases were like those years.  One thing I do point out is, you’ve got a few years where the individual — so 2014, there really was no mandate; not in the law itself.  And then the next few years you had somewhat fairly lax enforcement of it.  You had so many exceptions to the mandate, that it wasn’t really much of a mandate.  So whether you’re for it or against it as a policy from a philosophical point of view, if you say you have one and you don’t really have one, then don’t expect the market to behave as if you do have one.  And that’s what we saw.

Peter talked about healthcare sharing ministries.  One of my favorite things to talk about sometimes.  When we have laws of general application and then we say:  But if you say that you believe something and you get to get out of it, then once again, just like you have a — if you have a mandate that you don’t enforce, when you have all of these requirements and then X number of people don’t have to follow, it creates problems within a single risk pool, especially in the individual market.  And I mentioned the large number of exemptions that you could get.  So when you take that, together with the rate increases over time, it’s not — or shouldn’t be a surprised that people who don’t get tax credits end up exiting the individual market.  So you’ve got rate increases like you’ve seen, it’s hard to afford to spend 20 percent of your income.  And that keeps going up.  We did have a rate decrease in Louisiana this year for the current year, and yet you see what happened to enrollment.  It still didn’t really convince anyone to come back into the market, because a six percent rate decrease year over year, when as Peter says, you point out over five or six years, you’ve got an 85, 83 percent — whatever you said it was in those federal market place states.  A reduction of six percent doesn’t make new customers at that point.  So that’s — and I think this is a picture you’d see in quite a few states.  So when we had discussed what we had talked about today, I said, well, I will maybe throw out some ideas of things you can do that can put some downward pressure on premium.  And so one thing is to hit Tax ACA Section 9010; state regulators like to call it the Federal Premium Tax, because it essentially functions as a tax that’s a percentage of premium and it comes out to about 2.2 percent of your premium, which is a significant amount of money to pay on top of whatever it costs for me to cover your healthcare services, you add a significant percentage on top of that, so that the Federal Government can get revenue that it didn’t get before 2014.  And there’s some data there on kind of what that looks like per person or per family.  Congress has done it before, suspended the hit tax.  It’s scheduled to come back.  You’ve got a limited amount of time.  Rates are pretty much developed for next year, so it’s difficult for insurers after that point to do something about a 2.2 percent reduction after that.  But it’s a problem we’d rather have to deal with than not deal with.

The next one is the whole cost sharing reduction.  So that’s the subsidies of the ACA when the administration decided to stop paying them, insurers, under the law, were obligated to make those reductions no matter what.  So if the Federal Government doesn’t repay me for that, I still have to do it.  And because none of us are really intentionally in the business of losing money, we had to do something about it.  So the infamous silver loading that we’re doing now, we’re raised prices on the silver plan premiums to increase the amount of federal tax credits they get paid, so that we cover the cost of the subsidies that we’re not getting reimbursed for.  And so over ten years, it’s saved the Federal Government $118 billion to stop paying CSRs and because I’ve raised prices on silver plans by $365 billion to get that money back, it’s cost the Federal Government $194 billion over ten years.  So even not paying the CSRs has actually cost more money to the Federal Government.  So it’s not a sensible — at least financially, it’s not sensible.  You can never be sure one minute to the next when we do or don’t care about the federal deficit.  But that is a problem.  There is of course the Cadillac tax, which is delayed until 2022.  I don’t preach that much about getting rid of it, because frankly, it’s part of the problem.  If we get around to that subject at some point, the fact that employer sponsored insurance exists at all, is part of the problem.  It’s the way we’ve structured this entire system.  And it’s not quite logical, but that’s not going to get undone, right?

So what can we do in the meantime?  Or not the meantime.  What can we do, since we have this system?  Peter has talked about what California has done.  Admittedly, it would be very difficult for a lot of states to do that, but as you said, we look to the Federal Government to increase subsidies in that once you hit 300 percent of the federal poverty level, if the subsidies, the tax credits, are increased, it makes it more affordable.  Because what we do have now in many states is essentially a federally subsidized high-risk pool.  So in order to get people back into the individual market, people who want to be there, it does have to be more affordable.  One possible thing from an insurer perspective is the — there is kind of an age ratio that the ACA has insisted upon where if you’re 64 years old, you’re never charged more than three times what a 21-year-old has been charged.  The natural economic ratio is closer to 6-1, 5-1, depending on the morbidity and the risk pool.  But when you say we’re limited to 3-1, that really puts pressure on people who are 35 and under and it makes — they are paying more than they otherwise would.  And so they stay away from the market.  And it’s not just the number of people who stay away that’s the problem, it’s also when you keep healthy people out, the problem intensifies.

One minor thing is there is some rigidity in plan design and I think Peter and I are kind of at this point where it’s kind of a philosophical difference.  It’s, do you want more choice?  Or do you want a stricture, but you always know what you got?  That’s I guess, a question you always have to ask yourself.

The next one:  Transitional reinsurance.  Well, someone else has mentioned reinsurance, so we won’t spend a whole lot of time talking about it.  But when the reinsurance program went away, we saw huge rate increases and of course that magnifies, it doesn’t happen just once.  When their rate increases because of structural changes to a market, it just goes on and on and on.  It becomes part of trend.  And so that never goes away.

There’s a few other things that — I think I’m out of time.  I think there are a few other things we may get to at some point about other policies regarding prescription drugs, things like that.  I would always point out, whether I was as a regulator, or on this side of the industry, the massive role of government in healthcare with Medicaid and Medicare, the government is essentially a third party payer, and it underpays physicians, it underpays hospitals, and in order to make up that difference, everyone who’s in a private market whether it’s group or individual, we have to pay more for our goods and services to cover the gap — the loses, that providers get from being underpaid by Medicare or Medicaid.  Until that problem is solve, there’s always going to be cost shifting that people — those tens and tens of millions of Americans who are — who have insurance have to make up the slack for government underpaying.  So — all right.

SARAH DASH:   Thank you.  You all did a fabulous job and we have about 40 minutes for a really good Q&A and discussion.  Again, if you have a question and you can write it down on a green card, somebody will come around and bring it up to me.  There’s also two mics.  A little hard to see, but if you can make your way to a mic, you can also ask your question that way.

I’m just going to start off.   You all gave us a lot of food for thought and there’s some clear philosophical differences on the panel, clear differences in sort of how the ACA has been implemented.  But I mean we said we were hear to really talk about affordability.  And you all shared a number of different ideas about how to improve affordability.  If you had a magic wand and you could say what’s the one thing that states or the Federal Government could do to improve affordability in this marketplace, what would you do?

JP WIESKE:  So I guess I’ll go first since nobody else wants to.  I’ve always thought that if you’ve seen one state market, you’ve seen one state market.  And that’s part of the problem, that the one-size-fits-all approach has created some of the issues that populations are different; Montana operates very differently than Wisconsin.  California operates before and after the ACA, very different than Wisconsin ever did.  And so I think that’s part of the issue, is that from my perspective, more state flexibility.  I think we’ve looked at this and I think the ACA did a great job dealing with affordability issues surrounding folks who couldn’t afford coverage.  I’m not so sure that when you look at, again, the one-size-fits-all approach, that it functionally made the market a market.  It’s still a residual market.  It’s still a problem.  And finding a way to sort of merge those issues together and finding some ways to mitigate those risks would make some sense, and I think that’s going to vary on a state by state basis in looking at it, and depending on the population, depending on — again, even inside Wisconsin; Rhinelander, Wisconsin is very different from Green Bay, is very different than Milwaukee, and is even more different than Madison.  So from my perspective, more state flexibility and less sort of federal control over it, would make more sense.

SARAH DASH:  Sarah and then Peter.

SARA COLLINS:  So I think what’s been interesting about this conversation and hearing about the approaches that states are using to improve affordability in the individual market, has been the fact that these are a very small number of states that are doing this, and that when you take reinsurance, which has had proven impacts on lowering premiums in the states that have implemented them, only seven states have implemented them.  Only five more are considering them.  That’s twelve states.  So what about all of the other states?  So there is a clear, federal role in all of these policy options.  The other critical aspect of this is the financing.  The states that have passed re-insurance laws struggle to finance them long term over time.  I thought Peter’s example of the subsidies in California, it’s three years, it’s limited.  The Federal Government could make those changes in the affordability of marketplace plans very easy.  I showed you the numbers that Rand did on how much it would cost to lift that cap, or increase — extend the premium tax credits farther up the income scale.  These are not very big dollars.  And on the point about the cost sharing and reduction payments that we’re overpaying, the Federal Government is overpaying those.  That kind of waste in terms from a federal budget stand could be, if you funded those, you could transfer those savings into increasing the subsidies on the premiums and using it in a much more efficient way.

I also wanted to just also make one other point.  What is driving the affordability, the main cause of the affordability problems in both employer-based coverage and the private market, is healthcare costs overall.  Prices we pay, particularly in the commercial market to hospitals and providers. We pay much more than Medicare pays and it is actually not the case that we pay higher prices to providers through commercial plans, to make up for the low rates in Medicare.  That’s not the reason.  There’s been lots of work that’s been done on this.  If that were the case, you would see prices paid by commercial plans rising at the same gap across the country.  But instead, what you see are highly variable prices across markets.  Those prices are the result of confidential negotiations between commercial insurers and hospitals.  We don’t know how those prices are set, but they are highly variable and they are the main driver of healthcare costs right now in commercial insurance.  So we really do have to focus our attention on that critical factor and the affordability issues that we’re talking about today.

PETER LEE:   So you asked magic wand one thing, and I’m not going to note one thing.  Not surprisingly.  In the individual market, it’s so clear there’s seven or eight things that lead to success.  It is spending money on marketing, it is a common risk pool, it’s better spending on CSRs.  It is things like re-insurance at the federal level.  So that’s — but I want to speak to the more broad issues because the title of this whole session is about the private insurance market.  And when you think about why do Americans care about healthcare affordability, I’m actually sort of sad to say, it’s not because of the remaining, in California, six percent of people that are uninsured.  It’s because a huge percentage of people with employer coverage are financially insecure. So the two things that I would do with my wand is:  One, to have benefit contributions from employers be adjusted for income just like they are in the individual marketplace.  Right now, 90 percent of people with employer coverage, you get the same contribution for your premium if you make $200,000 or if you make $30,000 by the same employer.  That is crazy.  It’s regressive.  It means lower income Americans with employer coverage.  Where 50 percent of Americans get their coverage, are totally unable to afford coverage.  That’s one.  And the second, Sara’s note that we need to be looking directly at the underlying costs of healthcare.  I would note — I know that Pam isn’t able to be up on the panel, but it’s a tough thing that Washington is doing.  They have something called Cascade Care, which is under the label of a public option in the exchange, but it’s basically saying they want to have products on the individual marketplace for which no provider on average really paid more than 160 percent of Medicare.  Now, we could all argue about what the right line is, but America pays too much for virtually everything.  You all know this.  We spend double what other countries spend and as the late [name] said:  It’s the prices.  And prices are driven by consolidation, by negotiating power, but if we don’t get our arms around prices, all of the coverage issues in the world won’t matter.

SARAH DASH:  Korey, did you have some thoughts on that?

KOREY HARVEY:  I would say, I think it will take a magic wand, under the circumstances.  I mean, you’ve heard of some of the things that could help get people back into the market, about increasing tax credits, you know, once you get north of somewhere around 300 percent of the federal poverty level, and yes, if you’re just below 400 percent and then something happens in your career and it takes you just over 400 percent of federal poverty level, then whatever that amount of increase was in your salary has just completely been evaporated and then some, by the fact that you’ve lost all of your tax credits.  So yeah, those are some common sense things, but I’m glad we’re all at least in agreement about one thing.  And the problem is — we can talk about ways to get more people into the insured market, but we’re going to have increases in price for the cost of that insurance next year and the next year and the next year and the next year.  And until we do something about the underlying cost of care, you know, that’s what we, I think, all agree on.  Is that’s part of the problem.  Is that we do spend more as a percentage of national income, on healthcare, than any other country on earth.  And I don’t know that we’ve quite invented a way to empirically prove if we’re always getting our money’s worth.  But that’s something we have to address before we have insurance that everyone can afford.

SARAH DASH:  Well, I’m hearing agreement on that and I think we’ll come back to this question as well as, I think, some of the other points around state flexibility and others.  But we have somebody who has been waiting patiently at the mic.  So could you introduce yourself please, and ask your question?

AUDIENCE MEMBER:   Sure.  Hi, I’m Rose Chu from HHS and this is a question for Peter Lee.  How did you come up with the standardized benefit options?  And is it popular with insurers and consumers?

PETER LEE:  Really good question.  We spent months engaging consumer advocates, actuaries, health plans, in what would be the best design that would actually promote people getting the right care at the right time.  originally — again, we have 11 carriers, some of which are across the nation, some of which are in California.  They were sort of leery, saying, we want to innovate.  We said, fine, innovate off the exchange.  But on exchange, you’re offering this product.  And if you want to offer other products, bring it forward, but we’re going to review to make sure it’s clear to consumers and it’s consumer centric.  Plans did not offer alternate designs off exchange, even though they could, and in California, the off exchange market is over 800,000 lives.  So it’s not like it’s a piddly little market.  And they aren’t bringing alternate markets because it’s working for them.  They find that consumers understand the benefit designs, and they are competing based on price and they are getting enrollment that’s working for them.  So the plans were originally hesitant, but it’s working for them and for consumers.  Again, the designs were (indiscernible) but it was based again on pre-ACA — I would say most benefit designs were gaming risk selection.  They were designs to encourage particular people to join your plan or to scare away others.  These designs are very specifically trying to remove barriers as much as possible for people seeing their primary care doctor.  Remove barriers as much as possible on someone going to the urgent care center, versus an ER.  So there’s differential co-pays, co-insurance, geared to people getting the right care, right setting, right time.  And we’re going to be doing more evaluation on it compared to other places, but it’s working for consumers, working for health plans, and for providers.  Because providers aren’t dealing with 8,000 tweaks on benefit designs.  Providers know that every one of the 2.5 million people in the individual market have common benefit designs.  Thank you.

AUDIENCE MEMBER:  If I could ask the others:  How about provider network adequacy?  How would you say the states are doing on those?

JP WIESKE:  So I ran the NEAC’s Broader Network Advocacy Model law group for a number of years.  I think as a group, we’re doing horrifically bad.  And what I mean by that is, I don’t have any good advice for a particular — having dealt with this for like, a year and a half with weekly phone calls, I don’t have any good advice for a consumer right now at this moment to say:  You look at this network and you tell me whether or not it meets your needs — your particular consumer needs.  Except for whether or not your doctor or hospital is in the network.  And I think we’ve tried to get better at it.  State regulators have tried to get better at sort of figuring that issue out and answering that question and sort of anticipating the needs. I think there is some movement in that space.  I’ve talked to some companies who are working on sort of being able to score network base on a variety of metrics.  And being able to come up with a number that sort of makes sense and allow you to compare those metrics between network to network.  And I think some of the states are implementing those tools.  I think California may have one of those.  They may have that contract as well.  And I think that will be an interesting approach.  Once we get to a point where we can agree on what the metrics are and what they look like, and consumers can make that judgement based on objective standards that everybody agrees to, I think that’s where we’re going to get.  But I think right now the networks are getting narrower and narrower because consumers are focused on cost.  At least in a lot of states.

KOREY HARVEY:   I would just say, it’s the symptom rather than the disease.  There are limited ways for us to contain costs.  Our network as a whole — like my company’s got just somewhere around 90 percent of all the providers in the state, so it’s a lot.  It’s a high number, but we have a modicum of — especially in the individual market — of enrollees who in order to reduce costs do pick slimmer plans and until there is a way to sort of judge the adequacy of those networks in some sort of empirical way, that’s fair, it will be tough to help consumers navigate.  I mean, it’s an easy thing to do, if you wanted to know right now.  If your provider was in my network, you could find out in seconds.  But some random physician you might see ten months from now, you don’t know that you’re going to see that person.  And so that’s what’s hard to predict.

PETER LEE:  I worry a lot about standards that are numeric to the size of the network.  We have standards for all of our health plans on the quality of the care they deliver.  Does someone with a very complex illness get to a center of excellence?  And you can do that whether you’ve got 90 percent of your physicians and whatever in, or not do that.  Or if you have 40 percent.  So we in California have time and distance standards, ratios, et cetera.  But the last thing I wanted a consumer to say, somewhat narrow that gets a score of a four, is worse than a plan that has an eight.  California has Kaiser.  It’s a fewer doctors, but very integrated.  The issue is about provider adequacy.  In many ways, we live in America, the idea with the mythology that more is always better.  The issue for us is to make sure we’re holding whatever the network is, to account for the sickest people getting the right care.  People with chronic care getting the right care.  And I would rather have quality measures and hold a plan that can’t deliver quality, I want to toss it whether they’ve got a broad network or a narrow network.  And yes, when you enroll in Cover California, you can find out if your doctor is in the network.  That’s a starting point.  Which hospitals are in which network?  That’s a key factor.  But beyond that, we should be holding plans to account for the quality they deliver, more than the number of docs.

SARAH DASH:   I want to follow-up on this question a little bit.  Did you have another question?  Okay, great.  I do want to follow-up on this a little bit though of — since all of you mentioned the underlying cost of care, and just ask if you can take this one step further and talk about that intersection of network design, if you will, and underlying cost of care.  How does that play out?  Have you done anything on that front?  Peter, do you want to start off?

PETER LEE:  We’re going to be releasing some sort of academic evidence review of, what is the evidence about having their own networks?  What does it mean for cost?  What does it mean for quality?  The evidence for cost is really clear.  Narrower network can save between 10 and 25 percent of premium.  The evidence on quality is less clear.  There’s not evidence that you get better quality, there’s also not evidence you get worse quality.  You look at the scatter chart of quality by doctors, it’s all over the map.  And it’s not the case that more expensive means better quality.  So that’s some of the basic evidence.  We look at making sure again, that every network has access to high-quality trauma facilities so if people are really sick, they have some place to go.  But there’s really good evidence that bigger, broader networks are going to end up costing you more, as opposed to as a carrier being able to negotiate and say, you know, I’m not going to have everyone in, so come into my network and I’ll pay you X.  And then consumers can pick a health plan that has some doctors, and a health plan with other docs.  I think if we don’t allow consumers to shop, based on network, we’re removing one of the key drivers having more affordable care.

JP WIESKE:  I think the other interesting approach is the narrower networks, I think, to dovetail off your point, mean that the insurer has more control over how the particular doctor practices.  That the narrower the network means — and this is where really, I think, the interest has been intersecting with the number of insurers and the narrow networks.  Is they want to know that if you’re — if you’ve got a diabetic, that you’re meeting certain particular protocol that is going to drive down costs inside their network.  Because they know they are going to have diabetics.  And they know they are going to have a certain number, and if you are following these protocols, you are doing the AIC regularly,  you are checking the blood sugars, you’re having nurses follow up with dietary sort of concerns as a practice, that that’s going to be a good practice.  And so I think that that’s a piece and part and parcel to the narrower network.  And you flip that on the other side, which is where consumers want some control over where they go and choice in where they get their care and it’s a difficult decision.  We were talking beforehand, the commissioner, and this is probably out publicly, a couple years ago had — Commissioner Nicol had had a brain tumor that he needed to have some surgery on.  Well, he went to UW, who theoretically should have been the best practicing medicine, and the surgery would require three days intensive care, following the surgery.  He went to Mayo and got an exception to go and get looked at, and it was a surgery where he was out later that afternoon.  No intensive care.  It was much less invasive.  He was recovered within a couple of days.  Obviously he chose the Mayo, the less invasive.  And so finding that sort of balance, which was outside of their network, on a doctor by doctor basis, and having the ability to make that choice, is sort of — there’s an interesting intersection there as we move forward with the rare conditions and rare issues and people’s deeply personal care and their ability to make their own decisions.  There’s going to be a push and pull with cost and choice as we go through this and quality and not quality as we go through this. Because somebody is seeing the world’s worst doctor tomorrow and they have an appointment and they are going to be seeing him or her, and think that they are a genius.  And that’s a problem.

SARAH DASH:  I want to take the question that we got on the card.  Again, please send your questions up.  I think it was you, JP, who talked about age rating — or maybe it was Korey.  Talking about the age rating provision around the three-to-one age band.  I would ask you to, as you were explaining this to, to explain again just the technicality of that provision.  But the question has to do with the concern for the sort of 35 and under population and how do you balance that with the affordability for the 55 plus population?  The ability of older adults to afford, say, a six-to-one age band, versus a three-to-one age band.  And the questioner points out that at a time of decreased employment opportunities for older Americans, that a six-to-one ratio could make healthcare unaffordable for those older adults.  How do you deal with that?  How do you deal with the desire to get younger people covered, but also older folks.  Sara, you’re looking at me, do you have a thought?

SARA COLLINS:   Yeah, I can just jump in real quick on this.  But the age bands have been a really critical part of the Affordable Care Act, because it has kept plans more affordable for older people who are really priced out of the market before.  And actually, the analysis has been done by the Urban Institute a few years ago, show that actually health — the three-to-one ratio actually does closely track healthcare spending over the life cycle.  So it is relatively accurate in terms of what people’s costs are.  So in certain states, have even gone more narrow with two-to-one in some states.  Rand did some modeling of this on the young adult issue.  Two policy options:  One was increasing the age band to four-to-one, or five-to-one, or six-to-one, and making policies cheaper for young adults that way.  And the second was just giving a lump sum subsidy increase to young adults.  And what they found was, the impact on coverage for the latter policy, increasing, or providing a lump sum payment or a lump sum subsidy, was much higher, or higher at least than the changing the age banding.  And the other critical difference was that it brought — the age band change brought young adults in front employer-based coverage.  So you weren’t actually increasing the overall number of uninsured — of young adults, you were just shifting them into the individual market.  So in fact, I think the three-to-one ratio is probably a pretty efficient policy option and there are other ways to bring young adults into the market.

JP WIESKE:   I think it’s important to remember pre-ACA, when you look at the three-to-one versus a five-to-one band.  You are not looking at moving just the five-to-one up, you’re looking at changing both of those because you’re assuming that you’re getting more younger people in.  So a five-to-one age band is not really a five-to-one age band in the same way pre-ACA, and consistently insurer pricing has shown that, that the expectation is that when you expand that band, that the insurers expect to get — and lower the price for the younger people.  You get more of those younger people in and it lowers the overall rate, which leads to not really five-to-one age band, but in five-to-one given the same sort of starting point.  So your starting point changes.  I can’t disagree with the fact that there may be other policy options that are more effective from a subsidy standpoint, but I’m not so sure that we’re looking at a world where more subsidies are coming anytime soon.  It is a functional problem that when you look at a state like Wisconsin where the average age of purchase pre-ACA — and granted, it was unwritten and there were issues, was 32, and now the average age is 44 or 45.   That’s where the prices are driving upward, and the enrollment has been change.  So I think that that is an issue and you’re leaving a generation of folks out of this market where — and they are staying increasingly on their employer plans — their parent’s employer plans — until age 26, in order to take advantage of the lower rates in the small employer market as Korey indicated.  And so that drives up the costs for the small employers as well.  So there’s significant impacts, I think, from those folks largely staying out of this ACA market, despite the significant subsidies.

PETER LEE:  There is a lot of moving pieces here.  The one thing that I just note, because the kids are going to stay on their parent’s plans until they are 26, no matter what, and that’s a piece — and so the bigger piece that I worry about is people talk about the healthy young people.  I care as much about healthy older people.  And if you raise the cost for the people from 45 to 65, who do you lose?  The healthier ones.  And they are paying three times as much premium.  So the issue that we all want is a healthy risk pool across all age sectors.  And so we in California, I think Massachusetts, Washington, are doing a pretty good job of having a good age distribution across the board.  When you have states that have lost half of their enrollment or more in the last few years, you’re going to lose absolutely healthy people across the board, which are more apt to be younger, but boy do I worry about losing healthy older people that are putting more dollars into the premium pool.  So that’s just a factor — there are many policy options, but the issue isn’t healthy young people.  The issue is a healthy risk pool, which is at every age, healthy and sick folks, not just sick people.

KOREY HARVEY:  So there we are again, back to the magic wand.  And for Congress, when they made the decision in 2010, it’s precisely a political question.  So we know that economic expense for people who are say, 64, is much higher than people who are 24.  And so if you say, we’re going to have what was — you know, two-to-one, three-to-one, five-to-one, they are all arbitrary.  They are arbitrarily chosen, right?  The moment that you put some sort of cap on it, you have decided that either the young will subsidize the old, or vice versa.  So whichever way you want to go, whether it’s three-to-one or five-to-one, know that you’ve made a decision, that you’ve forced someone to subsidize someone else.  So it’s not a moral disagreement between us that it’s three-to-one versus five-to-one, but either way, what we’re doing is cost shifting.  And so if subsidies are required to make that better, just know that the problem was still there.  You’ve had to come up with a new subsidy to pretend as if it wasn’t.  To me, part of this problem is the — I think it was Sara’s second slide, maybe, as you’ve seen the number of insured kind of stagnating, go down.  And then you keep in mind Peter’s, over five years, especially in those federally facilitated marketplaces, you’re seeing — was it 83 or 85 percent?  85 percent over time, the amount of money spent on tax credits continues to go up.  The premium rate increases continue.  And the number of people with coverage in that individual market continues to go down.  So your input is going up, but your output is going down for what you’re getting for it.  So until we structurally talk about the cost of care, I don’t know that that black hole will stop sucking up those resources.

SARAH DASH:  I want to spend our last ten minutes or so just — let’s talk about political and policy realities and constraints.  I think we’ve put a lot of different ideas on the table.  I just want to start with the state flexibility questions, since that is something that’s been more recently on the table.  JP, you went into a lot of detail about the 1332 waivers and you mentioned also some interest in states combining that with the 1115 process.  I’d like to start with you and just say, as states are looking at this, from your perspective, what do you think are the biggest issues that they are considering?

JP WIESKE:   So before I left the Department in January, I also chaired a group on healthcare reform alternatives at the NEAC and we talked extensively about what sort of state options are inside the ACA. And I think Peter’s sort of point that the tale of two cities, has some truth to it in the way, you know, the political realities sort of play out.  We sit inside a state and we talk about what we want to do, and the ability to be able to get through Republicans and Democrats, even inside the state legislatures, to come together and sort of have a discussion without sort of resorting to issues that you’re pro or against the ACA if you’re doing X, Y, and Z, regardless of where your politics are is very difficult.  We’ve got a top down sort of approach where states are sort of stuck in the individual market to some degree.  That you’re certainly flexible to lean in and embrace everything that the Federal Government wants you to do and everything the Federal Government wants to tell you to do, as an option. But that does something different to your market functionally inside a state, to function the way you want and to allow sort of broader choice in the market.

So I think states are trying to find some ways to sort of figure out.  They don’t have money to sort of go through this process.  I came from a state that had surplus after surplus after surplus, so it was a lot easier for us to do re-insurance.  But the money is a gargantuan issue for states to be able to move forward on.  And without money, a lot of these are sort of problematic.  You’ve got all of this uncertainty, which deals with the court cases, with the process of a 1332, the process of an 1115 waiver, the potential political change that goes through both inside your state and at the Federal Government as to whether or not your waiver will get through.  And then you’re faced with a decision of trying to put all of these resources together and go forward and get permission from the Federal Government to be able to go ahead and do what you want to.  And that’s sort of where the rubber meets the road.  Not to be the Debbie Downer.  Maybe I’m reading too much apocalyptic fiction lately again.  But functionally, that’s sort of the issue, is it’s a very difficult lift to deal with politically.  I think states are looking for any solution that sort of works.  I know a number of states that are looking at 1332s behind the scenes and they don’t even want to announce them publicly until everything is all set.  So they are working through that process and I think they’re looking for any solution that works.  But the individual market is a tough, tough nut to crack.  Again, because this residual — you know, you need to build the size of that market, but the only way to build the size of that market is to take it from other small employers.  I mean, if the ACA had gone differently and the federal exchanges had worked well, maybe the small employer market is vastly different now and the individual market is different, much larger.  But they are trying to find solution, but it’s very difficult given no money, and given the constraints, even with the 1332 guidance that’s available.

PETER LEE:  The additional flexibility under this administration has been geared towards flexibility to in many ways, roll back the ACA to offer new non-ACA products that will actually do damage to the risk pool in the individual market.  So a lot of states that think the ACA philosophically was the right approach, guaranteed issue, common risk pool, stepping up that 1332 model — the new one.  States have stepped up some to do reinsurance.  I think very few more will do it, I know the balancing act of “if you bring state money, how much federal money will come?”  has huge uncertainties.  The third thing though that I note on 1332, and this is again back to the — we should all be thinking about not just today, but was the Affordable Care Act right?  And how do you build on it?  The formula that JP noted of deficit neutrality was baked in — and is baked into the Affordable Care Act itself.  And I think it’s wrong to say that a state that implements programs and lowers the per person cost to the Federal Treasury by $100 per person, but in doing that, brings in 200,000 more insured, says, sorry, you can’t get federal help to do that, is saying that the purpose of the Affordable Care Act was not to expand coverage and make it more affordable.  Deficit neutrality as a part of the law, standard to say, we won’t help a state do a better job to get more people covered more cost effectively, is a dumb element of the law.  But that’s not Trump, that’s the original ACA.  It’s baked into the law.  So as we all think about building on the ACA and improving it, boy do I want a state to have federal help to do a better job at expanding coverage more cost effectively.  You can’t do that under any rubric of the 1332 today.

KOREY HARVEY:  So in Louisiana the last few years, one of the biggest legislative fights, and it happens every legislative session, is on the topic of surprise billing, or balanced billing, which is finally taken some interest here in Washington.  Because it’s been almost exclusively within the realm of state activity for years.  And there are different models, different states have approached it in different ways.  And I guess the one thing I would say about it, especially if Congress is going to act, is number one:  If a state has already acted, I would leave it alone.  I wouldn’t pre-empt whatever that state law is.  And secondly is, pay close attention to the possibility that whatever law you design, could have the effect of pushing prices on insurance up.  So if we’re not careful and you say, well, you’re the insurer, just cover it.  Well, okay, I can only “just cover it” with premium dollars, which has to come from somewhere.  So with surprise billing, it’s important that we don’t just congressionally create a situation where I have to pay whatever some ER doc demands.  And that’s going to be the tough spot.  I would always encourage you to look into the possibility that in many states, including my own, there’s basically one provider group that tends to own most if not all of the provider groups in say, an ER.  And so they’ve kind of created a monopoly and their hospitals have let them do it.  As always, it’s more complicated than it looks at the surface.  But if you do tackle surprise billing, give some consideration to, will this make it better or worse?  So hopefully you go down the pathway where it doesn’t get worse.

SARAH DASH:  We did actually have a question about this and I think without going too much into the weeds on surprise billing, knowing that we have limited time left today.  We will have a separate Alliance briefing on that topic actually on the 15^th — next week.  But there are some strong differences of opinion between the insurers, the hospital, providers, and other folks around kind of whether a benchmark rate approach or an arbitration type of approach.  And then if there is a benchmark rate, what is the benchmark rate and what’s better?  And I think that’s kind of the crux of the conversation at the moment.  So Sara did you have a further comment?

SARA COLLINS:   Just one, in terms of where I think the policy is headed.  I think we want to look at some of the optimistic trends.  I mean, there are several — there are 11 states now that run their own exchanges and there are several more now that are moving to run their own exchanges, so that’s a major change at the state level.  I think Peter Lee and California has demonstrated how innovative a state can be, even on things like quality of care, and the pricing, so that states can do a lot even within the structure of the current law without a waiver.  I also think on the re-insurance side, that there is bipartisan support.  Reinsurance has been proposed in both Democratic bills and Republican bills.  Part of the repeal and replace bills included strong re-insurance provisions too.  So I think there is potential for bipartisan agreement in the re-insurance area, which has the potential to lower premium costs.  And then again, I would just echo on the surprise medical bill issue, there is also bipartisan support for doing something at the federal level, which is really important, because at the state level, you can’t affect — you don’t have any control over self-insured plans.  So it’s always important to have a strong, federal partner even at the state policy.

SARAH DASH:  All right, so — yeah, you wanted to comment?

SPEAKER:  I want to be really clear that when I know that states won’t step up for re-insurance, I think that the federal re-insurance makes the world of sense.  I mean, individual market, because of the nature of the market, will always be a little bit sicker than everyone else.  And some ways that was part of the rationale both for priming the pump and having re-insurance to lower those costs.  But to expect states to do it, doesn’t work.  But as a federal, it is huge bipartisan support, makes the world of sense, and would actually be one of the few things that addresses unsubsidized people.  Unlike a lot of other policies which are bullet targeted at particularly low income.  Re-insurance lowers costs for people that don’t get subsidies, which is actually really important for people that have been priced out.

KOREY HARVEY:   Sarah, I would echo your comment about the Federal Government is probably — if you’re going to have re-insurance, it’s the best candidate for it, precisely because it’s so difficult to get to the self-insured to risk the market.  If a state wants to finance a re-insurance program 40 percent, whatever that percentage is in each state of the market, it’s kind of difficult to access in terms of financing the state side of the re-insurance.  And even if you do try to get to them, you’ve got unions and even state government through it’s own self-insured plans that all of a sudden say, wait, you want us to pay for this?  So it’s definitely, I think, was easier from the federal perspective.

SARAH DASH:  Thank you.  So in the 30 seconds we have left, I will ask you guys a quick “yes” or “no” question.  We heard a little bit about states having some power, but on the other hand, state’s hand being tied to some degree, do you think we’re heading towards some kind of a federal action around insurance coverage?  Whether it’s something relatively targeted like re-insurance?  Or something much bigger?  Thoughts? I know this is like a crystal ball question.  So it’s not fair.

PETER LEE:  Sadly, not in the next two years, but I think all of the lessons of what’s happening in states should be informing what you’re thinking about for 2020 and beyond, is that we need to get beyond jousting about repeal and replace and building up something that’s working for most Americans.

SARAH DASH:   Any other final thoughts?

KOREY HARVEY:   I don’t have a magic wand or the crystal ball, so I have no idea what will happen.  But there’s been more talk in the last few months about surprise billing than there really has been for years at the federal level and the fact that you’ve got senators from both sides, you know, House and Senate, but especially in the Senate you’ve got real bipartisan push for it.  So that’s kind of like a necessary ingredient, is it not?  In the last few decades.  So I think there’s a real possibility that that could happen within a year or two.

JP WIESKE:  I would dovetail off Sara’s point about the exchanges.  I think states both left and right are seeing the ability to sort of control their own markets inside those exchanges.  And that’s something that may be a trend going forward that a number of states are looking at.  Also, the per unit cost of running an exchange, the federal exchange, is relatively high to run a website, and I think states are now realizing that technology may be starting to catch up and become a little bit more affordable.

SARA COLLINS:  I’ll just say too, in terms of the 2018 midterms, affordability was obviously high on voter’s minds, and that’s going to continue to be an issue, and policy makers are going to continue to feel that pressure from their constituents.  So because of that, probably on both sides, maybe some potential for some agreement on how to reduce the burden that people are currently struggling with.

SARAH DASH:   All right.  Well thank you.  We are out of time.  I want to thank all of our panelists, and again, thank the Commonwealth Fund for partnering on this briefing.  Please do fill out your blue evaluation forms. We care about quality and outcomes, but more importantly, join me in thanking our panel.

[Applause]