Stabilizing the Individual Market in Uncertain Times

12:00 – 12:10 p.m.      Welcome and Introductions

• Sarah Dash, @AllHealthPolicy
  Alliance for Health Policy

12:10 – 12:45 p.m.      Presentations

• Sara Collins, @SaraCollins_
  The Commonwealth Fund
• Matt Eyles
  America’s Health Insurance Plans
• Brian Webb
  National Association of Insurance Commissioners
• Joe Antos, @joeantos
  American Enterprise Institute
• Tim Jost
  Washington and Lee University School of Law

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

Twitter:
#MarketStabilization

PLEASE NOTE: This is an unedited transcript. Please refer to the video to confirm exact quotes. SARAH DASH: Good morning everybody, or good afternoon rather. We are going to go ahead and get started in just a couple seconds. Hi, so I’m Sarah Dash, I’m president and CEO of the Alliance for Health Policy and thank you all, and welcome. We are excited to be here today to talk about stabilizing the individual market in uncertain times. Very briefly, for those of you who are not familiar with the Alliance for Health Policy, we are a non-partisan organization dedicated to advancing knowledge and understanding on health policy issues, and we are really glad you are here. Welcome also to those who might be following us on Twitter. The hashtag is #allhealthlive. With less than two months to go before the open enrollment period begins for 2018 coverage, today’s briefing is going to explore the current individual market landscape, defining the current challenges, what we really mean by marketplace stability, and look at potential solutions. And for those who are interested, the Alliance has held several briefings on this topic throughout the past year, and you can find those archived on our website at allhealthpolicy.org. We want to thank the Commonwealth Fund for their partnership in organizing today’s briefing, and we’re particularly glad you are here on a Friday which follows two days of committee hearings on this topic, and there will be additional committee hearings in the Senate as well next week. So, we hope that you learn something from today’s briefing, and I think you will, because we have a fantastic panel that I’m going to introduce. They are going to focus not only on the short time issues, but longer-term issues, and what areas for bi-partisan compromise might look like as well. I’m going to go ahead and introduce them in speaking order. Sara Collins is Vice President of Health Coverage and Access at the Commonwealth Fund. She has lead the fund’s national program on health insurance since 2005. Next, Matt Eyles is Executive Vice President of Policy and Regulatory Affairs at America’s Health Insurance Plans, where he leads their government programs, state policy and product policy departments. Brian Webb, right to my left, is Assistant Director of Health Policy and Legislation at the National Association of Insurance Commissioners, or NAIC, and previously worked on Medicare and Medicaid policy for Blue Cross/Blue Shield Association. Next, Joe Antos is the Wilson Taylor Scholar in Healthcare and Retirement Policy at the American Enterprise Institute. Finally, Timothy Jost is the Robert Willett Professor of Law Emeritus at Washington and Lee University School of Law. So, we are really thrilled to have them all here, and I am going to go ahead and let Sarah start us off. SARA COLLINS: Thank you, Sarah, and thank you so much to the Alliance and the panelists for joining us today. I’m going to provide some brief background and the current status of the marketplaces, and what we mean by the term “marketplace” stability, and then using some new findings out this week from the Commonwealth Fund’s tracking survey, I’m going to focus on two key characteristics of stable marketplaces: Affordable health plans, and steady enrollment growth. At the beginning of this year, the marketplaces were widely viewed as stable or stabilizing in most states, for example, Standards and Poor’s projecting in April that 2018 premiums would increase by less than they did in 2017. Most counties would have at least one insurer, and more insurers would report positive margins next year. But S&P also cautioned that the marketplaces are still young, and insurers that are participating in them, need to have certainty that the rules of the market will stay largely the same over time. This certainty about what the rules are, enables insurers to accurately price their health plans year to year and commit to participating in them long-term. Right now, insurers are not getting that certainty. It’s unclear for example, whether the federal government will A, continue to fund the cost-sharing reductions that insurers are required to offer people under the Affordable Care Act; B, enforce the individual mandate, and C, commit to a strong outreach and enrollment drive for the 2018 open enrollment period. Because of this uncertainty, premium increases for 2018 are very likely to be higher than projected in many states, and fewer insurers are participating. We are going to be talking about marketplace stability today, a lot, and you’ve been hearing the term in hearings this week, as Sarah mentioned. What exactly do we mean by that? Generally — and my colleagues will probably want to weigh in on this issue too, but stable markets can be characterized by plans that are affordable for all people who are eligible to enroll in them. Steady and predictable enrollment growth, a reasonable balance of healthy and less healthy enrollees, premiums that change year to year in predictable ways, rather than spiking, and relatively consistent year to year participation by insurers. I’m going to focus my remaining comments on the first two characteristics: Affordability and steady enrollment growth, using our new survey findings, and there is a report in your packet that provides the details. There are currently about 17 to 18 million people who are in the individual insurance market right now, including about 10 million people who are in marketplace plans. About 15 million people have gained Medicaid coverage as a result of the expansion, but about 28 million people remain uninsured. In the new survey, we wanted to know why so many people are still uninsured. We find that about half of uninsured working age adults, are likely eligible for either marketplace subsidies or Medicaid expansion in their state. About 15% are living in Medicaid non-expansion states and have incomes that are too low to qualify for premium subsidies. About 11% have incomes that are too high to qualify for premium subsidies, and about one quarter are likely not eligible for Medicaid, or the marketplace plans, because of their immigration status. In the survey, we asked adults several questions about why they were uninsured. We found that 40% of uninsured adults were not aware of the marketplaces. 59% of the uninsured adults who were aware of the marketplaces, said they hadn’t visited one because they didn’t think they would be able to afford a health plan. 74% of uninsured adults who did visit the marketplaces, said they couldn’t find an affordable plan. And while we don’t really know whether better information about cost and choices in the marketplaces would have encouraged these adults to visit them and enroll in the plans, the survey findings do indicate that assistance during the enrollment process matters a lot. Adults who receive some kind of personal assistance either from a broker, a navigator, a help line, were more likely to enroll than people who didn’t get assistance. In addition, we find that based on the views of adults who have marketplace plans, uninsured adults with lower incomes would likely have found the plans to be affordable had they enrolled in them. We find that most lower income marketplace enrollees paid premiums that were equal to or less than what people pay in employer based plans, but that higher income enrollees pay more. Lower income enrollees were more protected from premium increases than enrollees with higher incomes, and lower income enrollees were much more likely to view their premiums as affordable, then enrollees with higher incomes. Most lower income enrollees had lower deductibles than higher income enrollees. In terms of policy changes that would increase affordability, increase enrollment and increase marketplace stability, there are both short-term and long-term options. For the short term, it’s obviously very important that a permanent appropriation for cost sharing reductions be made, that there needs to be clear intent on the part of the administration to enforce the individual mandate, and there will need to be a strong outreach enrollment effort this fall. To increase affordability and enrollment over the longer term, the findings point to making tax credits and cost sharing subsidies available to people with higher incomes. In 19 states that haven’t yet expanded Medicaid, could move forward, or Congress might consider marketplace subsidies for people under 100% of poverty in these states. There is consensus about the need for federal or state reinsurance programs, and a fallback health plan option in counties without participating insurers. Thank you and I will stop there, and turn this over to Sarah. SARAH DASH: Thank you. So, we are just going to go right down the row, and I just want to kind of ask — since we are talking about the individual market, and Sara, most of your comments kind of focused on the marketplaces under the Affordable Care Act, but I just wonder if you could just briefly, before we let Matt dive in, you know, to what extent does the market, outside of the exchange — there is still an individual market that exists outside, and if you have any thoughts about the extent to which these polices or policy decisions effect both the inside of the marketplaces, and the so-called outside of the marketplaces. SARA COLLINS: I think that’s a very good question, and it’s really important to remember that the reforms of the Affordable Care Act apply both to the plans that are being sold outside of the marketplaces, and about seven to eight million people may be enrolled in those plans, as well as to plans inside the marketplaces. So, pre-existing condition, exclusion restrictions, underwriting — the underwriting rules, all of those rules are the same regardless, but the tax credits are only available to people within the marketplaces. Another really important thing to remember, is that people who are not documented citizens, are not eligible to purchase plans in the marketplaces. They are not eligible for tax credits, and they are also not eligible for the Medicaid program. They can however buy a plan outside the marketplaces, so that’s also an important feature to remember. People above 400% of poverty, likely are buying plans both in the marketplaces and outside the market, where there are no subsidies available to them. SARAH DASH: One last follow-up question, is it more likely for those people who are have incomes above 400% of poverty to be buying outside of the marketplaces, to your knowledge? SARA COLLINS: We know that about 1.7 million people have incomes above the range in the marketplaces for subsidies, and I’m not sure what the breakdown is outside of the marketplaces. SARAH DASH: Thank you. We will now turn to Matt Eyles from AHIP. MATT EYLES: Good afternoon, everyone, thanks so much for having me here, and it’s great to be on such a strong panel, especially with people I’ve worked with in the past, and this panel is about stability and I will open with one thought: When you are on a rollercoaster ride, it’s really hard to find stability. And that’s sort of the way that the individual market has functioned over the past couple of years, and actually, it even pre-dates the Affordable Care Act. The individual market has always been a challenge, it’s still a challenge, and you might ask yourself, well, we know a lot of the reforms that were put in place under the Affordable Care Act, you know, are designed to promote a long-term, stable individual market, and we think that it’s possible to get there. But there are clearly some fixes that need to happen. It’s not a fruitful exercise to sort of look back historically and say, well, how did we get here, only to say that there have been decisions that were made in the past — over the past couple of years, and more recently, that have contributed to the instability and the individual market, and as a result, we’ve seen some things like higher than expected premiums, fewer plan choices, lower enrollment, than expected, and some big instability, especially in certain markets and states. But to Sara’s point, it’s also important to recognize that we have an additional ten million people who have coverage as a result, just for the individual market, setting aside Medicaid, which has expanded coverage further. But what really characterizes the individual market today is uncertainty. For those of you who work in healthcare or who have worked in other markets or other segments and sectors, you all know that markets don’t like uncertainty. It doesn’t matter whether you are talking about health insurance, flood insurance, financial markets, uncertainty, and having uncertainty as a characteristic of a market, just creates instability. We were very heartened and encouraged by the efforts by Senators Alexander and Murray over the past couple of days, and we know that there are additional hearings that are coming up, and I think what was remarkable over the past couple of days, was sort of the violent agreement that we saw across what needed to be done, particularly in the short term, whether it was from insurance commissioners and governors, and I expect we will hear a lot of the same next week about what do we need to provide some greater stability to the individual market. And this action is really important right now, particularly as insurers are filing and getting final rate approvals. Insurers who want to participate in the marketplaces, particularly in the federally facilitated marketplace, need to sign agreements, currently as of September 27, and that is right around the corner. If you think about where we are today, you know, less than three weeks from when those agreements need to be signed, there are still a lot of decisions that haven’t been made. We’ve really focused on short-term options that the Congress can pursue to help provide stability, and there is a brief two-pager in the packet that was handed out there, and I will just tick through the list of the ones that are the highest priorities that we think would really provide stability in the short-term, that would be a building block for longer term stability. The first one of course, that everyone hears about, is funding the cost-sharing reduction benefits that are provided to low-income individuals. Remember, these are payments that reduced the co-pays and deductibles and out-of-pocket maximums for those individuals with low and modest incomes below 250% of the poverty level. It’s also important to note that these are not a bail-out for insurers. Actually, the only payments that get made to insurers at the end of the day, are when patients get and use care. So, when the payments are made, again, it’s always as a result of someone going to fill a prescription, go to the hospital, or see their physician, and that’s the only time that those payments are actually made. There isn’t some other funding that sits out there, and plans really pass through and facilitate that much in the way — if you are familiar with the Medicare Part D program, that the low-income subsidy works for lower income seniors. We believe that funding needs to occur for at least two years, and for funding to be continuous. If you think about where we are in terms of the cycle, both in terms of insurance rates and just thinking about 2019 — and it’s hard to think about that here in September of ’17, but open enrollment starts in just a couple of weeks, November 1st. We have plan year starting January 1st, and then this whole cycle starts again. So, funding that only lasts for one year, would mean that we would have to be right back at it, having this kind of discussion and it turns into sort of a new SGR. The second area that we have been focused on is some sort of premium stabilization program, whether it be in the form of re-insurance or other sort of risk mitigation measures. This could have a substantial downward impact on premiums, depending on the size of the funding. It could be in excess of 10 or 15% downward pressure on premiums. It also has the benefit of not costing the entire amount, because you’ve got an offsetting reduction in terms of the premium tax credit. So, it’s not a dollar for dollar trade. Getting rid of some of the taxes and fees, like the health insurer tax that are added to the premium. The fourth area is state flexibility, and we are supportive of improving the process by which Section 1323 waivers would be approved to make it a little easier for states to do it. We want to keep a number of the guard rails in place, but to the extent that approvals happen with other waivers, there should be an expedited process going forward for other states that want to adopt similar approaches. Also, maybe some flexibility so that state legislators don’t necessarily have to act in advance of that. When we think about the longer term, there are a lot of issues related to affordability. Making sure that an alternative, if the mandate were ever eliminated, we think it’s important to have a continuous coverage requirement, and other measures. But I will just leave you with the thought that we know how to fix the problem. It requires some will, it also requires some funding and recognize the difficulty that lies ahead. But we think we can find a path to stability and hopefully get off this rollercoaster. Thanks for your time today. SARAH DASH: Thanks, Brian. BRIAN WEBB: “Fix” is a strong word. I don’t know if we can fix it all, but we can certainly make it a lot better, can’t we? I represent the National Association of Insurance Commissioners. They are the ones that regulate in each of your states. I wanted to just remind you first of all, that healthcare is very local. When we talk about all of these things up here about markets, each state’s market is very different. Different characteristics, different pools, different people, different problems, different issues. So, I strongly encourage you to contact your insurance commissioner, find out what is going on in your state, find out what the challenges are there, and make sure you are working with them to try to find the fixes that will actually help them meet. When we talk about stability, there is the stability of the overall market. You want a market that is working, is operating, that has competitors, that has good information going out to everybody. But really, the bottom line is, you want something that works for consumers. What consumers are looking for is basically every year, their insurance company is going to be there. The same plans are generally there. Your cost sharing is about the same. Rates are going up at — they are going to go up, but a measured way that you can understand, and without tremendous spikes. You can go to your providers. Your providers for the most part are still part of the network, and you can go to them. That’s the kind of stability we need to get to. We have that in small group market, large group market. We have tremendous amount of stability. We are not there yet in the individual market. Some states are better than others. But for the most part, we are still struggling to get carriers to participate on an ongoing basis to have the same plans from year to year, that have basically the same coverage, and the same networks. But this is just the situation that we’re in. We knew we were going to have this problem. It’s just going on longer than we expected. Action is needed right now. We would agree — you heard five commissioners go before the Senate Help Committee this week; they were all very clear. Number one is you have to pay the cost sharing reduction payments. As Matt said, this is not a bailout. I don’t know how you could say that. I pay my mortgage, it is not a bailout to the banks. I owe them. That’s basically what cost sharing reductions are. Carriers, to participate on the exchange, have to offer these lower cost-sharing plans, and anybody eligible for them, can buy them. The law says, “The Secretary shall, in a timely manner, reimburse the plans for those different costs.” That’s what it says. And it’s time to just not — month to month, wondering, am I going to get paid? I’m sure all of you like getting paid every month, amen? They like getting paid and know they are going to get paid, and when you are talking about insurance and you are trying to figure out your rates for next year, you have to know that each one of those months, what you are going to get paid. Because stability, certainty, is important. We look at stability in terms of stability in revenue — you know what’s going to be coming in, how it’s going to be coming in. It’s stability in risk. You know who you are going to be covering. And it’s stability in regulations. And we have not reached any of those yet in the individual market, so we have to move. On the revenue side, cost sharing reductions is number one. Make sure they are being paid. Not just for 2018, but for 2019 too, so everybody knows what the rules are as they prepare their plans the first quarter of next year. Second of all goes to risk. We do fully support some kind of reinsurance stability funding. We do believe the federal government, like they did in 2014 through 2016, with the temporary reinsurance program, can provide that kind of funding. We’ve suggested 15 billion dollars a year for at least 2018 and 2019, to try to bring some stability. Just to know what we are trying to do here. Again, the individual market is a volatile market. There are people on there who have claims of nine million dollars. Drugs that they are taking that cost $3,000 a month. Some are $30,000 a year in costs. You as an insurer, you don’t know who those people are. You’ve got to cover them. And that kind of uncertainty is what’s keeping a lot of carriers from participating. That’s the bottom line. So, what do you do? Through reinsurance, what you are doing, is you are taking the volatile risk of the individual market, and you are sharing it beyond the individual market. Things like risk adjustment stuff, you are just moving things around in the market. We’ve got to get some of that risk outside of that market, either through shifting it like the temporary reinsurance program shifted it to the large group markets and the large group market, or you shift it to tax payers, or somebody else. You try to take that risk out of there. That way, carriers have some assurance of what that risk is going to be. Then they can price appropriately, and then they can participate. That’s what we are looking for. Now, the suggestion has been, well, why don’t states do that? We do have two states right now, Alaska and Minnesota, through a Section 1332 waiver, are doing that. They have the luxury of already having the revenue in place through their old high-risk pool program. They already have the mechanism in place through their high-risk pool program. I will tell you right now, most states don’t have that. But then to set up their own reinsurance program is going to take at least until 2020 in most states. That’s why we are saying, can we get something to stabilize this market now, as we move to that, and states move to that later on. We do agree that the health insurance taxes, the Section 9010 taxes, just add to cost. That’s just a reality. I don’t know if you realize that, but corporations don’t really actually pay taxes, they just shift them to somebody else. They raise prices, they do that, and the same here. So, if you want to bring down prices, you can get rid of that. Continue that moratorium, that was 2017, just continue that in the out years. Then as we move forward, these are the immediately things you can do. These are things that can impact rates in 2018, right now. But as we move forward, we do agree that the section 1332 waivers need to be made more flexible, more certain, really. Every state we talked to is — let me get this straight, I have to go, I have to develop something and I have no idea whether it even meets any requirements, whether it’s good or not, will it be accepted or not. I’ve got to go to my legislature, I have to try to get something passed through legislature and you guys know how hard it is to get anything passed through any legislature. I have to get something passed not knowing even if it’s going to be acceptable, if it’s within the guardrails, or anything like that. That’s where we need to have more certainty about what is allowed, what is not allowed. We need good timing. Not 120 days for the secretary to review. We need a shorter time frame for reviews so that we get answers back quickly, and something like, allowing governors and insurance commissioners to be more in control of the process when it’s not talking about state money, would be much more helpful, and we can move much more quicker to meet the needs of each state’s populations. Finally, I just want to note that things aren’t going to get better unless there is action. There are a couple things coming down the road such as — how many are familiar with the transition plans? Some states have large pools of transition plans, these grandmother plans, pre-ACA, non-compliant plans that continue to be renewed. As of right now, those are no longer allowed past 2018. That means all of them are going to change, or not change, I don’t know, we don’t know what’s going to happen. That’s an uncertain pool of people that’s coming down the road, we have to deal with. And then you also have to remind yourself that the states are going to have to start paying out more money for Medicaid expansion too. And what are states going to do then? So, that’s a couple things down the road that will create more instability. So, let’s do what we can do now to stabilize the market, and then let’s keep working together to make sure we stabilize it for down the road. Thank you. SARAH DASH: Before we move on to Joe and Tim, I just want to ask a couple of technical questions for those who maybe haven’t been following this in as much detail. Brian, you talked about re-insurance, and several others have mentioned it, and I expect it’s going to keep coming up in the conversation. You explained the concept of re-insurance, but could you just go back and kind of explain what was the temporary re-insurance that was set up under the Affordable Care Act? Are the re-insurance proposals that are being discussed now, similar? Not similar? And is this a new idea? Is this something that happens in other insurance markets too? Or is this just specific to the individual market? BRIAN WEBB: Yeah, the temporary re-insurance program has set aside a certain amount of money each year. 2014 there was 10 billion, and it’s going to strain my memory, it was six and five — well, some went to Treasury. So, there is a certain amount each year, and it came down. The 10 billion dollars, the first year, it came from the insurance industry. It came from them, again, trying to spread that risk across a larger pool of people. And it came and basically what they did, is the federal government paid any claims above an attachment point. So, any claims that exceeded a certain amount of the claims, the federal government would then pay a percentage of claims up to a cap. That’s a way to re-insure. Now, some states like Alaska, and their re-insurance program, they are doing more of seeding risk. Where people who have certain illnesses, certain needs, the company seeds over their coverage, basically. Companies still pays for — you know, still does that, but they are seeding over the cost of that person over to the high-risk pool and the re-insurance entity, where they pay all their claims. So, that’s another way to do it, that’s the way Maine did it as well, before the ACA. So, there are different ways to do it, but basically what you are doing is you are seeding a certain amount of high cost claims to somebody else, to where they will help pay those. SARAH DASH: Not to put too fine a point on it, but we’ve heard of virtual high-risk pools before, is that the idea behind a virtual high-risk pool? BRIAN WEBB: That’s a seeding. When you say “virtual”, you are talking about seeding that risk to some other entity, where they cover all of those costs. SARAH DASH: Thank you. And I think for those who want more information on the re-insurance and the risk corridors and the risk adjustment, the three R’s, there is lots of background on that, and the Alliance is always happy to provide background on that. Okay, we are going to move on to Joe Antos, and then to Tim. JOE ANTOS: Okay, great. Thanks for inviting me to meet with you today. I think Brian’s distinction about short term and long term is very important. There are some things you can do, or should do — maybe you can’t do them — but you should do them in the short term. But you should have a longer-term perspective. If it’s just a matter of plugging the immediate hold in the dam, the dam is going to break somewhere else. You really have to take the longer run perspective, and you have to think about what the deficiencies are in this non-group market. What the deficiencies are in the ACA rules that run that market. And what the connection is between all of that, and the whole rest of the health insurance system, which I think is often overlooked. People have a tendency to say, oh, we’ve got this crisis, let’s focus on that. But as Brian kind of indicated, the money doesn’t just stop right there. Often times, those of you, presumably everybody in this room who has employer sponsored coverage, is also absorbing some of the cost through premiums, and also, we are certain absorbing quite a bit of the cost through — I don’t want to say taxes, I want to say increased debt, which some future generation will end up paying. But so far, we are not. Eventually it will all come home. So, it does boil down to money. The kinds of things that you need to do, clearly, I think everyone has agreed on a technical level, that if the government imposes a new requirement on an industry to do certain things that are costly, it’s a new requirement, and it in essence disrupts the business of that industry in some ways; good ways or bad. Then, somebody’s got to pay for it. In this case, the ACA changed the rules very dramatically. So, by establishing a new social norm, not a business norm, a social norm, that insurance companies have to cover everybody, that means that people previous who weren’t insured, who had expensive conditions or whose conditions were not fully covered by insurance, they were coming into the market. And since we decided that, as a Congress, as a president, and I think as a people as well, then we are under some obligation, if we want the insurance industry to operate as a business, then you have to find the money or find the mechanisms by which to finance those additional people and those additional costs. I think that is one of the many problems with the ACA. The focus was on expanding coverage, and less so on, how would that market work over time? As I said, short term or long-term issues. Clearly resolving the cost sharing subsidies problem, is something that ought to be done quickly, but beyond that, there are a whole bunch of other issues that people talk about. For example, there is always talk about a stability fund, which is just another way of saying, put more money into the insurance industry to pay for these extraordinary costs of people who are now in the system, who weren’t there before. That really amounts to kind of the same things. I think other issues that are, to me, a lot less plausible, have to do with this idea that there are some counties and the number varies from “a lot” to “none”, to potentially a fair number. Some counties that are going to go bare. That at one point, Ohio had, I believe, 20 counties that were going to go bare. The dropped to 19, thanks to the intervention, largely, of the state insurance commissioner, who exerted a little pressure. I’m sure it was gentle pressure, as it always is. And there was one county left over, and I think that one county that was left over is very instructive, because that was a county — I didn’t bother to look at a map, but apparently that is a county where people get their healthcare in another state. So, it’s very hard to create a provider network when you’re being regulated in one state, but basically all the services are being delivered in another state. And somehow, that was resolved. But w