Senate Committee Receives Health Insurance Testimony From Anthem
"Thank you, Chairman Alexander, Ranking Member Murray, and members of the Committee for the opportunity to testify today. I am
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"I have over 25 years of experience across numerous facets of the health care industry, including serving as an original board member of the Colorado Health Benefits Exchange, appointed by Governor
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"I appreciate this opportunity to speak to you today about some of the challenges we have observed in the individual market - from the opening of the Exchanges in 2014 to today - and to offer our recommendations for ways in which health care stakeholders, lawmakers, and regulators can work together to bring stability to that market in 2018 for the millions of consumers who rely on it.
Fundamentals of a Viable, Functioning Insurance Market
"For more than seven decades,
"While we are pleased that a number of steps have been taken to address the long-term challenges facing the individual market, the underlying lack of stability and predictability in the structure of the market continues to undermine our ability to map out a sustainable path forward. For
"A stable insurance market is dependent upon three fundamental conditions. First, there must be a balanced risk pool. A balanced risk pool is the result of health plans' ability to offer products that create value for consumers through the broad spreading of risk, as well as market dynamics which promote ongoing enrollment by individuals of all risks - healthy and unhealthy. Second, it requires a predictable regulatory environment with a known set of rules and conditions under which rates can be reliably developed. Finally, it requires predictable financing to ensure affordability for consumers. Unfortunately, those three conditions have failed to fully materialize, which has made the planning and pricing of health plans in the individual market increasingly difficult, leading to a deteriorating and contracting risk pool with higher costs and fewer choices for consumers.
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2. Predictable Regulatory Environment: Health plans serving consumers in the individual market are regulated by two, and in some cases three or four, separate governmental entities with varying requirements, mandates and timelines to follow. For example, in states that established a statebased exchange, health plans are subject to regulation from the federal government, state government and state exchange operating entity. In addition, some states have separate regulating entities for HMO and non-HMO plan offerings, which in addition to the federal government and state exchange operating entity, lead to four separate governmental regulating entities. Accordingly, plan participation in the individual market requires the careful orchestration of a multitude of moving parts in order to bring a product to market. For health plans, that means gathering input from clinicians, actuaries, claims departments, pharmaceutical benefits managers, and countless other functions, in the development of a high-quality product that is not only tailored to suit the varied health care needs of today's consumer, but is also affordable. Unfortunately, these efforts are rendered ineffective if the regulatory environment in which these products are developed is unreliable. The rules governing the individual market must be predictable and stable to ensure a balanced and functional operating environment for health plans.
3. Predictable Financing to Ensure Affordability for Consumers: It is critical that the individual market provide affordable options for consumers. Any payments from government sources to help achieve that objective must be predictable and reliable to ensure a stable market. There are many low-income individuals who cannot afford to purchase coverage in the individual market without financial assistance. As such, the uncertainty surrounding funding for the cost-sharing reduction (CSR) subsidies, coupled with the looming threat of the reintroduction of the health insurance tax (HIT), have only contributed to the volatile dynamics undermining health plans' ability to responsibly price products tailored to meet consumers' expectations of quality and affordability. These uncertainties have caused health insurance plans, including
Recommendations to Stabilize the Individual Market for 2018
"With open enrollment scheduled to begin on
* Funding certainty for CSRs: Cost-sharing reduction subsidies play a pivotal role in ensuring access to health care services for very low-income enrollees, helping these individuals better afford their co-pays, deductibles, and other out-of-pocket costs. Currently, 6.4 million consumers are benefiting from CSRs. However, uncertainty over funding for CSRs for the remainder of 2017 and 2018, including threats to cut off this funding, both immediately and in the future, only contributes to the instability undermining the individual market. In its recent analysis1 of the effects of terminating payments for CSRs, the
* HIT repeal or extension of the moratorium: The moratorium on the health insurance tax ends at the close of 2017. The reintroduction of the HIT next year would result5 in premium increases - ranging from three to five percent - across all fully-insured health insurance coverage, resulting in further disruption to the individual market. An extension of the current HIT moratorium - or full repeal of the onerous tax - would help prevent consumers from having to shoulder this burden, while introducing an additional stabilizing element to the individual market.
* Market stability funding: For the individual market to find its footing, it is critical that consumers have affordable options. Given the skewed distribution of health care spending - especially in the individual market - policy mechanisms6 are necessary to help spread the costs associated with covering high-risk individuals.7 In order to restore confidence in this fragile market, predictable and broadly financed stabilization funding must be made available. One way this can be accomplished is through a federal reinsurance8 program that reduces risk9 and enhances coverage options for individuals with costly health needs while lowering premiums for all consumers.
*Continuous coverage provisions: Consumers purchasing coverage through the individual market should be treated like consumers with coverage through their employer and not be allowed to purchase insurance only when they need services. Health plans are required to take all applicants, regardless of health status. To ensure that the risk pool is functioning as intended, with healthy individuals balancing higher risk participants, broad participation is required. Accordingly, sufficient incentives must be in place to encourage healthy individuals to purchase and maintain coverage. Currently, the individual mandate under the Affordable Care Act is the mechanism in place that is intended to promote continuous coverage. However, the weak enforcement of the individual mandate - since its inception in 2014 - coupled with the organic weakening that has occurred as a result of the widening gap between the cost of 12-months of premiums and the mandate's financial penalty, is a primary driver of growing instability in the individual market. If the individual mandate is repealed, and health plans are still required to take all applicants, there must be an alternative mechanism to incentivize individuals to purchase and maintain health coverage. This can be accomplished through the introduction of rules incentivizing both enrollment and maintenance of continuous coverage. For example, establishing a waiting period to access benefits or assessing a late enrollment charge for someone who has failed to meet the continuous coverage requirement.
* In addition, while we appreciate efforts by both the previous and current Administrations to constrain special enrollment periods (SEPs) by requiring pre-enrollment verification of eligibility, more must be done to discourage "gaming" of the enrollment rules, including:
- Limiting the number of life events that trigger an SEP to better align with the employersponsored market; - Requiring State-based exchanges to implement the same pre-enrollment verification rules required for the Federal exchange;
- Tightening premium payment grace period rules or returning authority to state regulators, to more closely align with pre-ACA grace periods, which were typically shorter than the current 90-day period under federal law, thereby limiting gaming opportunities, while still giving consumers a reasonable time to pay for coverage; and,
- Requiring that consumers be able to demonstrate continuous coverage to qualify for an SEP.
* Predictable regulation and implementation: As previously referenced, health plans serving consumers in the individual market are regulated by two, and in some cases three or four, separate governmental entities with varying requirements, mandates and timelines to follow. Stability and predictability of law and regulation is essential to a company's ability to engage in a market and effectively plan and execute its business operations. Successful partnership between government and business relies upon clear and predictable rules. The implementation of even small regulatory changes in the individual insurance market can be tremendously burdensome, requiring, at a minimum, sufficient lead time to plan and execute under the current rate and product filing requirements. Additionally, issuance of sub-regulatory guidance such as FAQs must be predictable and timely.
"With the 2018 open enrollment period scheduled to begin on
Recommendations for Long-Term Improvements to the Individual Market
"The process for planning products and geographic participation for 2019 will begin in a few months. As such, we encourage the Committee to also devote time and attention to several issues that will help ensure the long-term stability of the individual market, including: Section 1332 waivers under the ACA; long-term stability funding; limiting third-party premium payments; and returning to the states more regulatory authority over the individual and small group markets.
* Section 1332 Waiver Flexibility: Section 1332 waivers offer a valuable opportunity for states to implement innovative programs to stabilize and promote long-term sustainability in their markets. Given the length of time that it takes to develop and obtain approval of a waiver, any future changes to the Section 1332 waiver requirements or process may not impact 2018. Such changes, however, could greatly benefit states seeking to make changes to their markets in 2019 and beyond.
"Unfortunately, rigid requirements and a burdensome process have dissuaded states from seeking innovation waivers until recently, when continuing instability prompted a number of states to pursue waivers in an effort to ensure that their residents would have access to affordable coverage in 2018. Waivers for reinsurance programs, in particular, have shown great potential for promoting stability, reducing premiums, and increasing the number of individuals covered in a state. For example:
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"We recommend providing states flexibility to make innovative changes tailored to their markets by simplifying and streamlining the process for obtaining Section 1332 waivers and affording them greater flexibility in navigating the guardrails for obtaining a waiver. Specifically, actions should be taken to:
- Reduce the time period for federal review of waiver applications, expediting the approval of waivers similar to those already approved for other states;
- Allow states to authorize filing a waiver application via executive order or certification by the Governor and department of insurance, as opposed to requiring legislation; and,
- Allow states to satisfy the budget neutrality requirements for a waiver over its lifetime, as opposed to year by year.
"Long-Term Stability Funding: In addition to the need for market stability funding in the shortterm, we recommend establishing predictable and reliable long-term funding, from broadly based revenue, to help spread the costs of high-risk individuals. There are several viable ways to direct such funding, including reinsurance programs and high risk pools.
"Prohibit Third Party Steerage: Another recommendation that will improve the long-term stability of the individual market is to prohibit third parties from steering high-cost patients from public programs into the individual market. Health plans set rates based on the assumption that certain populations, like end-stage renal disease (ESRD) patients, will be covered under Medicare and/or Medicaid. Currently, certain third parties are taking action to seek higher reimbursements from health plans by paying premiums on behalf of Medicare and/or Medicaid-eligible Americans to move them into the individual market. This practice is increasing costs for consumers by driving more high-risk individuals into an already unstable market, while disadvantaging consumers from accessing specialized public programs established for their unique care needs.
"Reduce Duplicative Regulation while returning authority to states: Health plans serving consumers in the individual market are regulated by two, and in some cases three or four, separate governmental entities, which leads to duplication of regulation by federal and state entities in some instances. Specifically, the ACA created duplicative federal regulation in several areas where states are better positioned to know what works best for their markets. While increased federal oversight has led to greater uniformity, it has also compounded the regulatory schemes that health plans must comply with, which often increases costs for consumers. We recommend reducing duplicative regulation and returning regulatory authority to the states in the following areas to give health plans greater ability to customize products to meet the local needs of consumers, while maximizing quality and affordability:
- Individual and small group rate and benefit design review: The states have a long history of reviewing forms and rate requests for health insurance plans. Fully recognizing and relying on state activity in these areas will ensure that experienced regulators continue to review rates and forms while eliminating a duplicative process that often requires submissions of different forms, through different platforms, on different timelines at the federal level.
- Network adequacy determination and enforcement: States are best positioned to evaluate plan networks as they are familiar with consumer needs, provider availability, market dynamics, geographies and patterns of care - all of which are relevant to evaluating the adequacy of a health plan's network.
- Grace periods for nonpayment: The ACA contained a provision requiring for a 90-day grace period, meaning consumers could get coverage for the whole year while only paying for 9 months of coverage. Regulation in this area should be governed by state law, which prior to the ACA established grace period standards that were typically shorter than 90 days, limiting gaming opportunities, while still giving consumers a reasonable time to pay for their coverage.
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"Provider collaboration. Stakeholders are increasingly sharing risk. Behind this trend is our health care system's growing emphasis on value-based care.
"Consumer centricity. As consumers' comfort with their health care options has increased, so, too, have their expectations. This fluency has led to an increased demand for a more personalized health care experience.
"Quality.
"Cost of care. Our final strategic focus has to do with managing the total cost of care. While bringing stability to the individual market is a short-term imperative, a long-term health care crisis is being overshadowed: The continually rising cost of health care. Cost is the biggest and most pressing challenge facing our health care system. The cost of health care is simply too expensive and continues to rise at an unsustainable rate. Fifty years ago, spending on health care amounted to approximately 5 percent of the country's gross domestic product. By 2015, that number jumped to an alarming 17.8 percent, and is projected to reach 19.9 percent by 2025. Our country cannot simply continue to just spend more money on health care. We must seek solutions to address the underlying causes of cost growth in health care.
"Consumer research tells us that 'affordability' is now the most important factor guiding consumers' health care decisions. It is also a top priority for employers, as well as for our federal and state government partners. Improving affordability requires a focus on the cost of care - at both the individual and population levels.
- Value-based care. We now pay nearly 60 percent of our reimbursements through value-based care models. Today, more than 64,000 doctors across our family of health plans receive valuebased payments and are accountable for the cost and quality of care for more than 5.5 million of
- Mitigating escalating drug prices. Spending on prescription drugs is now the fastest growing area of health care costs,11 and is expected to continue rising faster than overall health care spending. Last year, the cost of drugs exceeded the cost of inpatient hospital stays in
"Given drug costs' disproportionate impact on the overall health care cost curve, the necessity of finding workable solutions cannot be overstated. With that in mind,
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- Innovation.
"Adopting a forward-thinking approach to anticipating consumers' evolving expectations, we have also established an
"Separately, as we look to help our members better manage their total cost of care, we interact with them more comprehensively along their entire continuum of care - from prevention to treatment to follow-up. This is made possible by our deep understanding of, and significant investment in, data analytics, which have enabled us to develop clinical programs and quality improvement initiatives that benefit consumers directly. For example, through our
"These key investments in our health care data analytics capabilities speak to our ongoing effort to unlock greater savings for our members. Last year alone, we processed more than 730 million claims. The sheer enormity of that data translates into 17 petabytes of health information about our members - which is the equivalent of 1,700 times the entire printed collection housed in the
Conclusion
"For all the challenges facing us, we remain optimistic about what lies ahead.
"While a balanced risk pool and a more predictable and stable regulatory environment remain necessary components of a viable, functioning individual health insurance market, we must also turn our attention to the underlying cost of health care. Working in our favor are advances in both science and medicine, technological enhancements, and the mutual goal that affordable, high-quality health care should be accessible to all.
"Thank you, again, for inviting me to share
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Footnotes:
1 "The Effects of Terminating Payments for Cost-Sharing Reductions,"
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4 "Cost-Sharing Reductions Are Essential for Consumer Affordability, Choice, and Stability," AHIP Issue Brief,
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6 "Steps Toward a More Sustainable Individual Health Insurance Market,"
7 "Using High-Risk Pools to Cover High-Risk Enrollees,"
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12 "The Future Cost of Innovation: An Analysis of the Impact of Breakthrough Therapies on Government Spending,"
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