State Responses to the Evolving Individual Health Insurance Market

This is the transcript for the briefing titled "State Responses to the Evolving Individual Health Insurance Market" held on Friday, July 20, 2018.

Note: This is an unedited transcript. For direct quotes, please see video:


MARY ELLA PAYNE:   Hello, good afternoon everyone. Nice that everyone just quieted down, so I figure we’ll go ahead and get started, even though I think we’re a minute early. But good afternoon everyone, and thank you for joining us here today for a briefing on State Responses to the Evolving Individual Health Insurance Market. My name is Mary Ella Payne, and I am the acting President and CEO of the Alliance for Health Policy. For those of you who are not familiar with the Alliance, we are a non-partisan organization dedicated to advancing knowledge and understanding of health policy issues. We will be live tweeting during this event. You can join today’s conversation on Twitter, using the #allhealthlive, and feel free to submit questions via Twitter. You also will have green cards in your packets that will allow you to ask questions. You can write them down and just flag them, and someone will pick them up, and we’ll, at that portion of today’s meeting, we’ll submit those to our moderator.


I also want to welcome to all of those who are watching live from C-SPAN, happy to have the coverage today. Another little, small note, is that you also have blue evaluation forms, and we’d love for you to fill those out before you leave today. It really helps us with our programming, and we’d love to get your suggestions on how we can improve, and also, topics.


So going right to the meeting today, our briefing. Over the last two years, there’s been a number of changes made to the individual health insurance market. These changes include repealing the individual mandate, suspending cost-sharing and reductions, expanding access to plans that do not comply with the original standards set up by the Affordable Care Act, and most recently, freezing payments to the risk adjustment program. Together, these decisions have contributed to the uncertainty about the stability and affordability of state exchanges, and the individual insurance market. As insurers file and negotiate premiums with state regulators for fiscal year 2019. This briefing will unpack the current landscape of the individual health insurance market, as well as state responses to stabilize their market.


We have an incredible panel here today, I think you are going to learn a lot. But before we get started, I would like to thank the Commonwealth Fund for making today’s briefing possible, and I’d also like to introduce Sara Collins, Vice President of Health Care Coverage and Access, at the Commonwealth Fund, who will be moderating today’s panel. You have all of their full bios in your packet, so we are not going to spend a lot of time on bios today, but you do have that if you want to look further for that.


So now I’m going to turn it over to Sara to introduce our speakers, and to moderate today’s panel. Thanks, Sara.


SARA COLLINS:   Thank you, Mary Ella, and behalf of the Commonwealth Fund, I’d like to thank the Alliance and also thank the panelists and the audience for joining us today to talk about state responses to the evolving individual insurance market. Some of you may be familiar with the Commonwealth Fund’s state scorecard on health system performance, where we use federal data to compare state performance on a large number of healthcare indicators. The scorecard has shown, over time, that there has long been considerable variation across states, on key indicators of healthcare access, quality of care, and healthcare cost. But we’ve also found in recent years that the ACA has narrowed state differences on access measures like the percentage of uninsured in each state, and the percentage of people who report not being able to get care because of cost.   This is because the Affordable Care Act set federal standards for health insurance such as services and health plans have to cover, and also banning insurers from charging people more, or denying them coverage on the basis of pre-existing conditions. The Affordable Care Act also provided substantial amounts of federal funding to states for subsidies in the individual market, the Medicaid expansion, and activities like establishing marketplaces and funding navigator programs to help people choose plans. But the scorecard also finds that there still is considerable state variation across states in the areas of access. For example, the percentage of people who are uninsured ranges from a low of about three and a half percent in Massachusetts, to nearly 21 percent in Texas. It is very possible that recent Congressional and Executive Branch actions that Mary Ella just listed regarding the individual market, as well as state responses to those changes, will widen state differences in people’s ability to get health insurance, and get healthcare.
The focus of our discussion today, is how our state is responding to these actions, and what are their likely implications? This first slide shows the first page of a new interactive tool on the Commonwealth Fund’s website. This shows how states are addressing these federal actions. Sabrina Corlette, who is here with us today, developed this tool with her colleagues at Georgetown, and as you can see, nearly half the states have taken up stabilization strategies like establishing reinsurance programs, increasing oversight of plans that don’t comply with the Affordable Care Act, and creating financial incentives for people to maintain coverage like passing legislation to establish an individual mandate in their states, or adding subsidies to the premium tax credits.  Georgetown and the Commonwealth Fund will be updating this tool as more states make changes in their markets. Also out today is a new report by the Urban Institute, which is also on the Commonwealth Fund’s website, where you can look and see what would happen to premiums and insurance coverage in your state, if it opted to implement an individual mandate.


We have a really distinguished panel of experts with us today to talk about these issues. Their complete bios, as Mary Ella mentioned, are in your folders. Leading off the panel is Sabrina Corlette. She is Research Professor, Center on Health Insurance Reforms at Georgetown University’s Health Policy Institute. She is the author of numerous reports on many of the recent federal actions that we’ll be discussing today. Brian Webb is the Assistant Director for Health Policy and Legislation at the National Association of Insurance Commissioners. The NIAC represents the insurance regulators in all 50 states, and D.C.  Mike Kreidler is Washington State’s Insurance Commissioner. He was first elected in 200, and was re-elected to his 5th term in 2016, and is currently the longest serving commissioner in the country. Robert Morrow is Associate Commissioner of Life and Health at the Maryland Insurance Administration. He was appointed to this position by Maryland’s current Insurance Commissioner, Al Redmer. Jeanette Thornton is a Senior Vice President for Health Plan Operations and Strategy at AHIP. She leads AHIP’s activities on the health insurance marketplaces, and is the lead liaison between the federal government and private insurers. We’ll start with Sabrina Corlette.


SABRINA CORLETTE:  Thank you, Sara, and thank you to the Commonwealth Fund, and the Alliance for health policy, for having me here today. It is a real privilege and pleasure to be with all of you and to talk about the individual market. And I’m coming to appreciate, after several years now of working in this area, that there is no such thing as a calm and restful summer when it comes to individual market policy. It seems like we’re always having to deal with one fire drill after another. I’m going to talk a little bit about what is driving premium rates and insurer participation in the individual market around the country, and in particular, states. So first, just in general, if you could imagine a normal year for the individual market, which may be hard to imagine, but if you imagine just sort of a typical year, what would insurance companies be thinking about as they develop premium rates for their customers? This slide gives you a picture of sort of, what are the factors that go into a premium, right?  And some of it is pretty obvious, right?  They are looking at what kind of health services their enrollees are using, and how many of those are likely to renew their policy. They are looking at market wide trends, and what physicians and hospitals and drug companies are charging for their prices, for their services and goods, and as well as market wide trends in the use of healthcare services.  They’ll be looking at the effect of state or federal regulatory or policy changes, so if a state passes a new benefit mandate, or if there is some shift in federal policy, that will be taken into account. And they are looking at things like the status of Affordable Care Act subsidies, like of course the cost-sharing reduction subsidy that compensates insurers for the cost of low deductible, low cost-sharing plans that they are required to provide to low income enrollees.  They will be looking at things like the premium stabilization programs that were part of the Affordable Care Act, the one that is in existence today is the risk adjustment program, so they may be making projections — do I think I’m going to have to pay into that program because I’m attracting healthier than average risk?  Or am I going to actually receive money under that program because I’m attracting sicker than average risk? So those are things that the insurance companies have to sort of project forward as they propose their premiums. They also may be making changes to the benefit design. To the kinds of benefits that they cover, as well as the cost sharing that the enrollees face. So if they increase the deductible a little bit, the premium might come down.  If they eliminate a particular kind of service, that would also lower the premium. Same as if they add services. They may be expanding or contracting the service areas, or their networks. Those things will all feed into the premium that the policy holder pays. Then of course, there is also just the costs of administering the plan, federal and state taxes, and any fees. And then last, but most definitely not least for most insurance companies, is profits and contribution to surplus. So you may see a range there, you know some companies are looking at a two percent profit, some companies four percent or five percent, it really just depends on the company.


What are we looking at for 2019? We are in the middle of the rate filing, and rate review season for the individual market, so I think insurance is a somewhat unique field in that the insurance companies have to submit proposed premiums in the spring, and they get reviewed over the summer, but they actually don’t go into effect until January 2019, so there is a long, long lead time. But what we’re seeing in the early prosed rates, anyway, is that driving rates up this year is the repeal of the individual mandate penalty, which is effective January 1, 2019. The President’s decision last October to cut off the cost-sharing reduction subsidy, that’s that compensation for those low cost sharing plans to low income folks. Then a number of insurers are saying they are going to have to raise rates, because they are predicting that the promotion of short term and association health plans is going to siphon away healthy people from the individual market to these cheaper, but also skimpier insurance policies. Moderating those rate increases are the delay, and the health insurer tax, which was a tax in the ACA that Congress has delayed for I believe, one more year. The federal income tax cuts that were in the tax cuts and jobs act, some insurers are, applied to them, passing those on to policy holders. And then benefit design changes, seeing a number of insurers shifting costs a little bit to higher deductibles and cost sharing, and that is lowering premiums a modest amount.


What about participation? It’s been an interesting story. Those of you who have been following the individual market may remember about a year ago at this time, there were a number of areas of the country that were facing the prospect of no insurer at all participating, leaving many consumers high and dry. So we saw that in Iowa, Nevada, Ohio, Oklahoma, Tennessee, and other states. And it was sort an unheralded, but remarkable effort on the part of many state insurance departments, insurance companies, policy makers at the state level, to really sort of, through political persuasion, regulatory changes, and sort of by hook or by crook, making sure that every county in the country was covered. So that’s the good news, is that in 2018, every country is covered. The not so good news is that about a quarter of enrollees only have one insurance company to choose from. So in a lot of parts of the country, there is just not a lot of choice.


Going into 2019, we’re seeing some notable expansions. Companies that sat out last year, or were only in a small of the state, now expanding to more counties in the state, and so it’s a somewhat brighter picture going into 2019, perhaps a number of companies feeling that they’ve sort of weathered the worst of the ACA storms. There are some wild cards there, most notably the decision last week, or two weeks ago now, I guess, of the administration to freeze the risk adjustment transfers. This is a really critical program to the market stability, and that sort of injected a fair amount of uncertainty. I’m hopeful that will get resolved quickly, but it sort of heightened some anxiety among, I think, a number of carriers about this administration’s competence and good faith in operating the marketplace.


I’m running out of time, and I know we’re going to talk more about state actions, but I just want to note that we are going to see some divergence among states in terms of premiums, enrollment, insurer participation. Because state policy decisions really matter. So this slide just shows some states that have really taken up, or are leaning in to preserve and stabilize their markets with individual mandates, short term and association plan limits, so they are not as attractive an option as a substitute for ACA coverage. Reinsurance, shifting to maybe operating their own marketplace to give themselves more flexibility, but on the flip side, we are also seeing states really embrace the opportunity to deregulate. To reduce regulation on health plans, such as in Iowa, Idaho, and potentially North Dakota. So with that, I will pass it to Brian. Tell us all about insurance regulation.


BRIAN WEBB:  Thank you very much. First I would like to start with, who knows who your Insurance Commissioner is? Anybody from Washington? This is him, right here. Get to know your Insurance Commissioner, get to know your Department of Insurance, because insurance remains a state-based product. Each market is very different, so if you really want to know what’s going on in your state, talk to your Department of Insurance to find out what’s happening.


I was asked to come talk about how regulation is done, kind of coordination between federal and state, and some of the decisions states have under the ACA, and as we’re moving forward, some of the things you’re looking at.  So just to kind of give a little bit of a history lesson, under the McCarran-Ferguson Act, states are the clear regulators of insurance, all insurance. State regulated, not federal. But then in 1972, ARISA was passed, which brought federal government into group insurance.  Basically federal government is in that relationship between employer and employee for benefits, including, at the last second, health was brought into that.  But what that means is, still if that group goes and buys insurance, the insurance is still regulated by whom? States. But if they self-insure, then it’s regulated by the federal government. So we kind of had the federal government getting into the insurance area. Then of course with HIPAA, they stepped a little further in, where they started getting into small group in particular, with regard to portability and individual as well, but that was mostly on access. They really didn’t look at benefits or rates or things like that. But they were stepping, again, into an area where states historically have been, and they created a pre-emption standard. And the standard is, prevents the application of. So if the state has a law of any kind that prevents the application of the federal law, then that law is pre-empted, federal law takes precedent. So then that’s something that was then brought forward to the Affordable Care Act in 2010. And this was where basically the federal government filled the field in many different areas — in the individual market as well as the small group market and the large group market, where you now had federal standards for benefits, for access, for rates, and those kinds of things. But the standard was still the same. States can still regulate as long as their laws do not prevent the application of the federal law. So that’s where we are at right now. And states had to make some real key decisions when it came to how they were going to regulate. Just looking at the key areas of regulation. One is licensure and solvency. That is still 100% states. Nobody can sell a product in a state unless they have permission from the state to sell that product. That is just the way it is. Nothing in the ACA changed that. Solvency is still up to the states. If a state feels like they are insolvent, they can shut them down. Plan management though, that’s where we need more state/federal coordination. So when it comes to rate and form filing, form — think of that contract. What are the benefits? Who is going to make sure that they meet all of the essentials of benefits? They do all the disclosures, they follow all the rating rules, and do all that kind of thing. Well, that now becomes a state and federal coordination. Now again, state can step up and say, “I will enforce, I will enforce state and federal laws, I have laws that do not prevent the application. I’m going to do it. Federal government, more and more, including with the Obama Administration, now into the Trump Administration, has said, “We’ll let the states do it.” Well, what if a state says, I don’t want to do it? Well, then you have something called Texas, Oklahoma and Wyoming, where the federal government does it. So carriers have to basically work with two regulators in that case. And when it comes to qualified health plan certification, what plans can be sold on exchange? Again, federal government filled the field, but a state can say, I will partner with you, I will do that job. I will make sure. I will run the tools. I will do all that. And again, with this administration, we see it even going more and more toward the state, where the state can play that role.


And then the deadlines. Feds now are setting kind of the broad deadlines, the key deadlines, but states can set their own deadlines as well. So its kind of a coordination. Network adequacy is going more and more toward the states. Federal government for a while there was starting to get involved. That’s where we ended up with notices going to companies saying they did not have enough providers in the middle of Lake Michigan, which nobody does. So we’ve got to tighten that up a little bit. So states are kind of more and more involved there. And then when it comes to enforcement, who takes the complaints? And basically if you’re a federal exchange, your state is the federal exchange. If they have a problem with subsidies, they have a problem with the system, they have a problem with the exchange itself, those complaints go to the federal government, federal government takes care of them. But if it’s something about the insurance company, that’s turned around, goes to the states. So we have good coordination there.


So what are some of the state options? First option is:  Who is going to enforce? You can be a state that says, I will not enforce these, and force the federal government to do it. That happened with HIPAA too, two states said, “I’m not going to enforce.” Who were they?  California and Missouri. So we are not going to do it, federal government had to do it for a while. Same here. Type of exchange:  States can be a state-based exchange like these two states here. And that gives you a lot more flexibility, you can kind of keep the money in your state that you’re collecting, you can run your things, but most states aren’t doing that. Instead they are using a federal exchange, and you can do that as well. Some now are doing the state-based exchange with a federal platform, where they are using, but they are running it. So those are some of the options that the states can make. The role in plan management, do they want to be a partner, or do they want the federal government to take a larger role? And they have taken a larger role in some of the things like quality, and some of those things, but most states are saying, “I’ll do the rate informed filing, I will do network adequacy, I will do those kinds of things.” Then of course we have Section 1332 waivers. The ACA, from the beginning, recognized the states need to play a major role. One size does not fit all. So we need to give some flexibility to the states. States are doing things like re-insurance right now. We have three states with re-insurance, four more have requested re-insurance waivers, but states are going to start looking more broadly now, and saying, okay, what else can I do? And there is a tremendous amount of things they can do.  So they need to figure out how far do they want to take this, and what kind of changes they need to make.


Essential benefits is a rather new one; under the new rules, states can change them every year if they want to, and they can change specific sections of the essential benefits.  So they have more flexibility now. In fact, two states, Illinois’ and Alabama, are changing theirs, or requesting to change for 2020.


Risk adjustment. How many people here know that if you are state-based exchange, you can do your own risk adjustment program? And how many are doing it? Zero. But the latest things, maybe more people will be thinking about it. But under the new rules they can though, even if they use the federal risk adjustment, they can request some modifications to the formula for their state. Those are due August 1st, so we’ll see how many states take them up on that.


Transition plans. These are the ones that were sold between 2019 and 2014. They cannot be sold after 2014, but they can continue to be renewed. If who allows it?  The state. And some states have not allowed it. Other ones have said, we will allow it, and those have continued, at least through 2019 for now.


Regulation [indiscernible] health plans. This is a big deal, AHPs.  Who regulates AHPs? States. I know it’s under ARISA, but there was an earlier borne amendment that said all multiple employer Welfare arrangements are regulated one hundred percent by the state, whether fully insured, which means they are buying insurance, or whether they are self-insured. One hundred percent states. So all states now have to decide, what am I going to do with these new rules? How am I going to apply those?  Short term limited duration plans? Who regulates them? States. So states will have to decide what they want to do. And then there is also other areas. Medicaid expansion. States had to decide there. And now I think overall what states are looking at — it doesn’t matter what color they are, blue and red, I mean, they are all saying, okay, how can I make this work better for the unsubsidized population? I’ve got my exchange population. We will call them the sick and subsidized. They are over there. What can I do to stabilize that? Reinsurance, things like that, I can stabilize that. But what about the other?  We will call them the healthier, wealthier. What about them? It’s too expensive. Unsubsidized is too expensive. Family of four can’t afford it. How can I do that? That’s where states are going to start to look at this other. How can I use 1332 waivers? How can I use other methods? How can I get coverage more affordable to them? So that’s what we’re looking to, that’s where the states are headed.


Now, let’s turn to the states.


SARA COLLINS:  One point of clarification:  People may not know the difference between association health plans and multiple employer Welfare arrangements. Maybe you might just quick —


BRIAN WEBB:   Well if I could do a diagram — going back to school. All association health plans are multiple employer Welfare arrangements, so it doesn’t matter. Association health plans are all multiple employer Welfare arrangements, because they all involve multiple employers, got it? But not all multiple employer Welfare arrangements are association health plans. There are other kinds of entities that are also multiple employer Welfare arrangements. And the final rule, out of DOL made it very clear:  Everything they talked about in the final rule, every new plan, everything they said could be created, are all multiple employer Welfare arrangements. So states regulated.


MIKE KREIDLER:  Thank you very much for the invitation to join you here today. I’m not sure which button I’m supposed to push on there. I didn’t push hard enough, that was my problem.


What you can see from this first graph, is we have about 270,000 people that are insured through the individual market in the state of Washington, it’s a relatively small number, about 4 percent of the state’s population. Small segment of the population, but a very vulnerable one from the standpoint that they have to pay their own premiums, they don’t have an employer that assists them in paying those premiums, so if there is a problem in the individual market, it’s one that comes home to roost and you read about it in the evening newspaper, but more likely on the evening news, you watch it on television, with some very personal cases of individuals who are being disadvantaged. We are down about 30,000 over what we had previously. That, we believe, is driven by cost, as opposed to stronger employment picture, and again it’s something that we worry about going forward. We have 11 insurers inside the exchange. Excuse me, 11 insurers offering individual products, seven of them off it outside of the exchange, and seven inside, and some offer the same product inside and outside, hence the overlap. And 74 plans overall are going to be offered. Again, we were talking about 2019 projections.


Every county in the state of Washington is going to have choices. Last year, we had a couple counties during rate filings that were left bare without any insurers, we don’t have that problem this time around, but it’s still one where you have 14 counties that have only one insurer in it that tend to be rural counties, much more isolated, much more challenged. 2019, we are looking at approximately nineteen percent in the way of requests that have come in from the insurers. Going forward we had 36 percent rate increase last year. These decisions are under review. We will be making our final decision in mid-September. We know that that number can be somewhat volatile, given the fact that we still don’t have a distinct answer, a complete answer to risk adjustment payments, is to how they will be applied for the state of Washington, and across this country of ours, going forward. We’ve been doing just about everything we possibly can right now to try to stabilize the market. We’re quick to approve the expansion of the Medicaid program in the state of Washington, we have, as was pointed out earlier, have our own state-based health insurance exchange. Didn’t allow cancelled policies to continue. It’s not rocket science. Those tend to be the healthier people who don’t need health insurance as much at the time, but if they get sick, they obviously want to go over to the ACA compliant plans. So we didn’t allow them to essentially water down the risk pool, and cause rates to be higher.


We also did something that was the pace setter for the country, we adopted clear network adequacy standards, and those standards are ones to make sure that all carriers have the same requirements here as to how many doctors and hospitals availability of providers in their network. We are down to under six percent right now from the standpoint of the uninsured rate in the state of Washington. The rate increases that we looked at for the first three years when we had the federal reinsurance program was under ten percent per year. That obviously has changed now, as you can see. And you have choices in every county.


The next graph here, before the administration’s actions, premium increases were stabilizing. That’s not true today. Before the ACA the plans were ones that invariably did not cover pharmaceuticals, or were extremely limited in their coverage of pharmaceuticals. Didn’t cover routinely maternity, which meant that the plans were weak and inadequate, so we want to make sure that everybody meets the same standard here, so that they are available to the people who really need it. And that means we need to continue to see what can do to stabilize the increases. We face deliberate acts to undermine what we saw as a stabilizing market in the state of Washington. We observed that our insurers start to get nervous, and nervous insurers is not a good thing, because they tend to want to charge more rates to cover their anxiety. Fifty percent of the people enrolled in Washington State, through the individual market, receive subsidies. Forty percent inside the exchange do not receive subsidies. So sixty percent of the people inside the exchange are receiving subsidies. They are counting on us to protect them going forward. I would be the first to say that the ACA is far from perfect. I’ve had the opportunity to be involved with insurance regulation before the ACA, and now obviously, afterwards. And as a consequence, we are taking very deliberate action right now to help try to stabilize the market, that which is not being properly addressed, if we’re ending the individual mandate, defunding CSRs, suspending risk adjustment payments, cutting advertising, and now navigator funds, the advantage Washington has, we have our own exchange, so we pay for it independently. Not defending the pre-existing condition requirement in the Texas case right now by the administration, obviously makes us very nervous, because all of a sudden you could wind up with carriers potentially, if that were to be carried out, insuring people who did not have protection of a pre-existing condition.  We are doing what we can right now to protect the market so it isn’t further segregated. Such things as short term medical. We very strictly limit that. We are in the process of adopting rules around it. The same applies for association health plans, both of which only fragment the market that much more.


Additional steps that Washington is taking legislatively; we wound up with — to make sure that we don’t have a bare county in the future, is to have a requirement for insurers that participate in certain state insurance programs, that if they participate in that program, they have to offer silver and gold exchange plans if there are no insurers in that particular county; a way again, of trying to keep the market stable. We tried to have a state based re-insurance program, coming up with a funding mechanism for some $200 million, proved to be quite a challenge, and it’s one that we may revisit, but it’s proved very difficult for us, again, trying to hold down rates, particularly for those individuals who do not receive subsidies. We also had legislation introduced to establish an individual mandate to make up for the federal one that went away, but it’s very difficult when you’re from a state that does not have a state income tax, it’s very problematic to try to find an alternative that would be available. Rural areas are a real challenge for all of us — they tend to be much more expensive, and harder to put together networks, so as we work now to adopt short-term limited duration and have clear disclosure as to what they cover and what they don’t, and make it very clear to people, we obviously work very closely with our insurers at every step, because it’s voluntary on their part as to whether they stay in a market. They have the ability to leave if that’s in fact what they want to do. And we encourage them to stay in these difficult counties, and that working together actually does benefit the people of the state of Washington, and obviously the individuals who might wind up in a situation without health insurance. My greatest fear is that we slip back to the days that we had before the Affordable Care Act, where it didn’t cover pharmaceutical and maternity. They were really inadequate plans. If you wind up with an individual who is healthy, you probably would have liked it, because they were pretty cheap. But if you wind up with somebody that has bad luck, or develops metastatic cancer, or any other types of major medical problems, that kind of bad luck means that insurers were in a position to work against you, in a sense of saying, we don’t want you. We need to make sure that that is not the case going forward. Thank you.


SARA COLLINS: Also just one point of clarification in your comments, Mike. When you refer to “cancelled plans”, those are similar to the plans that Brian referred to as “transitional plans”.


MIKE KREIDLER:  Excuse me, I need to be clear on that. These were obviously policies that had been canceled in the state of Washington when the President, Obama at that point, made the announcement that you could continue with the other existing plans that you had if you liked it. They’d already been canceled, and they had been in several other states too. It was very difficult to come back and try to recreate them. So that’s why the terminology, I sometimes get it mixed up.


SARA COLLINS:   So some states have allowed them to continue, and as Brian mentioned, but many states have not.


ROBERT MORROW:  Thank you very much to the Commonwealth Fund, and to the Alliance for allowing us to come and speak and represent the state of Maryland here today. I’m going to talk real briefly about some of the recent actions that Maryland has taken, but I want to give a little bit of just quick history and the state of the market in Maryland.


There is a little bit of contrast between Maryland and Washington. With the start of the ACA, we had seven carriers in the individual market, and now Maryland is down to two.  Only one of those carriers is in the entire state, the other covers what we’ll call the I-95 corridor, and I’m sure everybody here is familiar with that. Our uninsured rate at the beginning was 13 percent, and we’re down to about six percent now. Looking this year at the average rate requests in the individual market from the carriers is about 30 percent average, and some of that is a little bit skewed because you’ve got a PPO with a high request on one end, and the HMOs on the other, but we have some issues in the individual market, and they are significant issues. So trying to do some things to help out the individual market. The federal government returning more control over healthcare markets to the states to achieve greater access to healthcare for individuals. That’s been the policy for the last couple of years in response to the General Assembly in 2017 formed Healthcare Protection Commission. It was during the 2017 year, the commission did a lot of fact finding, and in 2018 there was some legislative action, mostly in the form of Senate Bill 387, touched on the three issues that I mentioned here.


Starting out with the individual mandate, first four bullet points are just kind of factual, the next two discuss something Sabrina touched on, which is whether or not the penalty was large enough in Maryland. We’ve had discussions, some think the penalty for the mandate was large enough, others didn’t think it was large enough. You know, in the grand scheme of things, we’re going to have the penalty for a very short period of time, so I’m not sure there is any way to really make any conclusive decisions or determinations on whether or not it was effective. That’s also demonstrated by our carriers. One carrier in their rate increase request filed a percentage as a result of the individual mandate repeal, and another did not. So not clear. There was legislation introduced this past session, which would have imposed a state mandate. In Maryland, it didn’t get much traction, so all of that action is at the federal level for this year. But Senate Bill 387 did pass, touched on short-term medical plans, and said, short-term medical plans have to be less than three months in duration. They have to have an end period, and it’s got to be less than three months. That tracts with the old Obama-era rule. The law also said a couple very important things, including that the policy may not be extended or renewed. Medical underwriting is still allowed, but a carrier much apply the same underwriting standards for everybody. So what does that mean? That means that you can’t use mechanisms to try and take  your short term policy and extend it out past the three months. I can tell you that we’ve had calls from carriers who have asked about how they might be able to do things like that, using one application on a given day to issue a short term policy. It goes three months, and then having that same application that was used back here to issue a second policy. Even if circumstances and health conditions have changed, that’s not the same medical underwriting. You know, my questions to them are:  Are you resetting deductibles? And the answer is, well, yeah, I think so, most of the time, but we’d like the variability to not have to reset. Same thing with out-of-pocket limits. Co-pays, that kind of thing. They want the flexibility to actually have things carry over, and turned it into a policy that is short term, but can be extended. And that’s not really what the intent of Senate Bill 387 with regard to short term medical plans is.


The Association Health Plan rule took the small group market requirements and applied them to Association Health Plans. So in Maryland, policy of group health insurance is one that is organized and maintained in good faith for purposes of insurance. There is also the five year requirement. That was two of the things that were addressed in the final rule, but most importantly, Senate Bill 387 says, if you’re issuing any coverage through an association to eligible employees of a small employer, Title XII applies. And that is all of our small group market rules, which include requirements to offer the benchmark plan, and the small group rates apply.


Other significant thing about association health plans is MEWAs are defined and regulated in Maryland as insurance carriers. Carriers are subject to capital and surplus requirements, so essentially, if you want to write association health plans in Maryland, you have to operate as an insurance company. So we anticipate that that will mute some of the interest that some people may have in association health plans.


1332 reinsurance waiver, Maryland has applied for the ability to allow reinsurance to be considered as one of the factors when they rate plans in the individual market. You know, what this does is allow — sorry, let me go back. Our estimated funding level is $462 million, which is a lot of money to be putting into the individual market over the next couple of years. What that does is provide premium relief, especially for the individuals purchasing off exchange, and when we actually get that premium relief, it saves money for the federal government, providing a subsidy. That money can be added to the money that we put in as a state, and come up with the $462 million. So we are doing that to try and get relief. One of the things that was raised in our public meetings with regard to the reinsurance application with CMS, was if you’ve got risk adjustment, the deals with the unhealthy people, and compensates carriers at an insured level for handling the unhealthy people. But you’ve got reinsurance handling their claims. Isn’t there a double payment? So HHS had looked at that previously when they had federal transitional reinsurance, but they didn’t ever try to go to any great lengths to quantify that, because it’s difficult, and their transitional reinsurance was temporary. So the federal government is very interested in that interaction. We received comments, we are starting to study that, and try to quantify what the extent of that interaction is, and try and figure out how we can use reinsurance regulations, which we have to write by the end of the year. The exchange is writing them, the MIA is consulting with them. Try and figure out how we can actually take those regulations and do the reinsurance calculation, look at risk adjustment, and then apply really some sort of what they call muting factor to the reinsurance payments to make sure, or at least minimize any sort of overlap or double payment.


SARA COLLINS:  People might be interested to know why a reinsurance program is saving the federal government money. Maybe you want to explain that?


ROBERT MORROW:  Well, I probably didn’t do a very good job. Brian, you gave a great explanation of the APTC.


BRIAN WEBB:   Basically if you run a reinsurance program, you are bringing down premiums. Because obviously you have this outside money coming in to help pay the claims. Well, when the premiums go down, then your tax credits go down. And there is a provision, section 1332 that says, if you’re saving the federal government money, you can basically get that money coming back to the state through what they call “pass through”. So as rates go down, you are saving tax credit money, that savings then goes back to the state, which they can use for really any purpose, but mostly they are using it for reinsurance.


JEANETTE THORNTON:  All right, you guys are doing great. I’m the last one, bringing up the rear. Hanging in there on this beautiful July, and you guys are the last thing I do before I go on vacation for a couple weeks, so I’m feeling really good. I want to do a little bit of level setting, and build on a couple of the points that some of our others made on our panel this afternoon, so we can get to questions, because I know you all probably have that list of questions you want to ask us, and I think — I can promise, or maybe not, there is going to be a quiz at the end of my presentation. So here is sort of what I want you all to sort of leave this afternoon in terms of thinking about, you know, what really impacts, why do you pay what you pay, and where does that money go? Talk a little bit about that.  What are these recent policy developments, and what do they mean for consumers who depend on this coverage? And talk about some of the challenges. Totally agree with what Brian said about affordability for that population who doesn’t get a tax credit. I will talk a little bit about some of our thinking there, and of course, risk adjustment and I promise I won’t get too technical.


I think you first have to think about when you all, or your employer are paying every month to a health insurance company, where does your money go? I think that’s really important, because I think that’s a good level setting point as we’re thinking about all the headlines you may read about premiums going up, and that sort of thing. And we put together, working with Milliman in June, this really interesting infographic, which really shows every dollar you are paying in, where does that money go? I encourage you to look at it online. It’s got the detailed methodology and breakdown and what all these different categories mean, as that’s really important. But if you look at it, 22.3 cents of your dollar go to prescription drugs. That’s significantly growing over time. A 22 cents to pay doctor, 20 cents or so to pay doctor’s offices and clinics, 16 cents to hospitals, and so on. So I think that’s a really good thing for you all to think about, when you are sort of talking about premiums. Where does that money actually go? We are having to pay people to deliver healthcare that everyone needs, and is so important. What drives how much those drugs cost? Or what those doctors require in terms of reimbursement, et cetera? There are several things that you all have to think about. I mentioned prescription drugs, and obviously that drives that significant portion of your premium dollar. But who is covered? Are they old, are they young, are they healthy, are they sick? Sort of all of that drives the plans as they are thinking about rates. What kind of providers are in the network? Is it broad? Is it narrow?  The level of specialists in the network, et cetera.  Finally, how the care is managed, and a lot of talk about this is so important, not just sort of throwing more and money at the system, but really thinking about controlling the quality of care that is delivered and making sure that that money is very well spent in terms of premiums.


As Sabrina mentioned, all of this thinking about what is that premium going to be, kicks off way long before you all are even thinking about it in the news. We are in this pink period right now, where plans are really done. They’ve developed their plans, their benefits, their rates, and for those of that work on the Hill, it’s always interesting, we get a lot of questions about potential legislation solutions that come up in June, July, August, and we’re like, wait a second here, we’re just about finished. We need to think about sort of the timing that goes into some of these proposals. We are happy to talk about that and provide assistance this session, but it’s always important to note how long of a lead time that goes into the planning of benefits, and how that process sort of plays out, and Sabrina sort of talked a little bit about that as well. So these are sort of the key dates, and I believe in the packet we’ve included some specific state deadlines that I think are good for specific states that are you are attracting.


Sort of hard to read, and a number of our speakers already spoke to this, but as part of looking at how much care is going to cost, there is obviously a component of what’s happening at my state, what’s happening in Washington D.C., and we have an issue brief that we linked to in the packet around that goes into a little bit more detail in some of these factors, if you can’t sort of see it up there on the screen. These are things like the mandate, and obviously that’s had an impact on planned rate filings. This 2019 will be the first year, and we really sort of see how that drives or doesn’t drive coverage. You know, CBO has sort of that one estimate and there is other sort of views out there about what that will impact, how many people purchase coverage. State specific programs like what Bob talked about in terms of Maryland’s reinsurance. Obviously the health insurer tax on a moratorium for 2019, that’s about three percent of the premium that you pay. And I would say that there is really a lot of uncertainty around some of the regulatory develops related to association plans that have been spoken at, at length, and the short term plans as — you know, we’ve seen the rule, or in some cases, proposed a rule. We really don’t know how the market is going to respond to that, and what that’s really going to mean from people that remain in the market, how healthy they are or not, or what are some changes you are going to see. So very interesting, and I would hate to be a health plan actuary right now — well, for a lot of reasons, but specifically because a lot of this is untested, right? We don’t really know how this is going to drive markets in specific states.


I think we’ve seen from the administration with the executive order from October, a real policy shift to focus on regulatory actions, and these regulatory actions are focused on one primary goal, which is giving people alternatives to the ACA coverage. I mean, that’s sort of a very clear goal in terms of the association health plans, and the short term plans. And so I think it’s just important to know that all of these types of plans are very different, they have different rules, different sort of structures and benefits, et cetera, and so we did lay out a little bit more detail in different types of plans. So you know what — and I think our biggest issue and importance is making sure that when consumers are purchasing these products, they really understand what they are buying. How many of you like to renew your insurance contract every year? Nobody. It’s really important in terms of disclosures.


I think we’ve mentioned this a little bit in terms of the 2019 outlook:  I would say that at least going into a couple of the 4th of July week plans, sort of knew what they knew. We understood the regulatory environment, we understood the trends that were happening at various companies, and across the country in terms of different state programs, and there was a — I always say this, whenever there is a press release saying that here is something stabilizing, then something happens. So we have a number of new entrants coming into new states, new local metropolitan areas, which I think is really exciting, it’s showing that health plans are committed to serving this market. They want to be able to support people who don’t get coverage through work, or don’t quality for a federal program, and they want to support this market. And we have seen sort of that positive development there.


But the one thing that I would highlight, and we 100 percent agree with what Brian said, is that this is not working for those people that either are caring for a family member, a sole proprietor, they don’t have insurance through work. And I think where we really agree, and want to support those policy solutions that support that aspect of the market, because I think that is the part of the market, about eight million people, at least in the current individual market, plus the uninsured, which is 28 million or so, that are really going to be driven towards some of these ACA alternatives. So that’s going to drive up costs for the people that remain, right? Depending on how healthy they are. Assuming a healthier person would leave that market. So that is a really significant long-term concern for the individual market.


Risk adjustment. So I don’t have enough time. I’m happy to take questions. A lot of complicated legal developments in the case yesterday or the day before. The administration sent interim final rule to OBM to respond to the issue at a court case related to the methodology behind how much people pay in and receive from the risk adjustment program. So that is a very positive development. AHIP, along with Blue Cross/Blue Shield Association submitted a motion in the case to the New Mexico judge yesterday also, addressing this uncertainty and prompt resolution and we can get into that a little bit more if you all have questions about that.


So really appreciate your time. Thanks for hanging with me this afternoon, and we welcome your questions.


SARA COLLINS:  Thank you, Jeanette, and thank you to the other panelists. I’m going to open this up to questions now. There are two microphones in the floor, and there are also green forms that you can fill out and people will pick them up. So before we get started, I do want to ask one question to the panelists. It’s a two-part question and it gets at this issue that Brian raised and highlighted and Jeanette just also underscored, is the affordability of insurance plans for people who are above the subsidy threshold. So about 400 percent of poverty, which is only about $90 to $100,000 a year for a family of four. As Jeanette mentioned, they are going to be the most likely to be attracted to these non-ACA compliant health plans like short-term policies and association health plans, but there is also a lot of plans in America that don’t comply with the Affordable Care Act, limited benefit policies, policies that are sold by health sharing ministries, Farm Bureau polices, and my question is, and Jeanette has a really nice list of things that consumers should think about when they are marketed a plan, how are people going to know that they are being marketed a plan that may not cover everything that they need, that might underwrite certain members of their family? Do these plans have warning labels on them, and is that going to vary a lot by state?


MIKE KREIDLER:  States are going to have requirements for disclosure. That’s the strongest protection, number one, and if they fail, they have to submit that material to the state for approval, or at least to review, so that they know that they are giving the proper kind of information to consumers before they make the purchase. So it’s clearly one where the buyer is going to be forewarned before they make the acquisition of a short term medical product that has some real distinct limitations to it, particularly if it turns out that they have a very limited coverage for pre-existing conditions. Those people will really need to know that before they make the purchase, and think they have insurance, and then try to use it, and find out the hard way that they don’t. So I can tell you that the state of Washington is going to be vigorous on this. My discussion with my colleagues from other states, they are equally going to be aggressive.


ROBERT MORROW:   Yeah, certainly the disclosures are required for short-term medical and some of the other plans as well, but it’s important, as Commissioner Kreidler mentioned, that people look at things, and read the disclosures, but also listen to what your producer is telling you. Make sure your producer is telling you something that matches with the paperwork that they put in front of you. People need to be diligent, and they need to make sure they understand exactly what it is they are getting.


SABRINA CORLETTE:  I want to push back a little bit. In our analysis of state rules, relating to short-term plans, very few require them to submit forms and rates on an annual basis. And so there is actually not a lot of upfront review of what hits the street, and what consumers see, and time and time again, we hear about consumers that get very slick marketing materials that make a plan look a lot like a major medical policy, when it’s not. And I’ll just give you one example of the kind of sophistication you might have to have a consumer:  I got a call the other day from somebody who bought a short-term policy, it was a stacked policy, so it was basically four, three month policies that she bought all at once.  And it said it covered mammography. So she goes to get her mammogram, and then she gets a really big bill, and she says, what in God’s name? This is covered mammography, I’m not supposed to get a bill. Oh, it doesn’t cover the reading of the mammography. So what is the consumer supposed to do? It said it covered mammography, but the plan said, sorry, we didn’t cover the reading. So you have to pay this gigantic bill. So I am not sure disclosures in 10 point font at the bottom of a 10 page marketing brochure is going to do the trick.


MIKE KREIDLER:  I certainly would add as a caveat that we’re not going to allow them to renew that policy, it’s a one time deal, and it’s limited to three months.


SARA COLLINS: But really, the point too is that there’s just a lot of variation across states and their approaches to all of these kinds of plans, so that’s something to watch this year. I also think it’s important, just on the affordability side, that states have a lot of tools other than using these plans to get people cheaper policies who are above this threshold. I do want to point out too that Congress has the ability to extend the subsidies, so we have an analysis that Rand did on our Commonwealth Fund website. This shows if you lift that 400 percent of poverty cap, threshold, and allow the tax credits to extend to people above that level, it has a nature phase out, no one pays more than nine percent of their income towards their premiums, so it’s actually not very costly to the federal government to do this, but it would really provide a lot of relief for people who are just over that threshold. In the absence of that, states are obviously really scrambling now to address this affordably issue in their markets. One of them, obviously, is the promotion of these alternative benefit policies, but the reinsurance efforts at the state and at least up to eight states at this point, is a way of making plans more affordable, and maybe the panel would also like to chime in on how other states are doing it.  Or what other tools states are using to make policies affordable for people over that threshold.


BRIAN WEBB:   Well, the key tool states are looking at right now is reinsurance. But there are some other ideas out there, I don’t know if you’re very familiar with what Idaho is doing, but they are trying to create what would be a state plan with a different risk pool, tied to the other risk pool, but another option out there. It’s got a lot of the same benefits and things like that, but because it’s a different pool, it provides more affordable options. You have Iowa following Tennessee, and creating a state Farm Bureau plan, which they call not-insurance, which means it doesn’t have to comply with the ACA, but can be a way to provide more affordable coverage, but tends to be good coverage to people in those states. We’ll see how that plays out. So there is just — this is going to be the challenge. This is what all of the states are looking at, is what can we do going forward? I think we’ve been basically spending the last eight years just trying to get to stability, just trying to figure out what the options are. We keep hearing changes at the federal level, regulatory changes, all kinds of things. So can we get to the point where things are stable enough where we can really sit down and figure out for each state, how best to get affordable options to people. And that’s the challenge in front of everybody right now.


MIKE KREIDLER:  Stabilizing the market is number one. I mean, we don’t want to see individuals going off to health insurance products that are weak and inadequate, but they are cheap. But as soon as they get sick, then come running to the ACA compliant plans. To do that, you have a very expensive risk pool for anybody who really needs insurance. And that person out there that’s with the cheap policy today, will pay through the nose tomorrow when they try to get full coverage, because wow, all of a sudden I have metastatic cancer.


BRIAN WEBB:  I would also note that it becomes very expensive to taxpayers as well. Because they are paying for a lot of that coverage on the exchange, and if rates keep going up because it becomes a high risk pool, taxpayers will be paying that dime.


JEANETTE THORNTON:  There are some creative policy solutions that we’ve been sort of thinking about. Minnesota did something pretty interesting a couple of years ago where they created a specific state discount program for those people that were unsubsidized. Unfortunately that didn’t work that well, just because it was announced really late in open enrollment, so there were some other sort of complicating factors related to that. But that was something that states could certainly consider. I think the budget questions are a big one. There is also — the individual market doesn’t get the same tax parity that say, you get when you purchase employer sponsored coverage or small group coverage, and sort of thinking about that, only individuals up to the 400 percent qualify for that premium tax credit, and there needs to be a debate around that. And then there are other things that we think are really important, especially in rural areas. Addressing expanding access to telemedicine, some other things to really help get at sort of that cost of care lever that I will call, to really think about, how do you get that underlining cost down that we really think are important to consider. Reinsurance is great, and we love reinsurance, but I think they are sort of looking at that in concert with some other things that really sort of address more of the underlying root causes and some of the things that I showed in my slides of why the cost of the smaller pool of people continues to go up.


SARA COLLINS:   Also, I just want to mention too, in addition to the Minnesota subsidy program, a couple of states, and you can see it on Georgetown’s new map that is on our website, other states have also increased their subsidies, so they have taken a different path from reinsurance and increased the subsidies for people to make it more affordable.


I am going to switch to the first question.


AUDIENCE MEMBER:  Thanks.  Mike Miller, and just for background, I’m a physician who’s been doing health policy work for about 30 years. I want to give you the context because I work both her in the Senate, over at the House, and for the last 18 years, I’ve been buying my own health insurance for four different states where I’ve lived. So I am the face of your constituent, in that unsubsidized individual market. I want to pick up a couple of things that Sabrina and Brian brought up. One thing that is very clear, Sabrina mentioned a divergence. There was a great divergence amongst the states for the ACA. The ACA brought up some convergence, but since the last few years, there has been an increasing divergence amongst the states. I raise that, because the state where I now live, the rates are going up very much, and I ran into a friend of a Republican yesterday in the metro, he’s paying $36,000 a year for his family of four. I’m paying about $9,000. I’m probably going to be leaving that state of Maryland before the end of the year, because I’m potentially facing a 95% increase in premiums next year. My question is to Brian and the two state insurance commissioners: Do you guys think that within your state operations, how this affects economic development and prosperity and job growth, particularly around entrepreneurs and the gig economy. I was living in a state that was very progressive years ago, and what they did in their individual small group market actually was drawing people in who were starting businesses, because they knew they didn’t have to worry about how to get insurance for the new employees, or for themselves, while they were going on this entrepreneurial risk-taking venture of investing a lot of their time and money — their lives and their money in this new venture. So the question is: Are states thinking about their individual insurance markets as part of their economic development policy and practices?  Thank you.


MIKE KREIDLER:  I think it’s safe to assume that we all think about it. We are very much limited as to what we can do about it. Because we are caught in a dilemma, what we can do that was by far the most effective, certainly for most states, and for the state of Washington, was to expand the Medicaid program, don’t allow those legacy policies to dilute the risk pool, and a number of other steps that we could take as a state, whereas the most effective way we could help to stabilize the market and hold those rates down, but I think that has always been one of my primary movers as to why we really need to make sure that we get closer to 100 percent coverage for health insurance. Because when people don’t have coverage, they impact the rest of us, and the system adversely, by causing rates to be higher than they would have been. We’ve got enough problems with pharmaceuticals and just general medical trend, without adding to it some of the dumb stuff we could turn around and do.


ROBERT MORROW:  So the answer to your question is “yes”, but I would also say there is somewhat limited ability to respond. Our focus on the reinsurance program is because it does offer us the ability to get some premium relief almost immediately in 2019. It’s very hard to look past that right now, because that’s the thing that can get us the most relief right now, but certainly, we’re always concerned with the folks who are in that spot. We have public rate hearings every year, and you as the face, and people who are in the same position as you are, are there every year, telling us about this. And so we are trying to do what it is we can, understanding that our statutory mandate is to provide or approve rates that are not inadequate, not excessive, and not unfairly discriminatory.  We are doing what we can.


AUDIENCE MEMBER:   My name is [name], I’m an intern, and I’ve been looking at a lot of the rate requests and a few of the states such as Minnesota and Pennsylvania have requested really low, or even decreases, and given their reinsurance programs. So I wanted to know why you think that the federal reinsurance program ended, and why there isn’t more bipartisan support for a reinsurance program at the federal level, given that most states are talking about it, and we spend our entire time here today talking about it.


BRIAN WEBB:  The one ended because the ACA only allowed it for three years. It was a transitional reinsurance. The idea was that we would reach stability in three years. We try. But there has been bipartisan support for a federal reinsurance program. In fact, last year there was a bipartisan group that got a bill very much along the process in the senate. It would have been $10 billion a year, which translated to about $18 billion after passing through everything, going out to the states. That would have been a tremendous help nationwide, especially for states that may not have the funds available, or the ability to do an assessment and things like that. Making sure it got something out there. Unfortunately it got tripped up right at the end, and the bipartisanship fell apart. Right now we are not doing it. The NIEC is still very supportive of that, and that would be a quick and easy way to, again, get to that stability so we can move on to the more in-depth changes necessary.


SABRINA CORLETTE:  I would just add that there are a lot of states, unfortunately that a reinsurance program at the state level is just very challenging either because it’s difficult to get the legislature to raise the revenue, or there is just not that infrastructure. A lot of states that have done it, have leveraged a pre-ACA high-risk pool infrastructure. So it’s not — it can be a really heavy lift at the state level, so perhaps we will soon be in more rational political times here in Congress, and the federal reinsurance could be revisited.


JEANETTE THORNTON: It’s really interesting what Wisconsin ended up doing. It has Governor Scott Walker really support state based reinsurance program in their state of Wisconsin, and how he funded that was because of the savings from the health insurer tax moratorium, and how that’s passed through Medicaid managed care plans, and he used those savings — so a very creative approach, because that moratorium had been passed after they had already gone through that assessment process, and used those savings to sort of fund the Wisconsin waiver, so it’s sort of a creative way to find sort of rainy day funds, if you will, and use that to sort of jump start the program in the state.


SARA COLLINS:   So I have a few questions that have come in. What would you like to — do you have a question?


AUDIENCE MEMBER:  I’m Sara [name] with Bloomberg Law. Anybody can respond to this, but a point that Alex Azar has made is that healthy people who are in the exchanges are not likely to leave because they are getting subsidies, so I would like to get some response to you about that, because you are saying that all the healthy people will go to the cheaper market for short-term plans, but if they are in the ACA now, they get subsidies, so why would they leave? Could you respond to that?


SABRINA CORLETTE:  Yeah, sure, I mean, Jeanette had a great slide showing that there is roughly ten million in the exchanges, and eight million buying off exchange. I think it’s somewhere between 80 and 90% of people on exchange are subsidized, so I think the concern that you’re hearing about these alternative, or non-ACA compliant policies and the siphoning away of the healthy risk is that it will be largely the unsubsidized healthy folks that will gravitate these cheaper options. But also, remember the ACA subsidies are on a sliding scale based on your income. So if you are fairly low income, like between 100 and 200 percent of the federal poverty line, you are getting a pretty good deal on the marketplaces, but as you get closer to 400 percent of the federal poverty line, you’re being asked to contribute as much as 10 percent, or close to 10 percent of your income to premium alone, which can be a pretty big bite out of a family income. And so for folks like that, between 300 and 400, I think many could find that the short-terms plans, association plans, are a cheaper option.


MIKE KREIDLER:  State of Washington now, we’re a little bit of an exception — more than a little bit of an exception from the average among the health insurance exchanges around the country. 40 percent of the individuals inside the exchange do not receive a subsidy in our state exchange. That is much higher than almost any other state, and maybe every other state. So it’s a little bit different in that respect. So their concern is if we don’t do something that helps, such as maybe a premium [indiscernible] as we’ve often referred to it, which would be a subsidy for individuals on their premium. For those individuals who do not receive assistance for their premiums, more and more of them are going to wind up leaving the market.


AUDIENCE MEMBER:   Hi, I’m Rhonda, I’m also an intern. Jeanette had mentioned something that is a big topic of discussion right now, which is prescription drug prices as an increasing percentage of premiums. I was just wondering if there were any state or federal policies that you are a fan of, that have been proposed, that you think will incite meaningful change in terms of reducing overall premium.


JEANETTE THORNTON:  Sure, I can start that. Just earlier this week we filed significant comments on the administrations prescription drug blue print, which I really think has a lot of great ideas sort of getting at this issue. One challenge is that it just sort of was an RFI, or request for information, and so those really have to be turned into actionable policies in order to drive some of those results. One of the interesting ones that was in there, was looking at direct to consumer advertising, and talking about what something really costs in that advertising. Definitely thought that was interesting. So I think there is a lot of good ideas out there. It’s the underlying unit cost of prescription drugs that’s really — and these continual price increases that’s just the root cause, and I think sometimes we get sort of wrapped around the axel in thinking about other issues, and rebates and all that sort of thing. But I think its really about how do you get more competition, how do you reduce this underlying drug costs, unit costs, is the only way we are going to get at this. And as you can see, I think it’s 22.3 cents on the dollar that you are paying every month, goes towards prescription drugs, and I don’t see that number going down, frankly.


SPEAKER: There’s actually an interesting finger pointing episode going on, and it’s been going on for a while. You’ll see the PBMs point the finger at the manufacturers and say they keep raising their prices, they are the reason drug prices are so high. And the manufacturers point their fingers at the PBMs and say, they are creating artificial spreads when they go ahead and have their reimbursements go to the pharmacists. So there is a lot of finger pointing as to why prescription drug costs are so high, and I think people need to take a look at that, and at a policy level, try to get to the bottom of that argument, if you’re going to get any traction on any solution.


AUDIENCE MEMBER:  Kate Gillard, American Physical Therapy Association. My question is:  What do you think the impact will be in states that have expanded Medicaid, maybe transitioned some of that population into the private market, and now we are rolling it back. I’m thinking Arkansas and New Hampshire in particular have private options for their Medicaid expansion population are now kind of backtracking. If that will affect the overall risk pool for good, or for bad. Just what your thoughts are.


SABRINA CORLETTE:   I’m not an actuary, and so take this for what it’s worth, but I think there is some evidence that the population in many states, between 100 and 138% of the federal poverty line, which is I think what you are talking about, where they are currently in Medicaid, and there is talk about shifting them to the private marketplace. I think there is some evidence that just generally a sicker population, and so it could have a negative impact on the marketplace risk pool, but I think each of those states is going to need to do their own actuarial analysis, and figure that out. And then determine whether the trade-offs are worth it.


AUDIENCE MEMBER:  My name is Lance Kilpatrick, I’m just a consultant. A lot of the theme that I’m hearing from the panel today, which is not necessarily surprising, is the lack of control over so many different forces that are causing a lot of the price pressures and everything that is going on. I wonder if this isn’t an inflection point where this could actually cause some rethinking about creating state public options, or state based Medicare for all. I know Mr. [name] is going to be talking about this issue, not in favor, this fall. And I was wondering what the panelists thoughts on that were.


MIKE KREIDLER:  Well, as the only elected person on this panel, let me say that as I observe what is taking place right now in the system, I clearly see some degradation taking place to the point where the only way that you can recover, is to move to a single payer system. It is just the consolidation that you’ve seen among providers, much less even among insurers, all of which make the kind of competition that we were anticipating as a part of the ACA, that much more difficult to effectively accomplish. I think the system itself, and to some degree the resistance to the ACA, which is a market-driven approach, moves us that much closer than to a single payer approach overall.


SABRINA CORLETTE: It’s interesting, there is so much attention on the individual market, which is this fairly small proportion of the overall population, and if you look at the actual cost of coverage in the individual market, the premiums, it’s not that much different from the group market premium, it’s just of course that people in the group market are insulated from that cost, thanks to the employer tax exclusion and all that. But the point being that we don’t talk in these panels about the underlying issue, which is of course the prices that providers charge, and the cost of care, and so one intriguing thing about a public option, of course, is like, could that get at that issue? Not so much the universal coverage issue, which I think people are very rightfully care about, but more something to push back on the providers, which is really sort of, I think, where a lot of our cost issues lie. And you look at, for example, Medicare Advantage, which is a pretty well-functioning market, one of the reasons that’s able to function so well, and they are able to get essentially Medicare rates from providers, is because Medicare exists as a public option, and so basically the payers in that market just piggyback off of the Medicare rates.


JEANETTE THORNTON:   So I can’t sit here and not jump in on this question. I will lose my job this afternoon. So definitely from our perspective, we really want to think about how you can support private market solutions, and the role that health insurance providers sort of play. 178 million Americans get their coverage through their employer, and that market is — there is certainly these underlying medical costs, trans affordability, but it’s working for a lot of people. So when we have these sort of broad brush discussions around single payer and Medicare for all, you really have to think about the disruption to those programs that are working, when it seems to me the real problem is looking at the smaller population, this individual market, that sort of gets all of the hot air for people like you and others that are buying your coverage on your own, and looking at solutions to fix that. Let’s talk about fixing that, and improving that. We’ve got some good ideas and I know others do as well, on both sides of the aisle. Let’s do that before sort of throwing the baby out with the bath water, and sort of going back to some of these other sort of approaches.


SARA COLLINS:  I also want to point out that there are some definitional issues with this idea of a public option. So we’ve seen in Congress the proposals for a continuum of public options and even at the state level, might even want to talk about what they’re doing in Washington to ensure that every American has a carrier and one is requiring private plans to serve public institutions to also play in the marketplaces. There are bills in Congress that would insert a Medicare-like public plan option in states that have bear markets, for example. And they are kind of the — the proposals run along a continuum, where more and more people have access to such a public plan. So I think one has to distinguish between these kinds of more marginal solutions to bear markets, before everyone goes off to the single payer realm, that there are potential ways to address some of the market issues that we are seeing, particularly bear markets, by coming up with a public plan type option, or requirements for insurers to stay in the market. If for example, they are participating in the Medicaid program, maybe they should also be required to participate in the marketplaces. So I think there is a lot of fluidity in terms of what we mean by a pubic option. Next question.


AUDIENCE MEMBER:  Hi, my name is Isiah, I’m an intern like the others. I had a question about reinsurance and the mechanism that reinsurance employs to reduce the rate of increase in premiums. If a state applies for a 1332 waiver and CMS approves it, and they have a state-based reinsurance program, and the amount of money they are getting from the federal government is equal to the amount that they are saving the federal government through reduced premium tax credits, how does that lower the rate of increase? Because the amount of money in the system isn’t changed.


ROBERT MORROW:  Well, at least on the reinsurance side, you are taking the worst claims out of the system, and you’re pulling them out. So you’re obviously dropping the biggest drivers of claims cost out, so you can drop your premiums. If you’ve got lower premiums, then the second lowest cost silver plan cost drops, and therefore the APTC, the subsidy is not as high, and therefore you’ve got a lower subsidy coming, but you can do an actuarial study and show through use of that reinsurance, what would have happened had you not pulled those claims out of the experience, and then you can show what would have happened, versus what you anticipate happening, and there is that gulf there, and that is the savings, and they pass the savings back. Did I answer your question?


AUDIENCE MEMBER:   Kind of. Specifically what I’m trying to get at, is if the amount of money you are putting into the healthcare system  — the amount of money that the state is getting from the federal government, is the same as the amount of reduction in the premium tax credit, right?


BRIAN WEBB:  Well, you have to  have some money up front. So there has to be some up front money that goes in that actually lowers the premiums. And then that savings. So I think that’s where we are getting caught up. It’s not the premiums reduced and then — something has to reduce the premium, so there is that money coming from the outside. It just augments it, because you get some savings coming back, which further lowers.


ROBERT MORROW:  And now I’m better understanding your question, and I think the answer is, it’s not necessarily, okay you saved $200 million state. You get $200 million. CMS looks at it and they use some calculation, I don’t know what it is, to determine what the actual savings are. But it may not be a dollar for dollar match.


AUDIENCE MEMBER:  I see, thank you.


SARA COLLINS:   I think we have time for one more question?


AUDIENCE MEMBER:  Hi, I’m Ben Lambert, I’m with the Alliance for Retired Americans, and I just wanted to ask, there’s been a lot of discussion of parts of the ACA that aren’t working as well as intended, or as intended at least. But one piece right now that does seem to be working more or less as intended, is the AD20 Medical Loss ratio. So particularly for the commissioners who are on the stage, I was wondering if any of you are anticipating policy changes, like less vigorous enforcement or anything along those lines?  And if so, how you are preparing for it.


MIKE KREIDLER:  It’s somewhat interesting that in the state of Washington, when it came to the medical loss ratio, that the 80/20 stipulation — 80 percent being for medical services, and 20 percent for administrative costs. We had almost no payback to insurers because we were already meeting the standard. Part of that is having a very competitive market, and being very vigorous on how we regulated the market to make sure that all insurers played by the same set of rules, so they couldn’t come in and low ball it, and make money at the expense of the overall market. So it depends a great deal from one market to another, but I’d be very surprised to see a willingness to go back and try to modify that in some fashion, because it obviously means moving money away from patient care, and moving more to, are you [indiscernible] for insurance companies, and that is not a selling political remedy.


ROBERT MORROW:  I have not heard anything about modifying the MLRs.


BRIAN WEBB:   The only area that has been discussed, and probably not that seriously is possibly a break for rural areas. Just try to get carriers in those areas, let them spend a little more money on marketing, because it is more expensive to market in those areas. A little more on outreach, and those kinds of things. Give them some break on that. But that’s the only thing we’ve really heard, and of course that wouldn’t necessarily destroy the marketplace. But the fact is, individual market, most carriers are well above 80 percent. Some are at 100 percent, which is always very exciting. So it’s there, but though, just to make sure it doesn’t get out of control. And we’ll see how it goes forward.


SARA COLLINS:  Thank you, we are out of time, unfortunately, and I think Mary Ella is going to close us up.


MARY ELLA PAYNE:  Yes. I think we can all agree, a round of applause for these incredible moderators and panelists. And for all those interns out there — who started as a Hill intern? I think we probably have a lot of people who started out as Hill interns, so it’s a great beginning. And then you become consultants of course.


I want to thank the Commonwealth Fund for making today’s briefing possible. I think it was an incredible discussion, really shed a lot of light on what’s going on today. Finally, I want to ask everyone to complete your blue evaluation form, please. It really helps us with programming, and we’d also love to get your ideas for further topics for other briefings. So thanks again for coming, and you can watch it again, I think probably on C-SPAN in another couple of days if you didn’t get enough. Thanks.