Comments from Richard Besser, MD, on Stabilizing Individual and Group Health Insurance Markets
The following comments were submitted to the Centers for Medicare & Medicaid Services (CMS) by Richard Besser, MD, RWJF President and CEO, in response to the agency’s request for comments.
"RWJF is the nation’s largest philanthropy dedicated to improving health and health care in the United States. We believe that good health and health care are essential to the well-being and stability of our society, as well as to the vitality of families and communities. As the work of our grantees and countless others has demonstrated, moving toward a system that rewards health care quality and improves care coordination can help patients’ access better care and improve overall health system value. Insurance market stabilization and consumer access to high-quality products also are essential to our vision to build a Culture of Health nationally.
Current law regulates an individual market that is designed to sell Qualified Health Plans (QHPs). Evidence suggests that the market as currently regulated works best when it supports the sale of these plans, and our comments will be framed around that premise. Taking actions that make it harder to sell QHPs destabilizes the market, as reflected in the current challenges experienced in some states’ non-group markets.
Our comments are intended to provide input to further the goal of improving the performance of the current market as it is currently regulated. The following comments and recommendations are informed in part by research supported by the Foundation. They are based on research and input from several of the Foundation’s grantees and programs, including Manatt Health, Princeton University, Georgetown University, Health 2.0, Milliman, and the Urban Institute. We would be happy to discuss any of these projects with your staff.
1. Empowering patients and promoting consumer choice. What activities would best inform consumers and help them choose a plan that best meets their needs? Which regulations currently reduce consumer choices of how to finance their health care and health insurance needs? Choice includes the freedom to choose how to finance one’s healthcare, which insurer to use, and which provider to use.
In the current environment, the single most important way to empower patients and promote consumer choice would be to take steps to ensure broader insurance carrier participation given that some U.S. counties may face the possibility of no exchange carrier, ensuring sufficient carrier participation should be a priority. Enforcing the mandate and providing the Cost- Sharing Reduction (CSR) payments are the best way to achieve this goal under current law.
The Department of Health and Human Services (HHS) should also facilitate the creation of state-level reinsurance programs either through Section 1332 waivers or in some other way so as to improve carrier participation. Alaska’s establishment of a reinsurance program, for example, resulted in a considerable reduction in premium increases. Through our technical assistance efforts with states we have worked with, Alaska and other states are seeking ways to use the 1332 process to stabilize their markets. Results from an Actuarial Challenge that RWJF recently sponsored highlight the consensus among actuaries that reinsurance is a necessary component of a stable market.
Other things that could be done include making QHPs more widely available through multiple channels. The Centers for Medicare and Medicaid (CMS) is to be commended for promoting direct enrollment through web brokers and carriers, which has been allowed since the first exchange regulations in 2012 but never made an agency priority. This is a step in the right direction, although it is important to ensure that consumers are protected and receive unbiased information about their plan choices. The Foundation has supported developers’ challenges to improve plan choice tools and we believe that high quality consumer decision support is an extremely important part of a successful direct-to-consumer insurance market.
2. Stabilizing the individual, small group, and non-traditional health insurance markets. What changes would bring stability to the risk pool, promote continuous coverage increase the number of younger and healthier consumers purchasing plans, reduce uncertainty and volatility, and encourage uninsured individuals to buy coverage?
Uncertainty and volatility are unfortunately serious concerns at the moment. As stated above, one of the most effective ways to immediately reduce uncertainty and volatility would be to give insurers assurance that the CSR payments will be provided. Providing an opportunity for states to create reinsurance programs would similarly promote stability. We would suggest that the individual mandate is currently the strongest tool to promote continuous coverage.
Another important way to improve the risk pool would be to eliminate the leakage that occurs through transitional products and the sale of limited coverage. In some states, there are more individuals enrolled in transitional products than there are in QHPs. For example, there are currently more than 85,000 people in underwritten, non-Affordable Care Act (ACA) compliant plans in Iowa, a number which exceeds marketplace enrollment by a considerable margin1.
Clearly the size of this transition population creates a significant hurdle for the QHP market, and creates a strong disincentive for carriers to participate. Compounding this, the practice of many states to allow limited coverage specialists to sell short term and other types of non-compliant coverage creates another form of leakage. In many states, such as Iowa, both practices are in place, with predictably unfortunate results. Although Medica’s recent announcement that they will sell plans on the Iowa exchange next year is welcome news, their proposed rate increase of 43 percent is directly related to the fact that they are the only remaining carrier in the great majority of Iowa counties.
It would be worthwhile to consider whether there are some constructive ways that CMS can engage with states that have significant leakage and poor carrier participation to help them create incentives to unify their risk pool, reduce the limited coverage specialists, and strengthen the market for QHPs.
Controlling inappropriate use of special enrollment periods is another way to reduce volatility. We have supported research which was recently presented to Assistant Secretary for Planning and Evaluation (ASPE) and Center for Consumer Information and Insurance Oversight (CCIIO) that showed how current risk adjustment does not adequately compensate carriers for enrollees entering during Special Enrollment Periods.2 Some of the recent market stabilization reforms such as the enhanced enforcement of special enrollment periods and the requirement that unpaid premiums be paid prior to enrollment in new coverage are designed to foster continuous coverage and encourage individuals to stay covered. If successful, these reforms are examples of changes that can improve the market while remaining consistent with current law. Some are concerned these reforms may have the unintended consequence of promoting adverse selection. This is an empirical question, and it remains to be seen how these reforms will affect consumer behavior and impact enrollment. It will be important to collect data to monitor these impacts and make changes if necessary.
As for encouraging more young people to enter the market, the current subsidy structure is not ideal with respect to achieving that goal, and there is relatively little that can be accomplished from a regulatory standpoint to change that fact within current law. Encouraging issuers to experiment with different benefit designs that might appeal more to younger people should also be considered. Continuing to invest in and focus outreach and enrollment efforts on younger consumers is also critical. Enhancing enrollment through mobile platforms also will be helpful for this population, as will opening up direct enrollment to web brokers who can specialize in targeting particular audiences, including young people. While this goes beyond current law, it may be helpful if there were some additional tax incentive or inducement specific to young people that could be administered by state or federal government, such a reduced interest rate on student loans.
3. Enhancing affordability. What steps can HHS take to enhance the affordability of coverage for individual consumers and small businesses?
In the short run, the best way to enhance affordability within the current law would be to minimize adverse selection, which is aided by the individual mandate. Given the current law, the market will work better if this mandate is enforced. We know from pre-ACA experience that the states with guaranteed issue and no mandate had smaller enrollment and higher prices—except Massachusetts, which achieved greater success with the mandate. Unless and until there is an equally effective alternative to the mandate, affordability will be improved by making the mandate work better. Carriers are pricing the cost of a weaker mandate in their rate filings, affecting affordability for consumers, as seen in this example, where weaker enforcement was estimated to contribute to a four percent premium increase.3
This development is unfortunate because there is much evidence that carrier financial performance improved in 2017, as seen in the attached data, which compares the ratio of premiums to claims in Q1 2017 versus Q1 2016 for a number of large not for profit Blue Cross and Blue Shield plans.4 As can be seen, this ratio almost universally improved between 2016 and 2017, suggesting that premium increases could be much smaller in 2018 as compared with 2017 in the absence of policy shifts that can adversely affect the risk pool. The importance of reinsurance as a strategy to improve affordability has already been discussed.
One commonly suggested way to improve affordability is to reduce the comprehensiveness of coverage, but this does not truly improve affordability per se so much as it does reduce the value of what is purchased. And as seen in this recent evaluation by the actuarial consulting firm Milliman, opportunities to save money by reducing covered benefits while retaining meaningful coverage may be less than imagined. A recent analysis that breaks down the cost of the Essential Health Benefits (EHBs) into separate components demonstrates that the great majority of costs that are for services such as inpatient care and prescription drugs that would be considered fundamental to any health insurance coverage. There is little opportunity to reduce costs by eliminating items such as maternity and newborn care, which a very small share of overall costs.5
Some aspects of the recent market stabilization rule, such as increasing flexibility around provider networks and actuarial value ranges may allow for some slightly more affordable products. But unless CRSs are paid and the individual mandate is enforced, these changes will have a limited ability to impact affordability.
4. Affirming the traditional regulatory authority of the States in regulating the business of health insurance. Which HHS regulations or policies have impeded or unnecessarily interfered with States’ primary role in regulating the health insurance markets they know best?
The most promising approach to promoting state flexibility within the current law is contained in the 1332 waiver. The recent 1332 checklist underscored this Administration’s commitment to the waiver process. Given the current climate, in which some counties face the possibility of having no exchange carrier, willingness on the part of CMS to think creatively and be proactive will be very helpful. The recent stopgap proposal from Iowa illustrates that states want to preserve coverage, and some may need flexibility and support from the federal government to be able to do so.
There is a widespread need for reinsurance, yet some states lack the funds to initiate a program. Much of the technical assistance RWJF does do with states focuses on the 1332 waivers, and we know that states are interested in state-specific strategies to improve their individual markets. It would be productive if CMS were to find some ways to remove barriers that prevent states from moving forward with reinsurance and other state reform strategies within the 1332 framework. Challenges to the market are significant, and time is running short. Yet fortunately, there are two powerful steps that can be taken right away. Finding a way to make the CSR payments, and signaling that these payments will be made, is critical for insurance carriers. Making a commitment to enforce the individual mandate will be similarly helpful. Facilitating the creation of some reinsurance opportunities and working with states to reduce the pernicious effect of leakage are other important ways to maximize the effectiveness of our current individual market for the millions who rely upon it."
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1 ratereview.healthcare.gov Transitional and Student Plans, Wellmark Inc. FB Classic Blue Indemnity–Individual–72160-IA008
2 Slides from this briefing are included as Appendix A of PDF download. The results are being prepared for publication.
3 Premera Blue Cross, Washington State, 2018 Non-grandfathered individual rate filing, Actuarial Memo, page 2. SERFF Tracking Number: PBCC-131047870
4 RWJF tabulation of insurance data from Mark A. Farrah. Comparison of Premiums/Claims Ratios between Q12016 &Q12017 Blues
5 Blumberg L, Holahan J. The Implications of Cutting Essential Health Benefits. Urban Institute, July 2017. Available at www.rwjf.org/content/dam/farm/reports/issue_briefs/2017/rwjf438507