House Education & Workforce Subcommittee Issues Testimony From Center for American Progress VP Ducas
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Chairman Good, Ranking Member DeSaulnier, Members of the Subcommittee, thank you for the opportunity to testify before you today.
I am currently the Vice President of Health Policy at the
This testimony will focus on the following points:
First: the Affordable Care Act (ACA) improved health care benefits and strengthened consumer protections for the more than 178 million Americans with employer-sponsored insurance (ESI). 2
Second: While some employers are exploring ways to bring down their health care costs through local market innovations, understandably, businesses want federal action. It is not sufficient or realistic to expect that employers can sustainably lower health care costs on their own.
1 I extend my deep appreciation to
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Third:
The ACA strengthened ESI benefits and consumer protections for employees and their families
Several ACA provisions enhanced the quality of coverage and offered important protections for workers with ESI.3 Among other changes, eliminating lifetime and annual coverage limits for essential health benefits helped provide greater financial security for workers and their families; the ACA's prohibition on pre-existing condition exclusions meant that employees and others could no longer be denied coverage because of a cancer diagnosis or pregnancy; and ACA requirements to provide employees with standardized summaries of their health insurance benefits help employees make more informed decisions about their coverage.4 The ACA requirement that ESI plans extend dependent coverage up to the age of 26 also established an improved coverage pathway for millions of young adults.5
Health care costs are squeezing employers, and employers want government relief ESI represents the largest source of coverage in
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Providing this coverage, however, is costly for employers. With few exceptions, growth in ESI benefit cost has outpaced wages and inflation for roughly 25 years.8 As a result, in 2022, after wages and salary, employers spent more on health care than any other employee benefit.9
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[View chart in the link at bottom.]
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While the growth of national health care costs has slowed since the ACA's passage in 2010, 10 rising prices for care and prescription drugs have continued to result in high ESI premiums borne by both employers and employees. In 2023, the average annual ESI premium was
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10 In decades prior to the passage of the ACA, national health care costs grew at a rate between 6 and 10 percent. That dropped to 3 to 4 percent since the passage of the ACA.
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...structured, high premiums are especially problematic for lower-income employees: the lowest quartile of income earners consistently pay the highest premiums.12
One strategy that employers have relied on to blunt premium costs increases is offering employees high-deductible health plans (HDHPs). HDHPs, and accompanying Health Savings Accounts (HSAs) were first introduced in the early 2000s, and now make up roughly one in four ESI plans.13
While attractive to employers from the perspective of lowering their own premium outlay, HDHPs simply shift costs from employers to their employees through higher deductibles--making employees bear more of the cost of care when they use it.14 As a result, people enrolled in HDHPs often delay or avoid needed care or are saddled with high health care expenses.15 Accordingly, in 2022, 29% of nonelderly workers with job-based coverage were underinsured.16 This is unsurprising, considering that in 2022, the average annual individual ESI deductible was
Some especially innovative employers have experimented with tools to tackle high health care spending through tactics like direct contracting, tiered or narrow networks, centers of excellence, and near or on-site clinics. In direct contracting arrangements, self-insured employers negotiate and directly contract with a health care system for a defined set of health care services (agreeing to prices together that might be lower than what they could have...
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13 Per the 2023 KFF Employer Health Benefits survey, 24 percent of covered workers were enrolled in HSA-eligible HDHPs, while roughly 30% of all workers were in HDHPs with any savings option. Claxton and others, "Employer Health Benefits: 2023 Annual Survey."
14 Claxton and others, "Employer Health Benefits: 2023 Annual Survey,"
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..achieved via negotiations through an insurer/third party administrator).19 Through tiered networks, employers offer their covered workers lower copays or cost-sharing when seeking services from a provider in a designated network "tier," typically chosen because of a provider's ability to efficiently deliver quality care.20 Narrow (sometimes referred to as "high performance") networks take that one step further, and largely limit employees to only accessing what are deemed as efficient providers.21 Centers of excellence (COEs), a designation given to a group of particular providers deemed as especially high-quality and high-value and paired with incentives for their use, can succeed in lowering costs by lowering utilization for expensive procedures of often marginal value 22--such as lower back surgery or hip/knee replacements--or by introducing competition to a given market (an employer or insurer might designate and contract with a COE in a different region and support employees in traveling to that COE to receive care) for especially high-cost services such as some orthopedic surgeries, cancer care, or transplants.23 Some employers also provide employees convenient access to care through near or on-site clinics, which can sometimes lower costs and help with presenteeism.24
These efforts, however, have had limited impact.25 A 2019 KFF study found that among firms with 50 or more employees offering coverage, only 14 percent of businesses were leveraging tiered networks, 5 percent offered narrow networks, 16 percent used centers of excellence, and 20 percent offered on- or near-site clinics.26 Among self-funded employers with more than 200 employees, only 8 percent were engaged in direct contracting.27 These tools can be costly and...
19 Catalyst for Payment Reform, "
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22 Healthcare Value Hub, "
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24 John Engbeg,
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27 Ibid.
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...time-intensive to pursue, and are by no means guaranteed to produce savings. It can be challenging for even the largest of employers to use their purchasing power to lower health care costs: employees are often distributed across multiple geographic areas and markets, diluting the potential power an employer has to counteract high prices in any given place.28
Employers know their potential for system-wide impact is limited--and as a result, want government action. A 2021 survey by KFF and the
Employer support is especially high for government intervention to increase price and total cost of care transparency (90 percent of KFF/PBGH survey respondents), and greater action against anti-competitive behavior by health plans, drug companies, and providers including through stronger antitrust enforcement (92 percent of respondents).30
High prices for health care services and prescription drugs, as well as consolidation, are fueling the growth of ESI costs
The underlying drivers of high health care costs extend far beyond any one employer or group of employers. In particular, high prices (as opposed to high rates of utilization) for health care services and prescription drugs threaten the affordability of coverage and care for employers and employees. Demonstrating just how significant that difference is, from 2017 to 2021, the prices for health care services grew at almost double the rate of utilization.31 Notably, according to the
Driving these high prices for health care services is increasing consolidation--both vertical and horizontal--in the health care market.33 Between 2018 to 2021, there were 310 consolidation...
28 Ibid.
29 Notably, large shares of survey respondents agreed "that a greater government role in providing coverage and containing costs would be better for their business (83 percent) and better for their employees (86 percent)."
30 Ibid.
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32 Ibid.
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...transactions between hospitals and health systems. 34 While some hospital systems argue that increasing concentration helps bring down their costs, 35 horizontal mergers are associated with an increase in the price of hospital stays of as much as 54 percent, 36 and vertical consolidation of physician practices into hospital systems is associated with a 14 percent increase in the price of physician services.37 There are also high rates of consolidation across the insurance industry.38 Insurers that dominate local markets often use this increased market power to raise premiums.39 Ultimately, the combination of high costs and high premiums fall on the employers sponsoring ESI plans, as well as their covered employees through increased cost sharing.40
High prescription drug prices are another key driver of ESI costs (and also make it difficult for employees to afford needed medications).41 Drug prices in the
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38 These mergers and acquisitions include consolidation between health insurance companies, pharmacy benefit managers, and home, primary, and urgent health care organizations.
39 Leemore S. Dafny, "Evaluating the Impact of Health Insurance Industry Consolidation: Learning from Experience" (
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43 Helpfully, the Inflation Reduction Act of 2022 introduced inflation rebates for Medicare Part B and Medicare Part D, limiting price hikes for many prescription drugs within the Medicare program.
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...2023 drug companies raised the prices of 112 drugs above the inflation rate. These high prices contribute greatly to ESI spending: In 2021, average ESI per-enrollee prescription drug spending was nearly
There are several actions
While the
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48 Rapfogel and Gee, "Employer- and Worker-Led Efforts To Lower Health Insurance Costs." .
49 Hart-Scott-Rodino Antitrust Improvement Act of 1976, 15 U.S.C. Sec. 18a, 94th Cong., 2nd sess. (
...applied to transactions generally valued at
Additionally, the
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51 Leemore S. Dafny, "Testimony Before the
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...drugs directly with pharmaceutical manufacturers for the first time, and also limited Medicare drug price increases to the inflation rate. The
Beyond the provisions in the IRA,
1. Stopping patent abuse by drug companies by limiting product hopping, patent thickets, pay-for-delay agreements to delay generics and biosimilars from coming to market, and sham citizen petitions. There are several bills, many of which are bipartisan, that would revise the patent and FDA approval process, including:61
- Protecting Consumer Access to Generic Drugs Act of 2023 (H.R. 6275)
- Ensuring Timely Access to Generics Act of 2023 (S. 1067)
- Expanding Access to Low-Cost Generics Act of 2023 (S. 1114) / the Federal Food, Drug, and Cosmetic Act to increase transparency in generic drug applications (H.R. 3839)
61 Protecting Consumer Access to Generic Drugs Act of 2023, H.R. 6275, 118th Cong., 1st sess. (
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58 Ibid.
59 Lowering Drug Costs for American Families Act of 2023, H.R. 4895, 118 th Cong., 1st sess. (
60 Hughes and Rapfogel, "Following the Money: Untangling
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- Increasing Transparency in Generic Drug Applications Act of 2023 (S. 775)
- Affordable Prescriptions for Patients Act of 2023 (S. 150).
Additionally, bills such as the Preserve Access to Affordable Generics and Biosimilars Act of 2023 (S. 142), and the Stop STALLING Act of 2023 (S. 148) would enable greater antitrust enforcement.62
2. Tightening the regulation of PBMs by introducing transparency, through bills such as the bipartisan Pharmacy Benefit Manager Accountability Act of 2023 (H.R. 2679), Transparency in Coverage Act of 2023 (H.R. 4507), Pharmacy Benefit Manager Reform Act of 2023 (S. 1339); and prohibiting spread pricing thorough bills such as the Modernizing and Ensuring PBM Accountability Act of 2023 (S. 2973).63
3. Introducing value-based drug pricing that considers the added benefit of a new drug compared to existing therapies in pricing.64 For example, the Independent Drug Value Assessment Act of 2022 (H.R. 9321) would require independent, outside entities to conduct value assessments of some approved drugs to inform the
Beyond the proposals described above,
62 Preserving Access to Affordable Generics and Biosimilars Act of 2023, S. 142, 118th Cong., 1st sess. (
63 Pharmacy Benefits Manager Accountability Act of 2023, H.R. 2679, 118th Cong., 1st sess. (
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65 Independent Drug Value Assessment Act of 2022, H.R. 9321, 117th Cong., 2nd sess. (
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...releasing a proposal and design considerations for a federal public option for employer-based coverage. We look forward to sharing it with this Subcommittee.
Thank you again for the opportunity to testify before this Subcommittee today.
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Original text here: https://edworkforce.house.gov/uploadedfiles/ducas_testimony.pdf
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