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ADVANCING PATIENT SOLUTIONS FOR LOWER 

COSTS AND BETTER CARE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JUNE 10, 2016 

Serial No. 114–151 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

GENE GREEN, Texas 

Ranking Member 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

DORIS O. MATSUI, California 

BEN RAY LUJA ́ N, New Mexico 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 3 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 5 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 6 

WITNESSES

Grace-Marie Turner, Founder, President and Trustee, Galen Institute, Inc. .... 8 

Prepared statement .......................................................................................... 11 

Doug Holtz-Eakin, President, American Action Forum ....................................... 19 

Prepared statement .......................................................................................... 21 

Sara Collins, Vice President of Health Coverage and Access, Commonwealth 

Fund ...................................................................................................................... 27 

Prepared statement .......................................................................................... 29 

SUBMITTED MATERIAL

Statement of the American Federation of State, County and Municipal Employees, submitted by Mr. Green ........................................................................ 87 

Statement of the AFL-CIO, submitted by Mr. Green ........................................... 89 

Statement of AARP, submitted by Mr. PItts ......................................................... 91 

Statement of the Association of Mature American Citizens, submitted by 

Mr. Pitts ................................................................................................................ 94 

Statement of Blue Cross and Blue Shield Association, submitted by Mr. 

Pitts ....................................................................................................................... 98

Statement of various organizations, submitted by Mr. Pitts ...............................

Article entitled, ‘‘Charging Adults Higher Premiums could cost taxpayers,’’ 

The Commonwealth Fund, September 15. 2016, submitted by Ms. Schakowsky .................................................................................................................. 99 

Article entitled, ‘‘Why the ACA’s Limits on Age Rating Will Not Cause ‘Rate 

Shock’ Distributional Implications of Limited Age Bands in Nongroup 

Health Insurance,’’ The Urban Institute, March 2013, submitted by Ms. 

Schakowsky .......................................................................................................... 102 

(1) 

ADVANCING PATIENT SOLUTIONS FOR 

LOWER COSTS AND BETTER CARE 

Friday, June 10, 2016 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 9:16 a.m., in room 

2322, Rayburn House Office Building, Hon. Joseph R. Pitts (chairman of the subcommittee) presiding. 

Present: Representatives Pitts, Guthrie, Murphy, Burgess, Blackburn, Lance, Griffith, Bilirakis, Bucshon, Brooks, Green, Schakowsky, Castor, Sarbanes, Matsui, Schrader, Kennedy, C ́ ardenas, 

and Pallone (ex officio). 

Staff Present: Adam Buckalew, Professional Staff Member; Paul 

Eddatel, Chief Counsel, Health; Bob Mabry, Fellow, Health; Graham Pittman, Legislative Clerk, Health; Jennifer Sherman, Press 

Secretary; Heidi Stirrup, Policy Coordinator, Health; Josh Trent, 

Deputy Chief Health Counsel; Dylan Vorbach, Assistant Press Secretary; Jeff Carroll, Minority Staff Director; Tiffany Guarascio, Minority Deputy Staff Director and Chief Health Advisor; Samantha 

Satchell, Minority Policy Analyst; Andrew Souvall, Minority Director of Communications, Outreach and Member Services; Arielle 

Woronoff, Minority Health Counsel; and C.J. Young, Minority Press 

Secretary. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. Good morning. The subcommittee will come to order. 

The chair will recognize himself for an opening statement. 

Today’s hearing will examine legislation designed to modernize 

the current health insurance market by empowering states to better regulate markets tailored to their unique conditions. Previously, 

this committee examined healthcare solutions that centered on promoting patient choice and innovation in the design of health coverage. This hearing is a natural follow-on to that. 

Current law is leading to an increase in healthcare premiums. 

Double-digit premium increases are hurting, not helping patients. 

It is no surprise that a recent Gallup poll revealed that healthcare 

costs top American families’ financial concerns. Almost daily, headlines across the country offer frightening news on healthcare cost. 

This undoubtedly is contributing to the fears of the American people. 

2 

And here are some of the numbers. In Virginia, nine insurers are 

looking to raise premiums at high as 37.1 percent. Three of the requests in Oregon are over 29.6 percent. One plan in New York is 

asking for a shocking 89 percent increase. For Texas, the biggest 

plan wants to raise its rate 60 percent. In Colorado, Golden Rule 

is seeking a 40.6 percent hike, Rocky Mountain HMO is seeking a 

34.6 percent boost, and Colorado Choice wants a 36.3 percent increase. Connecticut has three plans wanting increases from 12 to 

27 percent. In my home State of Pennsylvania, one insurer is seeking a 48 percent increase, while the insurance department says the 

average request is 23.6 percent for individual plans. 

And this is why we are here today—to offer better care at a fair 

price. Our solutions aim to help patients stabilize the insurance 

markets, restore flexibility, provide more choices, and keep costs in 

check. 

Health care is the most personal of any political issue. When 

Congress gets involved in health policy, we are changing people’s 

lives. Decisions we make in Washington can have a tremendous effect on the well-being of families and their budgets. States, on the 

other hand, are great innovators. When given the flexibility to tailor coverage and conditions, patients are the winners, with greater 

choices and more affordable options. 

The five bills before us today offer a variety of options to begin 

to reduce cost, including the Flores bill to align grace periods, the 

Blackburn bill, which requires eligibility verification, the Brooks 

bill, which adjusts age rating ratio for healthcare pricing, the Griffith-DeGette bill that allows individuals and families to purchase 

stand-alone dental plans either on or off the exchanges, and the 

Rick Allen bill, which establishes an audit process for failed state 

exchanges. 

Any unallocated or misspent Federal funds would be returned to 

the U.S. Treasury. The first thing health reform should accomplish 

is to stabilize or reduce the cost of health care. The number one 

complaint people have about health care is the rising cost. 

Yet the current law has done little to decrease healthcare spending. In fact, many Americans are paying higher premiums and 

deductibles for health insurance and care as a result of the law. We 

can do better. We must make healthcare costs more transparent, 

give people the freedom to choose the insurance they want, with 

the benefits they value most, at a price that is fair. 

More government bureaucracy, regulations, and spending never 

successfully reduce the price of health care. Yet, that is exactly the 

premise of how health insurance is regulated today, with top-down 

mandates that empower Washington and remove control over 

healthcare decisions from States, small businesses, families, and 

individuals. And this has to be changed if we truly want bottomup solutions that provide better care at lower costs for patients. 

The bills before our committee today will do just that. 

Is there anyone seeking recognition on our side? 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Subcommittee will come to order. 

The Chairman will recognize himself for an opening statement. 

3 

Today’s hearing will examine legislation designed to modernize the current health 

insurance market by empowering States to better regulate markets tailored to their 

unique conditions. Previously, this committee examined health care solutions that 

centered on promoting patient choice and innovation in the design of health coverage. This hearing is a natural follow-on to that. 

Current law is leading to an increase in health care premiums. Double-digit premiums increases are hurting, not helping, patients. It’s no surprise that a recent 

Gallup poll revealed that health care costs top American families’ financial concerns. 

Almost daily, headlines across the country offer frightening news on health care 

costs. This undoubtedly is contributing to the fears of the American people. 

Here are some of the numbers: 

• In Virginia, nine insurers are looking to raise premiums as high as 37.1 percent. 

•Three of the requests in Oregon are over 29.6 percent. 

• One plan in New York is asking for a shocking 89 percent increase. 

•For Texas, the biggest plan wants to raise its rates 60 percent. 

• In Colorado, Golden Rule is seeking a 40.6 percent hike, Rocky Mountain HMO 

is seeking a 34.6 percent boost and Colorado Choice wants a 36.3 percent increase. 

• Connecticut has three plans wanting increases from 12 to 27 percent. 

• And in my home state of Pennsylvania, one insurer is seeking a 48 percent increase, while the Insurance Department says the average request is 23.6 percent for 

individual plans. 

This is why we are here today: To offer better care at a fairer price. Our solutions 

aim to help patients, stabilize the insurance markets, restore flexibility, provide 

more choices and keep costs in check. 

Health care is the most personal of any political issue. When Congress gets involved in health policy, we are changing peoples’ lives. Decisions we make in Washington can have a tremendous effect on the well-being of families and their budgets. 

States, on the other hand, are great innovators and when given the flexibility to tailor coverage and conditions, patients are the winners—with greater choices and 

more affordable options. 

The five bills before us today offer a variety of options to begin to reduce costs— 

including the Flores bill to align grace periods; the Blackburn bill which requires 

eligibility verification; the Brooks bill which adjusts age-rating ratio for health care 

pricing; the Griffith/DeGette bill that allows individuals and families to purchase 

stand-alone dental plans either on or off the exchanges; and the Rick Allen bill 

which establishes an audit process for failed State exchanges. Any unallocated or 

misspent Federal funds would be returned to the U.S. Treasury. 

The first thing health reform should accomplish is to stabilize or reduce the costs 

of health care. The number one complaint people have about health care is the rising cost, and yet the current law has done little to decrease health care spending. 

In fact, many Americans are paying higher premiums and deductibles for health insurance and care as a result of the law. 

We can do better. We must make health care costs more transparent and give 

people the freedom to choose the insurance that they want—with the benefits they 

value most at a price that is fair. 

More government bureaucracy, regulations, and spending never successfully reduce the price of health care. Yet that is exactly the premise of how health insurance is regulated today—with top down mandates that empower Washington and 

remove control over health care decisions from states, small businesses, families and 

individuals. This has to be changed if we truly want bottom up solutions that provide better care at lower costs for patients. 

The bills before our committee today will do just that. I yield back. 

Mr. PITTS. With that, I will yield back and recognize the ranking 

member, Mr. Green, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman. And I agree that the increases that are requested, although having served as a State legislator in Texas in the 1970s and 1980s and the very early 1990s, 

I think we saw the same requests. Of course the health insurance 

market was not regulated in the State of Texas. But as a smallbusiness manager, we saw 25, 30 percent increases over the years. 

4 

So increase in health insurance cost is not new to the American 

public. 

Prior to the Affordable Care Act, the individual market on health 

care was deeply broken. People were sold junk plans at high cost. 

Individuals with preexisting conditions were essentially locked out 

of the market altogether. Women would be charged more just because of their gender. And plans could drop you at the moment you 

got sick, the time when you need the coverage the most. 

Three years after the Affordable Care Act, major health expansion went into effect. Approximately 13 million people have coverage through the marketplace and 15 more through coverage of 

Medicaid. Since the law was enacted in 2010, 20 million more 

Americans are no longer uninsured and the uninsured rate is at a 

historic low. Both the newly insured and previously insured are 

protected from the worst abuses of issuers and what plans must 

cover is significantly more robust than ever. 

Overall, the coverage expansions are improving Americans’ access to health care, the marketplaces are competitive and creating 

value for customers, and premium stabilization programs are working. The evidence is clear that the ACA is a success. The majority 

of people enrolled in marketplace plans or Medicaid report that 

they would not have been able to access or afford their care prior 

to getting their new insurance. 

It is important to recognize that marketplaces created under the 

Affordable Care Act are in their relative infancy. As with almost 

every new market, particularly in the healthcare space, there will 

changes and adjustments in early years. Insurers will both enter 

and exit as they navigate the landscape to the millions of new consumers, protections, and requirements. Medicare, when it was first 

created, experienced growing pains, as did Medicaid Advantage and 

part D plans. 

The Affordable Care Act is working. But like any law, it is not 

perfect. As I have been known to say, if you want something done 

perfectly, don’t come to Congress. That is why, after passing major 

reforms, Congress revisits legislation coming together and improve 

on it. 

Of the five proposals we are considering today, aligning children’s dental health coverage stands out as a bipartisan bill that 

has improved pediatric dental coverage. I am supportive of this legislation and appreciate that the committee is paying attention to 

this important technical fix for children. However, I am concerned 

that this bill was included in the legislative hearing evaluating several more controversial and I think irresponsible plans. 

The other legislative proposals we are considering today constitute a step backwards for consumers by forcing people out of the 

exchanges, making it more difficult for consumers to access affordable coverage using premium tax credits. We should be looking for 

ways to make the law work better on behalf of the American people 

rather than roll back reforms and protections designed to get more 

value from hard-earned dollars spent on coverage and put insurance back in charge at the expense of the consumers. 

Making it easier and more attractive to get coverage, expanding 

Medicaid, targeted outreach, these are ways to bring more stability 

and affordability to the health insurance market. Instead, most of 

5 

the bills we are considering today will make it harder for people 

to get coverage, more expensive for people who need insurance, or 

only serve to help insurance companies rather than people. 

Health insurance is a product that Americans want and need 

and the Affordable Care Act is creating a system that lends truth 

to the principle that health care is not a privilege for the few but 

a right for all Americans. And while I welcome productive conversation on how to improve and make the ACA even better, we 

must not do anything that would undermine the progress that this 

important law has already made. 

And I look forward to hearing from our witnesses, Mr. Chairman, 

and I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

Now filling in for the chairman of the full committee, Dr. Burgess, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman. 

This is a very good hearing for us to be having right now and 

I am very grateful that you have called it. I am very grateful for 

the members that have participated and provided us bills for consideration today. We have got an excellent panel of witnesses in 

front of us this morning, with whom I have either agreed or disagreed over the years, but I know them to all be the best of the 

very best in healthcare policy, and I am looking forward to their 

testimony this morning. 

Regardless of how you feel about the Affordable Care Act, I don’t 

think there is any question that the fractures are becoming apparent and they are growing. And somewhat ironically, at the very 

last weeks of the Obama administration, these fractures are likely 

to become fractures and real people are going to be affected by 

those fractures. 

It is important that we be talking and we be talking now about 

what we can do to help people when those inevitable failures do 

occur. The bills in front of us today make significant moves towards 

fixing some of those problems, but I am also anxious to hear from 

our witnesses what they see when they look over the horizon, not 

just for next year, but the year after, the year after. If something 

does not change, the likelihood is that we will have some very profound and real difficulties within the insurance market, within the 

provider space, and of course for patients themselves in this country. 

So, Mr. Chairman, I think you are to be commended for holding 

the hearing today. Certainly you have put a great panel of witnesses in front of us. And I will now yield to one of the authors 

of the bill, Mr. Griffith from Virginia, for his comments. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

And thank you, Mr. Burgess. I appreciate that very much. 

I just want to let folks know that my little bill along with Diana 

DeGette, 3463, will in fact level the playing field by applying the 

same rules to coverage options for dental care offered on the exchange and off the exchange. Currently, unfortunately, the way the 

language has been interpreted, you can buy a stand-alone dental 

6 

plan if you are in the exchange, but if you are out of the exchange 

it has to be wrapped into your health insurance. 

Oftentimes parents want to buy a better pediatric dental care 

plan for their kids than what is offered in a basic health plan. And 

so this bill would allow them that option and allow them to go out 

and buy a stand-alone dental along with a health insurance plan 

that otherwise qualifies except for the dental portions so that they 

are not just having their children’s dental care taken care of after 

deductibles are met or taking care of for cleanings but not for filling cavities, et cetera. 

I think it is a good bill. And I appreciate Mr. Green saying that 

they recognize that it is an attempt to fix a little glitch and is a 

bipartisan bill. 

And with thatI would be happy to yield to anyone else that wishes time. 

Mr. PITTS. Anyone? 

Mr. GRIFFITH. I yield back to Dr. Burgess. 

Mr. BURGESS. I yield back to the chair. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the ranking member of the full committee, Mr. 

Pallone, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Mr. Chairman. 

Congress passed the Affordable Care Act to ensure that all 

Americans had access to affordable quality health insurance and 

the goal was to achieve universal health coverage. Six years later, 

our uninsured rate is at an all-time low and our uninsured rate 

among young adults has dropped by 47 percent. Twenty million 

more people now have health insurance, and a new University of 

Michigan study shows that the ACA has reduced racial and ethnic 

disparities in coverage. 

And this is all good news. But we have a lot more to do. I believe 

there are ways we can strengthen and improve the law. However, 

I am concerned that this hearing is taking a cynical approach to 

doing so. Rather than have a legislative hearing on bills that would 

help get more people health coverage, three of the bills being discussed today are designed to make it more difficult for people to 

get healthcare coverage. 

One of the bills we are reviewing today would allow insurance 

companies to charge premiums that are five times as much for 

older Americans. Even more troubling, under this bill, a State 

could establish an age ratio even higher than 5:1. Many older 

Americans can’t afford to pay five times as much as people who are 

younger than they, and we purposely included in the ACA ways to 

ensure that younger people have access to health insurance, such 

as staying on their parents’ plan until the age of 26. So I am concerned this will force older Americans to go without coverage at a 

time when they need it the most. 

There are also potential unintended consequences. Studies have 

shown the 5:1 age rating band charges overcharges older consumers and undercharges younger consumers. Meanwhile, the inVerDate Nov 24 2008 13:31 Aug 31, 2017 Jkt 037690 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-151 CHRIS
7 

creased tax credits to accommodate these higher rates for older 

Americans could cost billions of dollars. 

Another bill we are reviewing today would make it more difficult 

for people to enroll in coverage during a special enrollment period, 

known as an SEP. SEPs are necessary for people to enroll in coverage when something changes in their lives outside of the open 

enrollment period. 

It is important for SEPs to maintain some flexibility so that individuals can get coverage in a reasonable amount of time as they 

transition through important life events, such as the birth of a 

child, a marriage, or a permanent move. We have heard from insurers that SEPs aren’t strict enough and are subject to gaming, 

and that is why the administration has taken major steps to prevent this. They have eliminated seven SEP categories and now require documentation to prove SEP eligibility for the five most common life events. 

In addition, starting June 17, CMS will require individuals asking to enroll in coverage through an SEP to provide documentation 

by a specific deadline. The individual will lose their coverage if the 

appropriate documentation is not received in time or is incorrect, 

and these are reasonable guardrails. 

Yet, although CMS is implementing stricter verification requirements, this bill goes a step further and requires someone to prove 

their eligibility for an SEP prior to gaining coverage, and I am concerned that collecting and submitting this documentation may 

prove difficult and could lead to gaps in health coverage. Cancer 

patients can’t wait a month to get their health treatments. 

In addition, the Urban Institute estimates that fewer than 15 

percent of people eligible for SEPs use them to enroll in marketplace coverage and the rest are likely to remain uninsured. So I 

worry that stricter documentation requirements could deter all but 

the sickest individuals, since they are the most motivated to get 

coverage, while healthy individuals may choose to remain uninsured, and creating more barriers to access is only going to serve 

to keep more people out of the insurance market. 

I am also concerned by the bill that would shorten the grace period for those lower-income Americans who qualify for tax credits. 

Grace periods were put in because many of the people who were 

signing up are doing so for the first time. That population that is 

eligible for tax credits is also lower income and has more fluctuation in income, which is why we wanted to give them a chance to 

keep their insurance as part of the ACA. And under the bill before 

us today, just one missed or partial premium payment would result 

in someone losing their coverage until the next year, and this isn’t 

good for consumers. 

I think I will yield. I have less than a minute left, and I would 

like to yield that to Ms. Matsui. 

Ms. MATSUI. Thank you, Mr. Pallone. 

Because of the passage of the ACA, millions of American families 

have access to affordable quality health care and our country’s 

overall uninsured rate has fallen to a historic low. We have come 

a long way from the days when patients were denied care because 

of preexisting conditions and young people were left without coverage as they searched for employment. 

8 

There is much we can and should be doing to build on the success of the ACA and keep moving our health system forward and 

ensuring that patients get the right care at the right time in an 

efficient way. We can continue looking at models of care that reimburse value over volume. We can infuse technology into medical 

practice and more. 

Some bills we are considering today would, unfortunately, reverse some of the important progress we have made. I oppose any 

legislation that disrupts the continuity of care for patients. As families seek health insurance, we cannot make the process more burdensome for them by asking them to jump through unnecessary 

hoops. I hope that instead we can continue to build on the progress 

of the ACA in a way that benefits American families. 

Thank you, Mr. Chairman. I yield back. 

Mr. PITTS. The chair thanks the gentlelady. 

As usual, all the members’ written opening statements will be 

made a part of the record. 

I have a UC request. I would like to submit the following documents for the record: statements from AARP, the Association of 

Mature American Citizens, a group of seven organizations on H.R. 

3463, and the Blue Cross/Blue Shield Association. 

Mr. GREEN. No objection. 

Mr. PITTS. Without objection, so ordered. 

Mr. GREEN. Mr. Chairman, we also have some to submit for the 

record. Letters from the American Federation of State, County, and 

Municipal Employees, the AFL–CIO—and I think AARP sent us 

both the same letter—and the Alliance on Retired Americans, I 

would like to ask unanimous consent to place in the record. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. At this time, I will introduce our panel of experts. We 

have three witnesses. I will introduce them in the order of their 

testimony. And your written statements will be made a part of the 

report. You will be each given 5 minutes to summarize your testimony. 

On our panel today we have, first, Ms. Grace-Marie Turner, 

founder, president, and trustee of the Galen Institute; secondly, 

Mr. Douglas Holtz-Eakin, president of the American Action Forum; 

and finally Ms. Sara Collins, vice president of health coverage and 

access, Commonwealth Fund. 

Thank you very much for coming today. 

And at this point, Ms. Turner, you are recognized for 5 minutes 

for your summary. 

STATEMENTS OF GRACE-MARIE TURNER, FOUNDER, PRESIDENT AND TRUSTEE, GALEN INSTITUTE, INC.; DOUG HOLTZEAKIN, PRESIDENT, AMERICAN ACTION FORUM; AND SARA 

COLLINS, VICE PRESIDENT OF HEALTH COVERAGE AND ACCESS, COMMONWEALTH FUND 

STATEMENT OF GRACE-MARIE TURNER 

Ms. TURNER. Thank you, Chairman Pitts, thank you, Ranking 

Member Green and members of the committee, for the opportunity 

9 

to testify today on legislation that I believe would advance patient 

solutions for lower costs and better care. 

The ACA was designed to provide people with choices of private 

insurance, with States in the forefront of organizing a new system 

of coverage. States had had decades of experience in regulating 

health insurance, but a battery of ACA rules really overrides these 

State laws that have been forged by decades of experience and I 

believe really threaten the future of the ACA and its stability. 

For health insurance to attract customers, policies must be affordable, and everyone in the pool must pay their premiums over 

time so that their insurance coverage is there to pay their bills. If 

people only purchase health insurance when they need expensive 

care, the pools break down. It would be like allowing a family to 

purchase health insurance only when their house is on fire. If too 

few younger people purchase health insurance, costs will soar and 

many of the young people will continue to drop out, increasing coverage for everyone, and that is one of the problems, I believe, with 

the age rating provisions in the ACA. 

Under these rules, insurers can charge their oldest policyholders 

no more than three times their youngest customers. However, the 

average 64-year-old consumes six times more, in dollar value and 

health costs, than the average 21-year-old. 

One of the top experts on the workings of the ACA is Timothy 

Jost. He noted early on that age rating compression is going to 

force younger people to pay more in the individual market as older 

individuals pay less, making insurance too expensive for younger 

people. And we need people, not just the 26-year-olds, but people 

that are up to 35, 40 years old in these pools. They drop out and 

it means that health insurance actually costs more for older people 

as we wind up seeing a spiral. 

Likewise, the special enrollment verification are designed to help 

people, as you said, Mr. Green, to obtain health insurance coverage 

through major life events, but we are finding that more and more 

people are purchasing health insurance when they need medical 

care and then dropping it after they receive the medical services 

they need. This really undermines the concept of insurance. 

The claim costs, according to the actuarial firm Oliver Wyman, 

found that in the first 3 months in 2014, for people enrolling in the 

special enrollment periods, their claims costs times were 24 percent 

higher than those who had enrolled during the regular enrollment 

period. In 2015, the difference increased to 41 percent. And these 

people are more than twice as likely to drop their policies after a 

short period of time. 

The administration has indeed taken preliminary steps to verify 

eligibility, but more needs to be done. I commend Congresswoman 

Marsha Blackburn for taking the lead on legislation to verify eligibility before allowing an individual to enroll in an exchange via the 

special enrollment period. 

Robert Pear has a piece in today’s New York Times talking about 

the expected significant increases in many places in 2017 for premium increases, and talking with experts and actuaries from 

Geisinger, for example, about why this is happening, and they are 

finding that people are gaming the system also through these grace 

10 

periods. The law allows people to stop paying their premiums and 

still obtain coverage for another 90 days. 

Unfortunately, the incentives are basically designed to undermine the concept of real insurance. McKinsey & Company found 

that nearly a quarter of consumers stopped payment on their premiums in 2015, yet most repurchased a plan in the exchange the 

next year, many of them the same plans, without the need to pay 

their back premiums. Insurers must build the cost of this nonpayment of premiums into their costs for the following year, and 

this raises premium costs for everyone. 

Additionally, doctors and hospitals are on the hook to continue 

to provide coverage even for those patients who are no longer insured. Representative Flores’ legislation would end this abuse by 

aligning the grace period for nonpayment of premiums before coverage ends with grace periods under State law. A 30-day rule 

would provide greater incentive for people to keep and maintain 

coverage, basically the standard in State law before the ACA overruled this legislation. 

Also, the failed State health exchanges, I think, is really an important issue to address. I know that your committee has issued a 

report, ‘‘Misleading Congress,’’ on this particular issue, focusing on 

the testimony by Acting CMS Administrator Andy Slavitt. States 

have decided that they can sue their IT managers who set up their 

Web sites when their Web sites have failed, and then they want 

to keep that money. That is really an abuse of taxpayer dollars. 

The Federal Government spent $5.5 billion in helping these 

States to set up their own exchanges. Oregon received approximately $305 million to establish an exchange. If it wins this lawsuit, it wants to keep the money. That is really not something that 

serves taxpayers well. 

And then finally, I also commend Representative Griffith and 

also Representative DeGette for your legislation, bipartisan legislation, to address the issue of really streamlining and unifying the 

dental plans for pediatric dental care. 

Thank you, Mr. Chairman. I will look forward to your questions. 

[The prepared statement of Ms. Turner follows:] 

11 


21410.027

i!ll 

GALEN 

INSTITUTE 

A not-jorMprofit health and tax policy research organi::ation 

Testimony before the 

Energy & Commerce Committee 

Subcommittee on Health 

United States House of Representatives 

Rep. Joseph R. Pitts, Chairman 

Rep. Gene Green, Ranking Member 

Hearing on 

Advancing Patient Solutions for Lower Costs and Better Care 

June 10, 2016 

Testimony presented by 

Grace-Marie Turner 

President, Galen Institute 

P.O. Box 320010 • Alexandria, VA 22320 • Phone 703-299-8900 • www.gakn.org 
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21410.028

Advancing Patient Solutions for Lower Costs and Better Care 

Energy and Commerce Subcommittee on Health 

June 10, 2016 

Grace-Marie Turner, Galen Institute 

Chairman Pitts, Ranking Member Green, and members of the committee, thank you for the 

opportunity to testify today on five pieces of legislation designed to Advance Patient Solutions 

for l ,ower Costs and Better Care 

My name is Grace-Marie Turner, and l am president of the Galen Institute, a non-profit research 

organization focusing on patient-centered health policy reform. I served as an appointee to the 

Medicaid Commission from 2005-2006, as a member of the Advisory Board of the Agency for 

Healthcarc Research and Quality from 2005 to 2007, and as a congressional appointee to the 

Long Term Care Commission in 2013. 

The ACA was designed to provide people with choices of private insurance, with states at the 

forefront of organizing this new system of coverage. States have had decades of experience in 

regulating health insurance, but a battery of ACA rules overrides state laws that have been forged 

by experience to keep insurance pools stable. 

Today, I will discuss ways in which the Affordable Care Act (ACA) is not working as planned, 

undermining its original goals of providing universal coverage through stable, affordable health 

insurance. I will focus on five problems and proposed legislation designed to address them: 

flawed age rating bands. a lack of verification of qualifications for special enrollment periods, 

abuse of the grace period for health insurance premium payment, waste of taxpayer dollars on 

failed state exchanges, and the need for a technical correction involving pediatric dental care. 

AGE RATING 

Avik S.A. Roy testified before your hearing on May 11, 2016, and explained why the 3: I age 

band rating in the Affordable Care Act is backfiring: 

Forcing the young to pay more drives costs up for everyone. The average 64-year-old 

consumes six times as much health care, in dollar value, as the average 21-year-old. 

Hence, in an underwritten (i.e., actuarially priced) insurance market, insurance premiums 

for 64-year-olds arc roughly six times as costly as those for 21-year-olds. 

Under the ACA, policies are age-rated; i.e., insurers cannot charge their oldest 

policyholders more than three times what they charge their youngest customers. If every 

customer remains in the insurance market, this has the net effect of increasing premiums 

for 21-year-olds by 75 percent, and reducing them for 64-year-olds by 13 percent. 

1 
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However, ifhalfofthe 21-year-olds recognize this development as a bad deal for them, 

and drop out of the market, adverse selection ensues, driving up the average health care 

consumption per policyholder, thereby driving premiums up for everyone, including the 

64-year-olds who were supposed to benefit from 3:1 age rating. 

In an attempt to mitigate this problem, the ACA includes an individual mandatc ... In 

theory, the individual mandate's fine should force these younger individuals to purchase 

health coverage, even if that coverage is far more expensive than their actual health care 

consumption. In reality, however, the ACA's individual mandate is too weak, 

representing a fraction of the cost of ACA-based coverage. As a result, younger and 

healthier individuals have disproportionately avoided the exchanges.' 

Before passage of the ACA, 42 slates allowed health insurance rates to vary by age by a ratio of 

5: I or more. In a state with a 5:1 age band, the ratio limits the amount an older individual will 

pay to no more than five times what a younger individual pays in premium dollars. This 5: l ratio 

was based upon vast experiential data that shows utilization of health care services is broadly 

correlated with age. These higher age ratios strike a careful balance: they provide protection to 

older consumers without making it impractical for younger consumers to purchase insurance. 

Making health insurance too expensive for the healthier young people we want in the insurance 

pools drives them away, increasing the cost of insurance for everyone who remains. 

The ACA restricts age bands in all stales to a ratio no greater than 3: I. The result was 

predictable. The Congressional Budget Office reported this year that enrollment in ACA 

exchanges was far below projections? Healthy young people have been the hardest to attract. 

Fewer than 40% of enrollees are younger than 35, though 50% of the potential exchange 

population is in this age bracket, reflecting a missed opportunity to enroll young, healthy 

consumcrs.3 

One of the top experts on the workings of the ACA is Timothy Jost. He noted early on that age 

rating compression "is going to force younger people to pay more in the individual market as 

older individuals pay less.''4 As younger, healthier individuals are discouraged from buying 

insurance because of the the high cost, an adverse market spiral happens in which costs rise for 

those who keep coverage, thereby serving to further discourage younger, healthier individuals 

from keeping or obtaining coverage. The premium increases we arc seeing for next year are at 

least partly attributable to the ACA's restricted age rating bands. 

Because affordability is such a high priority in stabilizing the health insurance system in the 

United States, action must be taken to bring young people back into insurance pools rather than 

drive them away. Rep. Susan Brooks is the lead sponsor on legislation to address the ACA' s agerating bands. Her bill would defer to the states to decide rating bands, starting in January 1, 

20 !8. If a state does not have a law addressing the issue, the 5: I ratio would prevail. 

This is an important step toward the goal of making health insurance more aff(Jrdable by 

allracting the larger number of the healthy young people needed to stabilize health insurance 

pools. 

2 
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SPECIAL ENROLLMENT VERIFICATION 

In testimony before this committee in May, American Enterprise Institute Scholar Scott Gottlieb 

said he believes that "some of our current cost challenges show the shortcomings that come from 

not having defined enrollment periods as a way to also help maintain a stable risk pool." 

He explained that: ''One recent analysis, undertaken to evaluate the impact that special 

enrollment periods have on the non-group market, confirmed that these constructs skew the 

overall risk pool, ultimately leading to a higher cost and a less stable market."5 

Special Enrollment Periods are designed to help people obtain and maintain health insurance 

coverage through important life events, such as job changes, moving to another state, marriage, 

birth of a baby, etc. The Obama administration has created more than 30 special enrollment 

categories and sent emails to millions of Americans last year urging them to see ifthey might be 

eligible to sign up after the annual open enrollment deadline. But the administration has done 

little to verify whether late arrivals were in fact eligible under the special enrollment criteria. 

Evidence shows that many Americans have figured out how to game the system by taking 

advantage of generous special enrollment period rules. A growing number of individuals are 

purchasing health insurance only when they need medical care and then arc dropping it after they 

receive the medical services they need. This undermines the concept of insurance, drives up 

costs, increases premiums, and discourages healthy people from purchasing continuous health 

coverage. 

An analysis compiled by the actuarial consulting tirm Oliver Wyman found that:6 

• The average per member per month (PMPM) claim costs for special enrollment period (SEP) 

enrollees in 2014 was 24% higher on average during the first three months of enrollment than for 

open enrollment period (OEP) enrollees 

• In 2015, the difference in PMPM claims costs increased to 41% for the 1irst three months of 

enrollment 

• SEP enrollees that chose plans with the highest actuarial values showed especially high costs 

during the first month of enrollment. 

At the end of2014, SEP enrollees represented nearly 20% of total enrollees in the non-group, 

ACA-compliant market. Data from one plan show that individuals enrolling through a special 

enrollment period are more than twice as likely to drop their coverage after a short period oftimc 

as those who enroll during the annual open enrollment period.7 

A recent Covered California report also found that "there are credible indications that the risk 

mix of special enrollment period enrollment is higher cost than those of Open Enrollment and 

that some of that difference is likely attributed to individuals inappropriately claiming special 

enrollment period events.''8 California found that the cost differential between special 

3 
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enrollment period enrollees and open enrollment period enrollees ranged from 15% to 50% 

higher, based upon data from the state's largest four health plans. 

The administration has taken preliminary steps to verify eligibility, but much more needs to be 

done. I commend Rep. Marsha Blackburn for taking the lead on legislation to verify eligibility 

before allowing an individual to enroll in an exchange via special enrollment period rules. 

The goal should be not only for people to get covered, but for people to stay covered. This not 

only will contribute to stabilizing insurance pools and thereby controlling costs but also to 

providing incentives for people to maintain continuous coverage so they can benefit from 

preventive care and coordinated services to help manage their health and medical conditions. 

THE GRACE PERIOD 

People have learned they can game the system through another ACA rule. The law allows people 

to stop paying premiums and still obtain medical services for another 90 days. This ''grace 

period" allows someone to top paying premiums on October I and still maintain coverage 

through the end of the year. The individual can sign up for new coverage during the openenrollment period for a policy that begins on January I. That means a person can have a fi.I!I year 

of coverage and pay only nine months of premiums. 

There is no obligation for people to pay their unpaid premiums from the prior year before reenrolling in coverage the next year---even if they are enrolling in the same plan. The incentives 

here are basically designed to undermine the concept of real insurance. 

The Centers for Medicare & Medicaid Services (CMS) regulations and guidance about the grace 

period work this way: 

• In the first month an enrollee fails to pay premiums, insurers must pay qualifying claims 

for medical services rendered to the enrollee 

• In the second and third months of the grace period, insurers may withhold payment for 

claims. but the patient is still "insured'' and cannot be billed by providers 

• If the enrollee fails to pay all ofthe required premiums by the end of90 days, the 

enrollee's coverage can be terminated. Insurers may then reject claims from the second 

and third months of the grace period. and providers may then try to collect payment from 

the enrollee for medical services they received during this time. 

Independent studies show people have figured out how to use the grace period to their advantage, 

but to the disadvantage of a stable health insurance system: 

• A national consumer survey by McKinsey and Companl fbund that nearly a quarter of 

consumers stopped payment on their premiums in 2015, yet most repurchased an 

4 
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21410.032

exchange plan in 2016, and many repurchased coverage from the same health plan 

• 18% of consumers stopped paying their premium in 20 IS and then reenrolled again in 

2016. Half of these consumers returned to the same plan they stopped payment for in 

2015. Forty-five percent said they had stopped making payments in 2014, too. 

Abuse of the grace period is undermining the concept of insurance and driving up the cost of 

coverage for others. Insurers must build the cost of non-payment of premiums into their 

premiums for the following year, increasing costs for those enrollees who play by the rules. 

Doctors and hospitals are on the hook to continue treatment, even if the patient has stopped 

paying insurance premiums and the coverage has stopped. Many say they cannot continue to 

provide care to the growing number of exchange enrollees who are using the grace period to get 

''free" care. 

Rep. Bill Flores is sponsoring legislation to end abuse of this provision of the Affordable Care 

Act by aligning the grace period for non-payment of premiums before coverage ends with grace 

periods under state laws. A 30-day rule would provide a greater incentive for people to keep and 

maintain coverage, and that was basically the standard in state law before passage of the ACA. 

FAILED HEALTH EXCHANGES 

States that decided to set up their own ACA exchanges were awarded more than $5.5 billion in 

federal money to create them. Some states succeeded in creating functional exchanges, but the 

majority failed-from Massachusetts to Maryland, New Mexico to Nevada, and Oregon to 

Hawaii. 

Oregon, which received approximately $305 million to establish its exchange, terminated it 

entirely and opted to use the healthcare.gov federal exchange instead. Massachusetts was given 

more than $200 to create an ACA exchange after successfully developing an exchange for its 

previously-created state health reform program. But the federal exchange failed miserably in the 

Bay State, with serious problems in determining eligibility and illegally enrolling hundreds of 

thousands of residents in Medicaid. 

Several states, including Oregon, have filed lawsuits against the information technology 

contractors that helped build their exchange web sites. State officials also have indicated that if 

they collect any money fl·om the lawsuit, the states want to keep the money instead of sending it 

back to the federal taxpayers who provided the funds in the first place. This clearly is an abuse 

and misuse of federal tax dollars. 

Your committee released a report, "Misleading Congress: CMS Acting Administrator Offers 

False Testimony to Congress on State Exchanges," 10 that documented how CMS Acting 

Administrator Andy Slav itt gave misleading testimony to Congress on this issue. He testified 

under oath that state based exchanges returned more than $200 million in grant funds to the 

5 
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21410.033

federal government. However, CMS documents do not support his claim, showing that the 

federal government has reclaimed only $21.5 million from 17 exchanges. 

Congressman Rick Allen is sponsoring legislation, the "Transparency and Accountability of 

Failed Exchanges Act," that would require an audit of a state exchange when it fails and 

establish a procedure to require states to return any unspent funds to the federal treasury. The 

federal government also would be able to dispose of real property or repurpose it and deposit the 

funds in the federal treasury. 

It is clear that Congress needs to continue to continue to provide oversight and hold the Obama 

administration and the states accountable for what is likely to be hundreds of millions of dollars 

in lost and misspent federal funds on failed state exchanges. 

FREE-STANDING DENTAL PLANS 

Finally, Reps. Morgan Griffith and Diana DeGette are sponsoring bi-partisan legislation that 

would expand consumer choice in pediatric dental coverage. This clarifying legislation would 

allow individuals and families to purchase dental coverage, including pediatric benefits, through 

a stand-alone dental plan otTered outside an ACA exchange. Currently, these stand-alone plans 

are allowed only for coverage offered inside an exchange. The Griffith-DeGette bill would level 

the playing field by applying the same rules to exchange plans and oft~exchange plans. 

"We hear from our members that their clients continue to express confusion regarding dental 

benefits," the National Association of Health Underwriters wrote in a letter endorsing the bill. 

''This legislation would give consumers more choices when shopping for dental coverage and 

eliminate confusion in the marketplaces outside the public exchanges." 

This claritlcation is needed to establish that the offer of stand-alone pediatric dental coverage for 

policies offered outside an exchange is treated the same as coverage inside the exchange. 

IN CONCLUSION 

For health insurance to attract customers. the policies must be affordable, and everyone in the 

pool must pay their premiums over time so their insurance coverage is there to pay their bills if 

they need expensive medical services. If people only purchase health insurance when they need 

expensive care, the pools break down. It would be like allowing a family to purchase 

homeowners insurance only when their house is on fire. If the current trajectory with these ACA 

rules continues, costs will soar, more and more healthy young people will drop out, and the 

Affordable Care Act will fail in its goal of providing stable, affordable health coverage. 

The Galen Institute is not officially endorsing these bills because we are prohibited from doing 

so by our 50 I c3 tax status. However, we believe the concepts behind them are sound and that 

they would begin the process of undoing some of the damage that the ACA has done to the 

6 
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21410.034

private health insurance market and that the bills would advance patient solutions for lower costs 

and better care. 

Thank you for the opportunity to offer this testimony today, and !look forward to your 

questions. 

ENDNOTES 

1 Avik S.A. Roy, "Transcending ObamaCare. Achieving Truly Affordable, Patient-Centered, Near-Universal 

Coverage." Testimony before the United States Congress House Committee on Energy & Commerce 

Subcommittee on Health, May 11, 2016. 7 Elmendorf D et al., Letter to the Hon. Nancy Pelosi. 2010 Mar 20; https:/(www.cbo.gov/publication/21351 3 Joel White, "Exchange Enrollment: An Opportunity for Reform," Council for Affordable Health Coverage, June 7, 

2016. http://tinyurl.com/hrmukey 4 https://www.politicopro.com/tipsheet/healthcare/?id=324 

5 Scott Gottlieb, "Health Care Solutions: Increasing Patient Choice and Plan Innovation." Testimony before the 

United States Congress House Committee on Energy & Commerce Subcommittee on Health, May 11, 2016. 6 Chris Carlson & Kurt Giesa of Oliver Wyman, "Special Enrollment Periods and the Non-Group, ACA-Compliant 

Market," February 24, 2016. 7 Robert Pear, "Insurers say costs are climbing as more enroll past health act deadline," The New York Times, Jan 9, 

2016. http://www.nytimes.com/2016/01/10/us/politics/insurers-say-costs-are-dimbing-as-more-enroll-pasthealth-act-deadline.html? r=2 8 Peter V. Lee, Covered California, "Promoting Special Enrollment Periods," Feb. 18, 2016. 

http ://board .coveredca.com/m eetings/20 16/2 -18/PPT-Covere d%20Ca li forn i a% 20SE P% 20Po I icy. pdf 9 McKinsey & Company, Center for U.S. Health System Reform, "2016 OEP: Reflection on enrollment," May 2016. 

http://healthcare.mckinsey.com/sites/default/files/McK%202016%200EP%20Consumer%20Survey%201nfographic 

~ 10 House Energy & Commerce Committee, "Misleading Congress: CMS Acting Administrator Offers False Testimony 

to Congress on State Exchanges, May 9, 2016. https://morningconsult.com/wp-content/uploads/2016/05/051016-

Siavitt-Report.pdf 

7 
19 

Mr. PITTS. The chair thanks the gentlelady. 

And I now recognize Mr. Holtz-Eakin 5 minutes for his summary. 

STATEMENT OF DOUG HOLTZ-EAKIN 

Mr. HOLTZ-EAKIN. Thank you, Chairman Pitts, Ranking Member 

Green, and members of the committee for the privilege of being 

here to discuss these five proposals to make changes to the Affordable Care Act in the interest of having State insurance markets 

work more efficiently and protecting taxpayer dollars. I think these 

are important issues. 

Let me begin with the issue of restrictions in the age variation 

of premiums. The ACA does restrict the variation to a ratio of 3:1, 

of the oldest versus the youngest, and the proposal is to allow this 

to go to 5:1 or a number that the State would pick. This matches 

some things that we know about the operation of insurance markets. It matches the ratio of average spending of 64-year-olds to 21- 

year-olds in a recent CBO study, in February 2016. 

We know from work we have done at the American Action Forum 

that this would lower premiums for younger purchasers of insurance by something like 6 to 8 percent for single individuals, by 7 

to 10 percent for families. That would bring millions of additional 

young and healthy people into these exchange pools. 

That is something that the ACA needs. Right now, only about 28 

percent of the pool is 18- to 34-year-olds versus 36 percent of the 

eligible population. The absence of those low-risk purchasers is one 

of the problems in the ACA. And older purchasers of insurance 

would benefit over the long term from this change because, without 

those balanced pools, we are going to see increasingly higher premiums that older and sicker individuals will have to face for their 

insurance. So this is something that would stabilize those risk 

pools, bring people in that the ACA exchanges need, and benefit everyone in the long run. 

The special enrollment periods. It is a sensible request that we 

require verification prior to having the insurance. The purpose of 

a special enrollment period is to allow coverage for those people 

who are eligible for coverage, and it is a sensible thing to verify eligibility. 

It also turns out to be quantitatively important. About a fifth of 

the people in the exchanges got there through a special enrollment 

period, through a SEP, and these turn out to be more expensive 

risks in the pool. They are anywhere from 10 to 55 percent more 

expensive depending on which source you go to. They appear to be 

becoming increasingly more expensive over time, and thus their impact as an issue of shifting cost to others and pushing premiums 

up, is becoming more important, and understanding their eligibility 

is important. 

And they are much more likely to lapse in their premium payments. And so this is a population that is, in its practice of purchasing insurance and letting it lapse, shifting their costs to others, 

undermining the functioning of an insurance market. And I think 

it is a good idea for the committee to look closely at this. 

Finally, the grace periods and their impact I think are important 

as well. The proposal to change from 90 days to 30 or 31 to match 

20 

State law does provide some basic equity between those who buy 

their individual market policy on the exchange versus those who 

buy it off the exchange. And getting the same treatment, I think, 

is an important matter of fairness. 

These generous grace periods do invite abuse. We know that in 

2015 about a fifth of individuals stopped paying for their policies, 

and then half of them turned right around and bought exactly the 

same policy. This is cost shifting in the most fundamental form. 

Those costs don’t go away. They show up as higher premiums. The 

higher premiums have proven to be undermining the ability of the 

ACA to provide broad, well-balanced pools. And that is a concern 

that I think the committee should address. 

And then lastly, on failed exchanges and dental coverage, these 

strike me as things that the committee should simply just move 

ahead with. It is always in the interests of the committee to protect 

taxpayers against the abuse of their dollars. To audit and rescind 

the unobligated balances is, I think, a very sensible and straightforward thing to do, a matter of program integrity that everyone 

should endorse. And a technical correction on a bipartisan basis to 

pediatric dental coverage is something that no one should object to, 

and I applaud the committee for doing that. 

I appreciate the chance to be here, and I look forward to your 

questions. 

[The prepared statement of Mr. Holtz-Eakin follows:] 

21 


21410.035

Common Sense Solutions to Improve the Affordable Care Act: 

Simple Changes Can Go a Long Way 

United States House of Representatives 

Subcommittee on Health, 

Energy and Commerce Committee 

Douglas Holtz-Eakin, President* 

American Action Forum 

june 10, 2016 

*The views expressed here are my own and not those of the American Action Forum. I 

thank Christopher Holt and Tara O'Neill for their assistance. 
22 


21410.036

Chairman Pitts, Ranking Member Green, and members of the Subcommittee, I thank you for 

the opportunity to testify today regarding various proposed changes to the Affordable Care 

Act (ACA). These changes represent efforts to provide equity, improve transparency, and 

reduce burdensome requirements that are unnecessarily driving up the cost of health 

insurance. Further, several of these changes will have the added bonus of assisting in 

federal deficit reduction. 

Making targeted changes to the ACA certainly does not imply that these are the only 

changes that should be made to the law or that making these changes will suffice to solve 

all of the issues created by the law. I have testified on many occasions before this 

Committee and others about the numerous problems with this law, however that is not my 

purpose today. The changes being discussed today arc not groundbreaking ideas that will 

fundamentally alter the health care system; rather they arc common sense improvements 

that should have broad, bipartisan support. In a less politicized environment, these and 

other changes would be bipartisan initiatives passing with little fanfare. 

Introduction 

The ACA was signed into law in 2010 with the goal of providing accessible, affordable 

health insurance coverage for all. Unfortunately, as I have testified over and over. these 

goals have yet to be met for many individuals.1.2 Today, the Subcommittee is attempting to 

provide some relief through a handful of proposals that deserve bipartisan consideration. 

Grace Periods 

Under the ACA, individuals purchasing insurance coverage on the Exchanges were given a 

90-day grace period during which insurers were required to continue offering coverage 

despite an individual not paying their premiums. This is very generous relative to the laws 

states had implemented for coverage prior to the ACA, and gives individuals buying 

coverage on the Exchange and advantage over those purchasing off the Exchange- an 

uneven playing field for consumers. As of 2012, all states but two had a minimum grace 

period requirement of 30 or 31 days for plans offered in the individual market.3 The 

generosity of the grace period for plans purchased on the Exchange could easily allow 

individuals to take financial advantage, at the expense of other paying consumers and 

taxpayers. With a 90-day grace period, individuals may receive coverage for twelve months 

while only paying for nine months' worth of coverage. 

A study by McKinsey found that 21 percent of 2015 Exchange plan enrollees stopped 

paying for coverage at some point during the year. In 2016, half of those individuals ( 49 

percent) repurchased the same plan they had stopped paying for the year before; twothirds of these individuals had also stopped paying for coverage at some point in the 2014 

plan year. Insurers and providers both must account for the possibility of not being paid in 

full and therefore increase their prices, passing the cost onto consumers who do pay their 

obligations and the taxpayers subsidizing the coverage through the premium tax credit 

subsidies. 
23 


21410.037

Aligning grace periods for policyholders in the individual market on and off the Exchange 

within a state will create equity among consumers. Further, reducing the 90-day grace 

period could significantly reduce the risk of losses for insurers and providers, which in turn 

will provide greater stability in the market and reduce the additional cost that unfairly 

burdens other consumers and taxpayers. 

Special Enrollment Periods 

Between specific statutory language, and subsequent regulatory guidance, the ACA 

provides for a combined 34 circumstances under which an individual may be eligible to 

enroll in an Exchange plan under a Special Enrollment Period (SEP). This is extremely 

generous. Medicare allows just seven of these instances, while the Health Insurance 

Portability and Accountability Act (HIPAA) requires only three be provided. 

I have previously testified about the importance of adequately and efficiently verifYing an 

individual's eligibility for premium assistance under the ACA; verifying an individual's 

eligibility to enroll during a SEP is equally important.4 

Many insurers have complained that the plethora of categories rendering people eligible 

for SEPs-and the seemingly lax verification protocols-allow individuals to take 

advantage of the system, undermining and destabilizing the market. Insurers found that in 

2014 individuals who enrolled during a SEP had much higher medical claims-10 percent, 

on average, though some as much as 55 percent higher-than those who enrolled during 

the open enrollment period preceding the coverage period. 5 Too much flexibility for SEPs 

may allow individuals to wait until they are sick to enroll in coverage, undermining the 

insurance market, and ultimately resulting in higher premiums the following year to 

compensate. In fact, SEP enrollees were found to be 40 percent more likely to have a lapse 

in coverage than those that enrolled during the open enrollment period.6 

The Centers for Medicare and Medicaid Services (CMS) evidently agrees with this 

observation, as evidenced by the recent issuance of an interim tlnal rule tightening 

restrictions for SEPs. Indeed, the fact that the rule was issued without first seeking public 

comment implies that the agency believed such changes were either of such import that 

delay would be especially harmful and/or that such provisions were unlikely to receive 

significant opposition. However, the rule only affected eligibility for individuals seeking to 

enroll under the "permanent move" allowance. Given that there are 33 other allowances, 

more needs to be done. Requiring a formal process for eligibility verification, and requiring 

proper documentation supporting such claims, will go a long way in reducing the number 

of individuals unjustly taking advantage of the current system. Further, individuals should 

not be granted coverage unless and until their eligibility has been verified, with the caveat 

that coverage be retroactive to the day the application and all necessary documentation 

was submitted should the individual indeed be determined eligible. Finally, requiring the 

Secretary to report to Congress on the number of individuals who attempt to enroll during 

a SEP but are unable to do so, and specifying whether enrollment was not permitted 

because the individual did not provide the necessary documentation or because the 
24 


21410.038

documentation was invalid, will enable policymakers to make more informed decisions in 

the future should it be determined that adjustments to such policies are needed. 

Age Rating Restrictions 

One of several provisions included in the ACA in order to constrain premium variation 

among individuals was a cap on the permissible variation of premium rates due to age by a 

ratio of 3:1, such that premiums for the elderly could not be more than three times greater 

than those for the youngest bracket of individuals in the adult population. Prior to the ACA, 

this ratio averaged 5:1. This difference was justified by the fact that this was roughly the 

average difference in spending among 64-year-old patients compared with 21-year-olds, 

according to the Congressional Budget Office (CB0).7 The stricter requirement imposed by 

the ACA artificially inflates premiums for younger individuals, forcing them to subsidize the 

coverage of older-and typically sicker-individuals. This result is likely responsible for 

much of the low enrollment among the younger adult population, despite these individuals 

having the highest uninsured rate among all age groups.8 In 2016, 3.5 million adults aged 

18-34 enrolled in Exchange plans, representing only 28 percent of all enrollees, despite 

representing 36 percent of the potential enrollee population.9·

10 

As the American Action Forum has previously reported. repealing the age variation limit 

should allow for premiums to decline and remove at least some of the financial disincentive 

preventing the younger population from enrolling in Exchange plans. 11 Increased 

enrollment rates among the "young invincibles" would contribute to greater market 

stability, and help prevent a "death spiraJ."lZ The administration has been trying to make 

progress with this segment of the population, but, despite 2.3 million young adults gaining 

insurance by enrolling in their parents' plans, the uninsured rate for these individuals 

continues to be 2.4 percentage points higher than the average for the total non-elderly 

populationB Loosening this restriction would greatly assist with that effort. 

Accountability for Terminated State Exchange Grants 

In order to facilitate the establishment of State Exchanges, states were provided grants 

under the ACA to assist with the costs of doing so; such grants totaled $5.5 billion. 

However, very few states actually succeeded in setting up a state-based Exchange, and 

many of those that did eventually relinquished control to the Federal government, placing 

the burden of continued maintenance and upgrades of the system used by 38 states on the 

Federal government. 14 Of the $900 million provided to states that failed to accomplish the 

task for which the money was provided, only $21.5 million (23.8 percent) has been 

"returned" to the federal government. More specifically, this money was simply "deobligated." Taxpayers deserve to know their dollars are being spent wisely, efficiently, and 

for the purposes for which they are intended. The federal government should be doing 

more to ensure that the states that have failed to meet their obligations are held 

accountable and return those funds in a timely manner. This is a matter of good 

governance, transparency, and fiscal responsibility. With more than $19 trillion in national 

debt, every dollar counts. 
25 


21410.039

Conclusion 

The Affordable Care Act, for the time being, is the law under which the country must 

operate. While we in this room today may differ on pursuing a full repeal of the law, repeal 

is clearly not achievable at this time. Therefore, we should focus on changes and 

improvements that provide consumers, providers, and taxpayers the most favorable 

outcomes possible. The evidence shows that there are clear failures in the law's efforts to 

regulate the insurance market. Thus, changes that seek to roll back or correct these failed 

market reforms deserve bipartisan support. Consumers deserve to be freed from 

provisions that are unnecessarily inflating premium costs and creating inequities among 

health insurance purchasers. Taxpayers deserve transparency from their government and 

to have their money returned when improperly spent. And all parties need a clear set of 

rules, rather than vast amounts of regulation leading to a myriad of loopholes. Eliminating 

the burdensome and restrictive regulations imposed by the ACA will reduce premium 

costs, making insurance both more affordable and more accessible. 
26 


21410.040

Notes 

1 Holtz~Eakin, Doug. "The Affordable Care Act after Five Years: Wasted Money and Broken Promises." American 

Action Forum, 19 Mar. 2015. Web. 08 June 2016. <http://www.amerieanactionlbrum.org/testimony/the-affordablccarc~act -after~ ti vc~ y cars~\ vasted-moncy -and-broken-prom i/> 2 Holtz-Eakin, Doug. "How the Aflbrdable Care Act and the Employer Mandate Impacts Employers: An Overview." 

American Action Forum, 23 July 2013. \Vch. 08 June 2016. <http://www.americanactionforum.org/testimony/howthc-af'fordablc-carc-act-and-thc-cmp!oycr-mandate-impacts-cmp!oycrs-an-o/> 

3 State Laws Requiring Grace Periods for Premium Payments. Rep. \Vashington, D.C.: America's Health Insurance 

Plans. 2012. Print. 

·'Holtz-Eakin, Doug. "Subsidy Verification in the ACA: Complexity Creating Taxpayer Risk- AAF." American 

Action Forum, IO June 2014. Web. 08 June 2016. <http://\V\\W.americanactionforum.org/testimony/subsidyveri fi cation-in-the-aca -complex! ty -crcati ng~taxpa ycr-ri sk/> 5 Carlson, Chris, and Kurt Gicsa. "Special Enrollment Periods and the Non-Group, /\CA-Compliant Market." (n.d.): 

n. pag. Oliver Wyman, 24 Feb. 2016. Web. 8 June 2016. <https://www.ahip.orgiwpcontcn t/uploads/20 16/03/0 I i v cr-Wyman-Anal ysis-o f-S F P-Enrollment-in-A CA-N ongroup-Market.pd f>. 6 !hid. 

7 Burns, Alice. and Philip Ellis. "Private Health Insurance Premiums and Federal Policy." Congressional Budget 

Oflice, Feb. 2016. <https:/lwww.cbo.gov/sites/default/filcs/ll4th-eongress-20 15-20 16/rep011s/51130-

Hcalth Insurance Prcmiums.pdl'> 8 Marken. Stephanie. "U.S. Uninsured Rate at 11.6% in Third Quarter." Gallup. com. Gallup. 8 Oct. 2015. Web. 08 

June 2016. 9 "IIEALTH INSURANCE MARKETPLACES 2016 OPEN ENROLLMENT PERIOD: FINAL ENROLLMENT 

REPORT." Onlce of the Assistant Secretary for Planning and Evaluation, II Mar. 2016. Web. 8 June 2016. 

<https:!/aspc.hhs.gov/sites/delault/ filcs/pdll 187866/Finalcnrollmcnt20 16.pdl'>. 10 "Exchange Enrollment: 1\n Opportunity for Rct(>rm." Council tc1r Affordable llealth Coverage, 7 June 2016. Web. 

8 June 2016. <http://cahc.net/wp-contcnt/uploads/20 16/06/CAfiC-IssueBriciCFinaiWcb-06161.pdt'>. 11 Holtz-Eakin, Doug. "Assessing Alternatives to the ACA's Jndi\ idual Mandate." American Action Forum, 14 Apr. 

2015. \Vcb. 08 June 20 l6. <http://\V\\ w.americanactionfOrum.org/tcstimony/asscssing-alternatives-to-thc-acasindiviJual-mandate/>. 

~ Holtz-Eakin. Doug. "Premium [ncrcases !'or '·Young Invincibles" Under The ACA and The Impending Premium 

Spiral." American Action Forum, 2 Oct. 2013. Web. 08 June 2016. 

<http:/ /wwn .amcri canacti on forum .org/rcscarch/rrcm i u m-i ncrcascs-for-young-in vi nci b les-u nder-thc-aca-and-thcimpending/>. 

11 "HEALTH INSURANCE COVERAUE AND TilE AFFORDABLE CARE ACT, 2010-2016." (n.d.): n. pag. 

Oflice of the Assistant Secretary lbr Planning and Evaluation, 3 Mar. 2016. Web. 8 June 2016. 

<https:/iaspc.hhs.gov/sites/del'ault!l11es/pdlll8755l I ACi\20 I 0-20 16.pdt'>. 1

' "IIEALT!IINSURANCE MARKETPLACES 2016 OPEN ENROLLMENT PERIOD: FINAL ENROLLMENT 

REPORT." Office of the Assistant Secrctar; t{Jr Planning and Evaluation, II Mar. 20!6. Web. 8 June 2016. 

<https:/ /aspc.hhs.gov/sitcs/dcfault/ li les/pdU 18 7X66/Finalcnro! I mcnt20 16.pdt>. 
27 

Mr. PITTS. The chair thanks the gentleman. 

And I now recognize Ms. Collins 5 minutes for your summary. 

STATEMENT OF SARA COLLINS 

Ms. COLLINS. Thank you, Mr. Chairman and members of the 

committee, for this invitation to testify today on advancing patient 

solutions of lower costs and better care. 

Three years after the Affordable Care Act’s major health insurance expansions went effect, nearly 28 million people are estimated 

to have coverage either through the marketplaces or Medicaid. 

There are 20 million fewer people uninsured since the law went 

into effect in 2010. 

There is considerable evidence that marketplace and Medicaid 

coverage is improving people’s access to health care. The Commonwealth Fund’s ACA tracking survey of 2016 finds that majorities 

of enrollees who have used their health plans, either marketplace 

or Medicaid, report that they would not have been able to access 

or afford this care prior to getting their new insurance. Majorities 

of marketplace or Medicaid enrollees are satisfied with their insurance. Federal data are indicating nationwide declines in consumer 

out-of-pocket spending growth, cost-related problems getting needed health care, and medical bill problems. 

Challenges remain. While the uninsured rate has fallen significantly among working-age adults, differences persist between 

lower- and higher-income adults. This is driven in part by the fact 

that 19 States have yet to expand their Medicaid programs, as well 

as dwindling resources for outreach and enrollment. News reports 

about high premium requests by several insurers and United 

Health Group’s decision to pull out of several State marketplaces 

next year have raised concerns about the stability of the marketplaces. 

There are several reasons why these developments don’t portend 

disaster: Most marketplace enrollees won’t pay double-digit increases in 2017, insurers premium requests are subject to State review, and 83 percent of marketplace enrollees receive tax credits to 

help them pay their premiums. Most of the increases will be absorbed by those credits. 

Research is finding that the marketplaces are competitive and 

creating value for consumers. Most participating insurers remain 

committed to the marketplaces in 2017. While risk pools remain in 

flux, the premium stabilization programs are working for the most 

part. However, the phase-out of the reinsurance program this year 

will likely lead carriers to adjust their rates upwards to accommodate the loss. 

Three bills under discussion today are aimed at addressing concerns about the marketplace. One bill would increase the amount 

that carriers could charge older adults from three to five times that 

of younger people. Research by Rand finds that this change would 

only modestly increase insurance coverage among young adults but 

would come with the hefty price tag of $9.3 billion in Federal 

spending and a loss of coverage for 400,000 older people. Premiums 

would increase much more for older people than they would decline 

for younger people. 

28 

Another bill would require verification of eligibility for special enrollment periods. The Urban Institute finds that 33.5 million people are actually eligible for the special enrollment periods, the vast 

majority because of job loss, but only 15 percent actually are using 

them. 

CMS has made adjustment to the special enrollment periods, including a new confirmation process that requires documentation to 

verify eligibility. People can still enroll while the verification process is underway. The proposed bill goes a step further by not allowing people to enroll until they have submitted this documentation. 

These tighter standards could lead to even lower enrollment 

through the special enrollment periods. Only the most motivated 

people might enroll, those who are most in need of health care, 

leading to less healthy risk pools. 

The third bill would decrease the grace period for nonpayment of 

premiums from 3 months to 30 days. While some have suggested 

that people use these periods to game the system, the rules governing them are restrictive and aimed at discouraging this behavior. This policy change could mean a loss of enrollment in the marketplaces among enrollees of very modest means and an increase 

in the number of people who are uninsured or have gaps in their 

coverage. The policy change would also seem to favor those who are 

the most motivated to retain their coverage, those in poorer health. 

It is encouraging that the committee is considering ways to improve the marketplaces. In considering these policy adjustments, it 

is important to remember that the fundamental purpose of the 

marketplaces is to provide coverage to those who currently lack 

health insurance and thus cannot get needed care and are currently suffering unnecessarily as a result. 

Thank you. 

[The prepared statement of Ms. Collins follows:] 

29 


21410.041

The 

COMMONWEALTH 

FUND 

Consumer Experiences in the ACA Marketplaces, Marketplace 

Stability, and Remaining Challenges to Covering the Uninsured 

Sara R. Collins. Ph.D. 

Vice President, Health Care Coverage and Access 

The Commonwealth Fund 

One East 75th Street 

New York, NY I 0021 

src@cmwf.org 

Invited Testimony 

U.S. House of Representatives Committee on Energy and Commerce, Subcommittee on Health 

Hearing "Advancing Patient Solutions of Lower Costs and Better Care" 

June 10,2016 

The author thanks Edwin Park and Tara Straw of the Center on Budget and Policy Priorities for 

helpful insights, David Blumenthal, Don Moulds, Rachel Nuzum, Munira Gunja, Jordan Kizla, 

Stephanie Caty, Deborah Lorber, and Paul Frame of The Commonwealth Fund for helpful 

comments, research support, and editorial assistance. 

The views presented here are those of the author and not necessarily those of The 

Commonwealth Fund or its directors, officers, or staff. To learn more about new publications 

when they become available, visit the Fund's website and register to receive email alerts. 
30 


21410.042

Consumer Experiences in the ACA Marketplaces, Marketplace Stability, 

and Remaining Challenges to Covering the Uninsured 

Sara R. Collins, Ph.D. 

The Commonwealth .Fund 

EXECUTIVE SUMMARY 

Thank you. Mr. Chainnan, members of the Committee, for this invitation to testify today 

on the Advancing Patient Solutions of Lower Costs and Better Care. Three years after the 

Affordable Care Act's major health insurance expansions went into e!Tect, 12.7 million people 

are estimated to have coverage through the marketplaces and 15 mill ion more through Medicaid. 

There arc 20 million fewer people uninsured since the law went into effect in 2010. Yet there 

remains considerable controversy over how well these reforms arc working for consumers and 

whether the marketplaces are stable and competitive. The bills under discussion in this hearing 

are aimed at addressing some concerns that have been raised about the marketplaces and how 

consumers are using their plans. In this testimony, I review current evidence about the 

experiences of consumers in marketplace plans and Medicaid, the competitiveness and stability 

of the marketplaces, and ongoing implementation challenges. I also examine three of the 

proposed bills and their potential implications. 

CO!'iSUMER EXPERIENCES IN THE MARKETPLACE PLA!'iS AND MEDICAID 

The Coverage Expansions are Improving Americans' Access to Health Care 

o The Commonwealth Fund ACA Tracking Survey February-April2016 finds that 

majorities of people enrolled in either marketplace plans or Medicaid who have used their 

plans report they would not have been able to access or afford this care prior to getting 

their new insurance. 

o The ability of adults with marketplace plans and Medicaid to find doctors and get 

appointments is similar to that of U.S. insured adults overalL 

o Majorities of marketplace or Medicaid enrollees are satisfied with their insurance. 

o The early efiects of the coverage expansions arc also evident in nationwide declines in 

out-of-pocket spending growth, cost-related problems getting care, and medical bill 

problems. 

2 
31 


21410.043

Implementation Challenges Remain 

o While the uninsured rate has fallen significantly among working-age adults, wide 

differences persist between lower- and higher-income adults. 

o This difference is driven in part by the fact that 19 states did not expand their 

Medicaid programs, as well as dwindling resources for and legislative barriers to 

outreach and enrollment in many states 

o Affordability remains a key issue for enrollees across the income spectrum. 

o Increases in the size and proliferation of deductibles in marketplace and employer 

plans may create more underinsured people. 

PREMIUMS AND MARKETPLACE STABILITY IN 2017 

News reports about double-digit 2017 premium requests by several insurers and UnitedHealth 

Group's decision to pull out of several state marketplaces next year have raised concerns about 

the ongoing stability of the marketplaces. There are several reasons why these developments 

don't portend disaster for the marketplaces. 

Most Marketplace Enrollees Won't Pay Double-Digit Premium Increases in 2017 

o Insurers' premium requests will be reviewed by state regulators and will be adjusted 

or even rejected in some states. 

o 83 percent of marketplace enrollees receive tax credits to help pay their premiums; 

most of the increases will be absorbed by those credits, so most people won't pay 

much more next year than they paid this year. 

o Marketplace shoppers are highly price-sensitive and will likely not buy the highercost plans. 

o At the end of the open enrollment period, people who received tax credits 

experienced average premium increase of only 4 percent. 

The Marketplaces Are Competitive and Creating Value for Consumers 

o The marketplaces arc promoting price competition among insurers. 

o Recent research finds that projected premium increases in 2016 were lower for health 

plans sold inside the marketplaces than for those sold by carriers exclusively outside 

the marketplaces. 

o The concern that UnitedHealth Group's departure from several marketplaces next 

year is a harbinger of more exits by insurers is overstated. 

o Insurer participation in the marketplaces was relatively stable between 2015 and 

2016. 

o A recent review of first-quarter earnings calls by publicly traded insurers selling plans 

in the marketplaces suggest that most of these carriers remain committed to the 

marketplace in 2017. 

3 
32 


21410.044

o Many catTiers report opportunities for growth; while the composition of risk pools 

remains in flux, there is variation across carriers, with some reporting healthier-thanexpected pools. 

Risk Pools Remain in F'lux but ACA Premium Stabilization Programs Arc Working 

o Analyses of the risk-adjustment program have concluded that the program is working 

by transferring funds from insurers with lower-cost enrollees to insurers with 

enrollees who are sicker and have higher costs. 

o While there is room for improvement, the program appears to be fulfilling its 

intended objective of encouraging insurers to compete on value rather than risk. 

o The temporary reinsurance program is estimated to have lowered marketplace 

premiums by 10 percent to 14 percent in 2014, 6 percent to I I percent in 2015, and 

by a smaller amount in 20 16 as it phases out. 

o The complete phase-out of that program this year will almost certainly lead carriers to 

adjust their rates upward to accommodate the loss. 

Ongoing Need for Ensuring Stability of the Marketplaces over Time 

o The ongoing stability of the marketplaces and reasonable premium growth over time 

will continue to be dependent on covering the remaining uninsured and encouraging 

people to enroll in marketplace plans or Medicaid when they experience coverage 

gaps. 

o States will need resources to provide needed outreach to those who remain unaware 

of or reluctant to visit the marketplaces. 

o Affordability of health plans and health care for modest-income consumers will also 

be critical. 

DISCUSSION OF PROPOSED BILLS 

Three bills under discussion in this hearing are aimed at addressing recent concerns about the 

marketplaces. 

Proposed Bill: Changing Permissible Age Variation in Health Insurance Premium 

Rates 

o The proposed bill would increase the amount that carriers could charge older adults 

from three times to five times that of younger people. 

o The proposal also appears to provide an option for states to determine their own 

limits. 

o RAND researchers previously modeled a change in the ACA age band from 3:1 to 

5: l. 

4 
33 


21410.045

o They found that while more-mostly younger-~~-people would become insured under 

5:1 rate banding, it would come with a price tag of$9.3 billion in additional federal 

spending and a loss of insurance coverage for 400,000 older people. 

o The researchers estimate that the higher limits would increase annual premiums for 

the average benchmark silver plan for a 64-year-old from about $8,500 under current 

limits to $10,600 under the 5: 1 rate bands, while lowering those for a 21-year-old 

from $2,800 to $2,100. 

Proposed Bill: Requirement of Verification for Eligibility for Enrollment During 

Special Enrollment Periods 

o The Urban Institute estimates that 33.5 million people are eligible for SEPs each 

year-- the vast majority because of job loss, but only 15 percent usc them. 

o The Centers for Medicare and Medicaid Services (CMS) has made adjustments to the 

special enrollment periods (SEPs), including a new confim1ation process for SEPs 

that requires documentation to verify eligibility 

o People can still enroll in coverage while the verification process is being conducted, 

but there are deadlines for submission that trigger loss of eligibility or coverage if 

missed. 

o CMS is also adding an adjustment factor for partial-year enrollees to the riskadjustment program for the 2017 plan year. 

o The proposed bill would require the Secretary to institute a verification process for 

SEPs, but people requesting a SEP would not be allowed to enroll in coverage until 

they have submitted documentation. 

o Tighter verification standards could lead to even lower enrollment through the SEPs. 

o Only the most motivated people eligible for SEPs--that is, those who are the most in 

need of health care-might enroll, leading to less healthy risk pools. 

o Given these potential adverse outcomes, it might be pmdent to assess the effects of 

the new CMS verification process before imposing more restrictive requirements on 

those potentially eligih1e for them. 

Proposed Bill: To Better Align the Grace Period Required for Nonpayment of 

Premiums 

o Recognizing that people with modest incomes might struggle in some months to pay 

their premiums, the law allows a three-month grace period for someone who fails to 

pay their premium in a given month. 

o While some have suggested that people usc the grace periods to game the system and 

get ti·ee coverage, the mles governing them are restrictive and aimed at discouraging 

such behavior. 

5 
34 


21410.046

o The proposed bill reduces the ACA grace period for marketplace enrollees from three 

months to one month. 

o Such a policy change could mean a loss of enrollment in the marketplaces among 

enrollees of modest means and an increase in the number of people who are uninsured 

or have gaps in their coverage. 

o The policy change would seem to also favor those who are most motivated to retain 

their coverage -- those in poorer health. 

CONCLUSION 

Overall, the insurance provisions of the Affordable Care Act have been successful in 

achieving a number of goals, including substantial declines in the number of uninsured 

Americans and improved access to care. 

The marketplaces are competitive and appear to be producing value for consumers. 

But challenges remain: 

o lack of Medicaid expansion in 19 states 

o need for ongoing efforts to reach uninsured people who are eligible for enrollment in 

Medicaid and marketplace plans 

o ensuring that consumers in marketplace plans and Medicaid have insurance that is 

affordable and designed with incentives and protections that encourage timely access 

to high-value health care; 

o ensuring the stability of the marketplaces and reasonable growth in premiums over 

time. 

It is encouraging that the Committee is considering ways to improve the marketplaces. In the 

end, the fundamental purpose of the marketplaces is to provide coverage to those who lack health 

insurance and thus cannot get needed care, and arc cmTently suffering unnecessarily as a result. 

Thank you. 

6 
35 


21410.047

Consumer Experiences in the ACA Marketplaces, Marketplace Stability, 

and Remaining Challenges to Covering the Uninsured 

Sara R. Collins, Ph.D. 

The Commonwealth Fund 

Thank you, Mr. Chainnan and members of the Committee, for this invitation to testify 

today on the Advancing Patient Solutions of Lower Costs and Better Care. Three years after the 

Affordable Care Act's major health insurance expansions went into effect, 12.7 million people 

are estimated to have coverage through the marketplaces and 15 million more through 

Medicaid. 1 There are 20 million fewer people uninsured since the law went into effect in 2010 2 

Y ct there remains considerable controversy over how well these reforms arc working for 

Americans and whether the marketplaces are stable and competitive. The bills under discussion 

in this hearing are aimed at addressing some concerns that have been raised about the 

marketplaces and how consumers are using their plans. In this testimony, I review current 

evidence about the experiences of consumers in marketplace plans and Medicaid, the 

competitiveness and stability of the marketplaces, and ongoing implementation challenges. I will 

also examine three of the proposed bills and their potential implications. 

EXPERIENCES OF CONSUMERS IN THE ACA COVERAGE EXPANSIONS 

Coverage Expansions Are Improving Americans' Access to Health Care 

The most recent Commonwealth Fund Affordable Care Act Tracking Survey, February- April 

2016 finds that coverage through the marketplaces or Medicaid is improving people's ability to 

1 By the end of The Affordable Care Act's third open enrollment period, marketplace plan selections had 

climbed to 12.7 million people and 15 million more people were enrolled in Medicaid compared to three years 

earlier. Health Insurance Marketplaces 2016 Open Enrollment Period: Final Enrollment Period, ASPE Issue Brief 

(Washington, D.C.: U.S. Department of Health and Human Services, March 11, 2016), 

https://aspe.hhs.gov/sites(default/files/pdf/187866/Finalenrollment2016.pdf; Medicaid & CHIP: February 2016 

Monthly Applications Eligibility Determinations and Enrollment Report, CMS Report (Washington, D.C.: U.S. 

Department of Health and Human Services, April 29, 2016), https:/(www.rnedicaid.gov/medicaid-chip-programmformation/program-information/downloads/february-2016-enrollment-report.pdf. 2 R.A. Cohen, M.E. Martinez, and E.P. Zammitti, Health l~surance Coveraqe: Early Release of Estimates [rom 

the Nationqi.Jj_galth Interview Su.(l!_e;L,_]015 (National Center for Health Statistics, May 2016). 
36 


21410.048

get health care3 More than 70 percent of enrollees in marketplace plans or Medicaid have used 

their plans to get care. Of those, 51 percent of those enrolled in marketplace plans and 70 percent 

of those newly enrolled in Medicaid said they would not have been able to access or afford this 

care prior to getting their new insurance (Exhibit 1). Enrollees say their ability to get the health 

care they need has improved or stayed the same since getting their new insurance (Exhibit 2). 

Those who have looked for new primary care physicians are finding them relatively easily 

(Exhibit 3). Wait times for doctor appointments are comparable to those reported in other 

surveys by insured adults (Exhibit 4). Majorities of marketplace or Medicaid enrollees are 

satisfied with their insurance (Exhibit 5). 

3 S. R. Collins, M. Gunja, M. M. Doty, and S. Beutel, Americans' Experiences with ACA Marketplace and 

Medicaid Coverage: Access to Care and Satisfaction, The Commonwealth Fund, May 2016, 

llttp://www.commonwealthfund.org/publications/issue-briefs/2016/may/aca-tracking-survey-access·to-care-and-

~-atisf~!lQ!l, 

8 
37 


21410.049

9 
38 


21410.050

Ill 

20 

8 to 14 

10 
39 


21410.051

These reports of improved access to care are evident in national spending account data 

and population wide trends in key measures of health care access and medical financial burdens. 

According to the Centers for Medicare and Medicaid Services (CMS), the annual rate ofincreasc 

in household out-of-pocket health care spending slowed from 2.1 percent in 2013 to 1.3 percent 

in 20144 Out-of-pocket spending on hospital services, a big-ticket item for uninsured families 

prior to the ACA, fell by more than 4 percent. CMS attributes these changes to increased 

insurance coverage through the expansions. In addition, federal and private consumer surveys 

show nationwide declines in reports of medical bill problems and cost-related delays in getting 

health care5 A recent analysis by the Federal Reserve Bank of New York found a decline in 

average debt sent to collections agencies among counties in states that expanded eligibility for 

Medicaid with high rates of uninsured people prior to the ACA6 These gains have occurred 

because millions more people have full protection against catastrophic health care costs. But they 

also likely ret1ect the fact that the ACA requires individual market and marketplace plans, as 

well as Medicaid plans, to cover a comprehensive set of services and places limits on annual outof-pocket costs. In addition, more than half of marketplace enrollees have health plans with costsharing reductions that have substantially lowered the amount of their deductibles, copays, and 

out-of-pocket limits. 

Ongoing Implementation Challenges 

Despite these substantial improvements in coverage and access, there remain obstacles to the 

goal of providing all Americans with access to high-quality care. Many adults and children who 

could benefit from the coverage expansions continue to be uninsured. While the Affordable Care 

Act has significantly reduced the uninsured rate among working-age adults, wide differences 

4 S. R. Collins and D. Blumenthal, "!'l_e_y,>_I,LS. Health Care Spending Estimates Reflect ACA Coverage Expansions 

and Higher Drug Costs," The Commonwealth Fund Blog, Dec. 4, 2015.; A. B. Martin, M, Hartman, 1- Benson et al., 

The National Health Expenditure Accounts Team, National Health Spending in 2014: Faster Growth Driven by 

Coverage Expansion and Prescription Drug Spending, Health Affairs, December 2015, 

h!!R ://content_ he althaffa irs. org/ con tent/ear lyfl.015/ 1 U2 5 /h lthaff. 2 015.1194 5 S. R. Collins and D. Blumenthal, "New Federal Survey Shows Gains in Private Health Coverage and Fewer 

.~"';!~w;<Lt.fQ~~~~~!L-":'!.f.<C," The Commonwealth Fund Blog, Feb. 24, 2016. 

N. Dussault, M. Pinkovskiy, B_ Zafar, Is Health Insurance Good for Your Financial Health? Federal Reserve 

Bank of New York, June 6, 2016, http:/(liber\ystreeteconomics.newyorkfed.org/2016/06/is-health-insurance-goodS. R_ Collins, M. Gunja, and S. Beutei,How Will the Affordable Care Act's Cost-Sharing Reductions Affect 

Consumers' Out-of-Pocket Casts in 2016? The Commonwealth Fund, March 2016, 

b_!_l]J:i/www.commorlwealthfund.()_rg/publicationsj~~e-briefsl:1Q16/mar/co~t-_sharing-reductions. 

11 
40 


21410.052

persist between lower- and higher-income adults (Exhibit 6). This is driven in part by the fact 

that 19 states did not expand their Medicaid programs,5 as well as dwindling resources for and 

legislative baniers to outreach and enrollment in many states 9 The Medicaid expansion, 

premium tax credits, and cost-sharing subsidies have made coverage and health care affordable 

for low- and moderate-income families who were most at risk of lacking insurance. 10 But 

afiordability remains a key issue for enrollees across the income spectrum. 11 Concern about 

affordability is the most oft-cited reason given by uninsured adults who either have not visited 

the marketplaces or have visited but not signed up for a plan. 12 Increases in both the size and 

proliferation of dcductiblcs in the marketplace and employer plans can lead to people being 

"undcrinsured"-that is, they are insured but have high out-of-pocket cost exposure relative to 

their incomes. 13 New policy options are needed to encourage people to enroll in the coverage 

options for which they are eligible and to ensure all health plans, including those offered by 

employers, provide the right incentives to enable people to get timely, high-quality health care. 

8 S. L. Hayes, S. R. Collins, D. C. Radley, D. McCarthy, S. Beutel, and J. Kiszla, The Changing Landscape of Health 

Core Coverage and Access: Comparing States' Progress in the ACA's First Year, The Commonwealth Fund, December 

2 015, http://www. com monwea lthfu nd .o rg/p u bl ications/issue-briefs/20 15/ dec/ changing -I a ndsca pe. 9 B.D. Sommers, B. Maylone, K.H. Nguyn, R.J. Bien don, and A.M. Epstein. "The Impact of State Policies on ACA 

Applications and Enrollment Among Low-Income Adults in Arkansas, Kentucky, and Texas." Health Affairs 34.6 

(2015). ~!1P,Lfc()ntg11_\ohe_a_l_thaff_a_ir:~.org/cqnte_nt/34/~Ll..QlQ.L~U. Web. June 8, 2016; A. G. Mosqueira and B. 

Sommers1 "Better Outreach Crltlcal to ACA Enrollment, Particularly for Latinos," The Commonwealth Fund 8/og, 

January 2016, h_l!.Pii2Yww.c(lffiffi{l[1"!.g?lti1J~n_cl_.g_rgLp~_lll!.\:il_ti2.'lli_QIQgl2016Lian/'pet;er-out[!'_<!.'b:.<:Lili.f.'l.l-to-<J'a.:: 

5. R. Collins, M. Gunja, and 5. Beutei,How Will the Affordable Care Act's Cost-Sharing Reductions Affect 

Consumers' Out-of-Pocket Costs in 2016? The Commonwealth Fund, March 2016, 

5. R. Collins, M. Gunja, P. W. Rasmussen, M. M. Doty, and S. Beutel, Are Marketplace Plans Affordable? 

Consumer Perspectives from the Commonwealth Fund Affordable Care Act Tracking Survey, March-May 2015, The 

Commonwealth fund, September 2015, !illP...oLL;vww.commonwealthfund.org/publications/issueS. R. Collins, M. Gunja, M. M. Doty, and 5. Beutel, To Enroll or Not to Enroll? Why Many Americans Have 

Gained Insurance Under the Affordable Care Act While Others Have Not, The Commonwealth Fund, September 

2015. 13 S. R. Collins, P. W. Rasmussen, 5. Beutel, and M. M. Doty, The Problem of Underinsurance and How Rising 

Deductibles Will Make It Worse-Findings from the Commonwealth Fund Biennial Health Insurance Survey, The 

Commonwealth Fund, May 2015, ~ttp:L/www.commonwealthfund.~ations/issuei:J_rie_ls/2015/ma'll.probleQ:l:Clf-underin_s_urance. 

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PREMIU:\1S AND MARKETPLACE STABILITY 

In the last few months, certain news reports have raised concerns about the ongoing stability of 

the marketplaces. These include stories about double-digit 2017 premium requests by several 

insurers selling plans in the marketplace and UnitedHealth Group's decision to pull out of 

several state marketplaces next year. There are several reasons why these developments don't 

portend disaster for the marketplaces. 

Most Marketplace Enrollees Won't Pay Double-Digit Premium Increases in 2017 

It is important to remember that most people who will enroll in marketplace plans in the 2017 

open enrollment period will not pay the widely reported double-digit premium increases. There 

arc a number of reasons for this. First, insurers' premium requests will be reviewed by state 

regulators and will be adjusted or even rejected in some states. Any many insurers in the same 

state are not requesting large increases. Second, 83 percent of marketplace enrollees receive tax 

credits to help pay their premiums. Most of the increases will be absorbed by those credits so 

people won't pay much more next year than they paid this year. Third, marketplace shoppers are 

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highly price-sensitive and will likely not buy the higher cost plans (Exhibit 7). 14 In the most 

recent enrollment period, 43 percent ofretuming marketplace enrollees switched plans. This rate 

is considerably higher than rates of plan switching in employer plans and among seniors in the 

Medicare prescription drug program. 15 Indeed, while many caJTiers last year also requested 

significant rate increases, and some early analyses predicted double-digit increases on average, at 

the end of the open enrollment period, people who received tax credits experienced an average 

premium increase of only 4 percent. 16 Premiums rose by 8 percent across the full group of 

marketplace enrollees. These increases are also lower than those that characterized the individual 

market before the reforms of the Affordable Care Act. 

14 S. R. Collins, M. Gunja, M. M. Doty, and S. Beutel, To Enroll or Not to Enroll? Why Many Americans Have 

Gained Insurance Under the Affordable Care Act While Others Have Nat, The Commonwealth Fund, Sept. 2015. 15 Health Insurance Marketplace Premiums After Shopping, Switching, and Premium Tax Credits, 2015-2016, 

ASPE Issue Brief, U.S. Department of Health and Human Services, 

https://aspe.hhs.gov/sites/default/files/pdf/198636/MarketplaceRate.pdf; T. Dele ire and C. Marks, Consumer 

Decisions Regarding Health Plan Choices in the 2014 and 2015 Marketplaces, Department of Health and Human 

Services, Assistant Secretary for Planning and Evaluation, October 28, 2015. 15 Health Insurance Marketplace Premiums After Shopping, Switching, and Premium Tax Credits, 2015-2016, 

ASPE Issue Brief, U.S. Department of Health and Human Services, 

~.:LL~<lchhs_,g_ov /sites/defa~tLfiL~_clfL\..~.@§LM_a_t:_k_g!~@~".B.il.!<'UJ.<if. 

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The Marketplaces are Competitive and Creating Value for Consumers 

The structure of the marketplaces and the designation of the second-lowest-cost silver plan as the 

benchmark for tax credits are promoting price competition among insurers. Research by Michael 

McCue and Mark Hall finds that projected premium increases in 2016 were lower for health 

plans sold inside the marketplaces than for those sold by carriers exclusively outside the 

marketplaces_~ 7 Carriers' profits and administrative costs were also lower inside the marketplaces 

than outside. Consumers who have plans purchased in the marketplaces are more likely to have 

plans with closed provider networks like HMOs and EPOs than those outside. These findings 

show that their premium dollars are providing them with greater overall value than is the case for 

consumers buying outside the marketplaces. While oversight is needed to ensure that consumers 

in narrow network plans have timely access to high-quality providers, 18 people in marketplace 

plans give their plans high ratings 19 and are satisfied with their choice of doctors and hospitals, 20 

despite the proliferation of these plans in the marketplaces. 

The conccm that UnitedHealth Group's departure from several marketplaces next year is 

a harbinger of more exits by insurers is overstated. Insurer participation in the marketplaces was 

relatively stable between 2015 and 2016 21 A recent review by Kevin Lucia and colleagues of 

first-quarter eamings calls by publicly traded insurers selling plans in the marketplaces suggest 

that most of these carriers remain committed to the marketplace in 20!7.22 Many report 

17 M. J. McCue and M. A. Hall, Promoting Value for Consumers: Comparing Individual Health Insurance Markets 

Inside and Outside the ACA's Exchanges, The Commonwealth Fund, June 2016, 

b!!rdlv;v;w_._c2_flJ!:ll..2~-"'e31Jth_f>'_Q_<t()rgfp_[lg_li'il!i®_~s_?__~2:121<efs/2016Li!!~-"/insuran!&excha~()J110te-value. 

:s D. Polsky and R. Rosenquist, Your Narrow Network Will Be Basic' But Wilt It Be Adequate? University of 

Pennsylvania, Leonard David Institute of Health Economics, March 9, 2016, 

http_JLI_d_i.upcnn.edu/h".althoolicyse~your-narrow-network-will-be-%E2%80%98basic%E2%80%99-will-it-beS. R. Collins, M. Gunja, M. M. Doty, and S. Beutel, Americans' Experiences with ACA Marketplace and 

Medicaid Coverage: Access to Care and Satisfaction, The Commonwealth Fund, May 2016, 

b.!!Q.JJwww .com rno Q.~__.§ a l th fund. org/pu b! i cations/issue~ brief s/2 016/ may/ a ca-tracking -survey-access-to-ea re-a ndL. Hamel, J. Firth, L. Levitt et al., Survey of Non-Group Health Insurance Enrollees, Wave 3, Kaiser Family 

Foundation, May 2016, http://kff.org/health-reform/poll-finding~Q_f-non-g~oup-health-insurance-enrolleesE. Curran, J. Giovannelli, and K. Lucia, "Insurer Participation in State-Based Marketplaces in 2016: A Closer 

Look," Commonwealth Fund Blog, January 2016, 

h tl p :(/www .corn mo nwea I thfu n J. org/pu b i i cation s/blog/20 16/ja n/i nsur er -participation-in-state-basedK. Lucia, J. Giovannelli, E. Curran et al., "Beyond UnitedHealthcare: How Are Other Publicly Traded Insurers 

Faring on the Marketplaces?" To the Point, June 1, 2016. 

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opportunities for growth, and while the composition of risk pools remains in flux, there is 

variation across canicrs, with some reporting healthier-than-expected pools. 

An Urban Institute analysis of marketplace competition in a select number of rating areas 

in 26 states suggests that carriers other than the large national insurers may be more significant 

drivers of competition in the marketplaces 23 While UnitedHealth Group participated in more 

than half of the regions the researchers analyzed, its premiums were higher relative to their 

competitors in most markets. In 20! 6, United was one of the two lowest-cost insurers in 18.5 

percent of the regions analyzed. This was true of Aetna in 16 percent of the regions and Humana 

in 6.2 percent. In contrast, Blue Cross-affiliated insurers, Medicaid insurers selling marketplace 

plans, provider-sponsored insurers, and regional insurers were far more likely to offer 

competitively priced plans. Blue Cross plans were one of two lowest-cost plans in 42 percent of 

regions analyzed. This was true of Medicaid plans in 54 percent of regions, provider-sponsored 

insurers in 28 percent, and local or regional insurers in 21 percent. 

Risk Pools Remain in Flux but ACA Premium Stabilization Programs Are Working 

The ACA's premium stabilization programs, including the temporary reinsurance and risk 

corridor programs and the pcm1anent risk-adjustment program, were designed to mitigate 

uncertainty for carriers in the initial years of the marketplaces and encourage competition on 

value rather than risk. The reinsurance program is estimated to have lowered marketplace 

premiums by 10 percent to 14 percent in 2014, 6 percent to 1 I percent in 2015, and by a smaller 

amount in 201 6 as it phases out24 The complete phase-out of that program this year will almost 

cctiainly lead caniers to adjust their rates upward to accommodate the loss. Because the riskcorridor program was ultimately implemented without federal funding, payments to caniers are 

being prorated in each year based on the balance of funds collected from insurers?5 

Consequently, for plan year 2014, plans that expected to receive risk conidor payments only 

received 12.6 percent of what they were owed under the program. 

23J. Holahan, l.J.Biumberg, E. Wengle, What Does the Failure of Some CO-Ops and the Possible Pullout of 

United Healthcare Mean for the Affordable Care Act? The Urban Institute, January 2016, 

http :/(www. urban. o rg/ research/pub I ica tion /what -does-fa ilu re-som e-co-ops-a nd-possi ble-pu !lout-unitedhe a lth care ·mean-affordable-care-act. 24American Academy of Actuaries, Drivers of 2016 Health Insurance Premium Changes, August 2015. 25 American Academy of Actuaries, Insights on the ACA Risk Adjustment Program, April 2016. 

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Recent analyses of the permanent risk-adjustment program have concluded that the 

program is working as it was intended to by transferring funds from insurers with lower-cost 

enrollees to those with sicker and higher-cost enrollccs 26 While analysts caution there is room 

for improvement, the program appears to be fulfilling its intended objective of encouraging 

insurers to compete on value rather than risk27 However, unlike the temporary reinsurance and 

risk-corridor programs, the risk-adjustment program is not intended to insure premium stability 

over time. The temporary programs were designed to address the likelihood that the initial 

marketplace enrollment would be sicker than average, given that many people were uninsured 

prior to gaining coverage and would have higher demand for care services. Over time as 

enrollment grew, the risk pools were expected to become more balanced with a mix of healthier 

and sicker enrollees. To the extent this has not yet happened, the phase-out of the reinsurance 

program in particular will lead carriers to set higher rates in 2017. 

Ongoing Need for Ensuring Stability of the Marketplaces over Time 

The ongoing stability of the marketplaces and reasonable premium growth over time will 

continue to be dependent on strong enrollment of a diverse group of people. To achieve this, 

given the large number of remaining uninsured Americans, states will need the resources to 

provide the necessary outreach and education to reach people unaware of or reluctant to visit the 

marketplaces. But more fundamentally, consumers will need to continue to view their plans as 

both affordable and providing high-value care through reasonable coverage of out-of-pocket 

costs and adequate access to high-quality providers. 

ANALYSIS OF PROPOSED BILLS 

Three bills under discussion in this hearing are aimed at addressing recent concerns about the 

marketplaces. This section provides some analysis of the proposals in the context of their ability 

to address key challenges: helping uninsured people who are eligible for marketplace and 

Medicaid coverage enroll, achieving balanced risk pools, and ensuring affordability of health 

plans and access to high-value health care for consumers. 

"American Academy of Actuaries, Insights on the ACA Risk Adjustment Program, April 2016. 27 Oliver Wyman, A Story In 4 Charts: Risk Adjustment in the Non-Group Market in 2014. 

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Proposed Bill: Changing Permissible Age Variation in Health Insurance Premium Rates 

Prior to the Affordable Care Act, insurers in the individual market generally charged older 

people higher premiums than they did younger people because their expected medical expenses 

are higher. Similarly, insurance carriers charged higher premiums to small companies with older 

workforces. Premiums varied by age by as much as 25-to-l in the individual and small-group 

markets, pricing many older adults and small businesses out of the market. 28 

While the ACA completely banned insurers from setting premiums based on health or 

gender, it allows carriers to adjust premiums based on age, tobacco use, family size, and 

geographic region, within defined limits. With respect to age, insurers are allowed to charge 

older people up to three times what they charge a younger person. This rule has had the effect of 

lowering premiums for older people who were at risk of exorbitant premiums in the individual 

market before the ACA, and increasing premiums for younger people who were viewed as far 

better health risks. In this way, the law has allowed risk to be shared in a reasonable fashion 

across the age spectrum, as intended by the principles of insurance generally. But also, by 

allowing rating on age, the law limits the extent to which younger people subsidize the costs of 

older people. 29 

There has been considerable focus on young adults in the marketplaces. On average they 

have fewer health problems than older adults and encouraging their enrollment may lead to more 

balanced risk pools. Despite early concerns that young adults might not sign up for coverage, 

enrollment of those under age 34 in both the marketplaces and Medicaid has been relatively 

strong. Recent data from the Commonwealth Fund ACA Tracking Survey indicates that among 

19-64-year-old adults, about 32 percent of marketplace enrollees in 2016 are ages 19-to-34 

which is comparable to their overall representation in the population 30 Young adults are 

disproportionately represented among adults newly enrolled in Medicaid, comprising 46 percent 

28 National Association of Insurance Commissioners and Center for Insurance Policy Research, Health 

Insurance Rate Regulation, 

http://www.insurance.naic.org/Qocuments/topics health insurance rate regulation brief.pdf. 29 Eibner C and Saltzman E, Assessing Alternative Medications to the Affordable Care Act: Impact on Individual 

Market Premiums, Santa Monica, Calif.: RAND Corporation, RR-708-DHHS, 2014, www.rand.org/t/RR708. 30 S. R. Collins, M. Gunja, M. M. Doty, and S. Beutel, Americans' Experiences with ACA Marketplace and 

Medicaid Coverage: Access to Care and Satisfaction, The Commonwealth Fund, May 2016, 

http://www,commonwealthfund.org/publications/issue·briefs/2016/may/aca·tracking-survey-access-to·care-and· 

satisfaction. 

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of enrollment among adults. The most recent HHS estimates of 2016 marketplace enrollment 

show that young adults comprised 28 percent of those who selected health plans in the last open 

enrollment period 31 

The proposed bill would increase the amount that carriers could charge older adults from 

three times to five times that of younger people. The proposal also appears to provide an option 

for states to determine their own limits. The intent is presumably to increase enrollment of young 

adults in the marketplaces. 

Christine Eibner and Evan Saltzman at RAND previously modeled a change in the ACA 

age band from 3: I to 5: l, which is the change called for in the bill. 32 The researchers found that 

while more-mostly younger-people would become insured under a 5-to-1 rate banding, it 

would come with a price tag of $9.3 billion in additional federal spending and a loss of insurance 

coverage for 400,000 older people. Premiums would increase for adults over age 47 and decrease 

for those under age 4 7. The researchers estimate that the higher limits would increase annual 

premiums for the average benchmark silver plan for a 64 year -old from about S8,500 under 

current limits to $10,600 under the 5: I rate bands, while lowering those for a 21 year old from 

$2,800 to $2, I 00. The higher premiums for older adults over age 4 7 would result in an increase 

in tax credits at a cost of $9.3 billion in federal spending. The lower premiums for younger 

people would increase enrollment in the marketplaces by 4.4 million, but 40 percent of those 

new enrollees would shift out of employer plans, mostly from parents' policies. The vast 

majority of new enrollees would have higher incomes and thus not be eligible for subsidies. The 

policy would lead to decline in employer coverage of 1.4 million, an increase in individual 

market and marketplace coverage o£3.3 million, with a net gain in coverage of 1.8 million. 

While the proposed policy change might marginally increase enrollment of young adults 

in the marketplaces, it significantly increases federal costs while leading to a loss of coverage 

31 Health Insurance Marketplaces 2016 Open Enrollment Period: Fino/ Enrollment Period, ASPE Issue Brief 

(Washington, D.C.: U.S. Department of Health and Human Services, March 11, 2016), 

~e.hhs.gov/sites/default/fileslpdf/187866/Finalenrollment2016.pdf. 

32 C. Eibner and E. Saltzman, "Charging Older Adults Higher Premiums Could Cost Taxpayers," The 

Commonwealth Fund Blog, Sept. 15, 2015, 

http://www. com m o nwea lthfun d .org/p u blica tio ns/blog/20 15/ sept/ charging -older -adults-higher-premium s-ea u I dcost-taxpayers. 

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among older adults. In addition, there is also no guarantee that these new enrollees will in fact be 

healthier than average. Since carriers arc allowed to rate on age, but barred from rating on health, 

swapping out older adults for younger adults may in some cases leave them more exposed to 

risk. Prior research by Eibncr and Saltzman finds that young adults arc only slightly more likely 

than older adults to have a positive effect on risk pools. 33 

Proposed Bill: Requirement of Verification for Eligibility for Enrollment During Special 

Enrollment Periods 

The A!Tordable Care Act's insurance market reforms have vastly improved the ability of older 

people or those with health problems to gain health insurance coverage. In 2010, the 

Commonwealth Fund Biennial Health Insurance Survey found that an estimated 9 million adults 

who had either purchased a plan or tried to buy a plan in the individual insurance market were 

turned down, charged a higher price, or had a service excluded from their policy because of a 

preexisting condition 34 To prevent people from enrolling in coverage only when they most need 

it, the law also included an individual mandate and defined open enrollment periods. People who 

miss the chance to enroll during open enrollment have to wait until the following year. 

But because most people continue to have coverage through an employer and millions 

lose it throughout the year because of job loss or change, loss of a spouse/partner or parent, and 

other life changes, the ACA included special enrollment periods (SEPs) outside the open 

enrollment period to provide a means for people to gain health insurance when they lose other 

fonns of coverage or experience other life changes such as moving to a new state or a birth. 

But a recent analysis by the Urban Institute suggests that only a fraction of people who 

are likely eligible for a SEP actually request them. The analysis estimates that12.9million 

people will experience a SEP-qualifying event in 2016, lose their coverage, and remain 

uninsured for the remainder of the year. Of those, 9.7 million would qualify for a SEP because of 

" Eibner C and Saltzman E, Assessing Alternative Modifications to the Affordable Care Act: Impact on 

Individual Market Premiums, Santa Monica, Calif.: RAND Corporation, RR-708-DHHS, 2014, 

S. R. Collins, M. M. Doty, R. Robertson, and T. Garber, Help on the Horizon: How the Recession Has Left 

Millions of Workers Without Health Insurance, and How Health Reform Will Bring Relief-Findings from The 

Commonwealth Fund Biennial Health Insurance Survey of 2010, The Commonwealth Fund, March 2011, 

lillQ:f jwww. com m o nwea !thfu n d .org/publ ication s/fu n d-re porteJ.;lO 11/m a r /11 el p·on-thg:J.'S'_r.i zan. 

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a job loss. An additional 20.6 million people this year are estimated to be able to usc SEPs to 

prevent temporary coverage gaps. Of this group, the vast majority (18.2 million) qualify because 

of a job change and would otherwise be uninsured in the period between the end of one job and 

the beginning of another in same year. But based on 2015 CMS data, the Urban Institute 

estimates that fewer than 15 percent of uninsured people who are eligible for a SEP are enrolling 

through one. 

The Department of Health and Human Services provided guidance for SEPs in 

regulations in 2012 and has amended them in each year sincc 35 This year, CMS has made 

several adjustments to the SEPs in response to insurer complaints that people who enrolled 

through the SEPs had greater health care needs than average and that some stayed in plans only 

long enough to get the care they needed. CMS eliminated seven SEPs, narrowing the number to 

the current six. The six SEPS arc for : losing other qualifying coverage; changes in household 

size like marriage or birth; changes in residence, with significant limitations; changes in 

eligibility for financial help, with significant limitations; defined types of errors made by 

marketplaces or plans; and other specific cases like cycling between Medicaid and the 

marketplace or leaving Americorps coverage. CMS also tightened some mles for SEPs including 

requiring that individuals who request a SEP hecause of a permanent move must have minimum 

essential coverage for one or more days in the 60 days preceding the move, unless they were 

living outside of the United States or in a United State territory prior to the permanent move. 

CMS notes that this ensures that individuals are not moving for the sole purpose of obtaining 

health coverage outside the open enrollment period. But such requirements would not apply to 

those who moved and were previously incarcerated or were in the coverage gap in a Medicaid 

noncxpansion state. 

CMS this year has also introduced a new confim1ation process for SEPs requiring all 

consumers applying through the most common special enrollment periods to submit 

documentation to verify their eligibly to use a SEP. This becomes effective June 17, and CMS 

has posted examples of the SEP eligibility notices that people will receive when they request one 

of five SEPs. These notices include the list of documents people need to prove they are eligible 

35 Timothy Jost, After Insurer Complaints, Small Steps to Toughen Special Enrollment Period Eligibility 

(Update), Health Affairs Blog, January 20, 2016. 

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for a SEP, such as letters from employers in the case of loss of coverage, leases or rental 

agreements in the case of a move, medical records in the case of a birth, adoption letters, and 

marriage certificates, among a long list of other documents. People can still enroll in coverage 

while the verification process is being conducted but there are tim1 deadlines for submission of 

the required documents that trigger loss of eligibility or coverage if missed. 

In another adjustment that recognizes catTier reports of higher-than-average claims costs 

of those enrolling through SEPs, CMS is making a change to its risk adjustment program for the 

2017 plan year that includes an adjustment factor for partial-year enrollees. As Tim Jost has 

pointed out, at least one of the SEP qualifying events-that is, birth-triggers higher than 

average costs by definition. 

The proposed bill under discussion would also require the Secretary of HHS to institute a 

verification process for SEPs. The proposal goes a step further than the new CMS confirmation 

process: people requesting a SEP would not be allowed to enroll in coverage until they have 

submitted the required documentation. 

CMS's tightened mles and new confirmation process should help allay insurers' concerns 

about abuse. Tbe new 2017 adjustment factor in the risk-adjustment program for partial year 

enrollees should also help protect insurers for greater cost exposure associated with the SEPs. 

But it seems that the provision under the proposed bill that prevents people from enrolling prior 

to the provision of documents could unnecessarily discourage those qualified for a SEP from 

enrolling. This could have the effect of lowering potential enrollment in the marketplaces. Even 

the new CMS process could have this effect for many people. Ironically, by setting a higher bar 

for verification, both processes could discourage those who are the least motivated to gain 

coverage~,~the healthiest~~ from completing or even starting the enrollment process.'6 Both 

processes could also disproportionately affect people with low incomes and possibly multiple 

jobs. For such people, the process of producing the necessary documentation might be the most 

difficult. 

36 Sarah Lueck, To Make Marketplaces Work Best, Enroll More People- Not Fewer, Center on Budget and 

Policy Priorities, January 2016. 

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Tighter verification standards thus could lead to even lower enrollment through the SEPs 

and therefore lower enrollment overall in the marketplaces. Only the most motivated people 

eligible for SEPS-thosc who are the most in need of health care---might enroll, leading to less 

healthy risk pools. Given these potential adverse outcomes, it might be prudent to assess the 

effects of the new CMS verification process and narrower definitions ofSEPs before imposing 

more restrictive requirements on those potentially eligible for them. 

Proposed Bill: To Better Align the Grace Period Required for Nonpayment of Premiums 

Prior to the ACA, the vast majority of uninsured Americans had low or moderate incomes. This 

is why the law's major coverage expansions with subsidized marketplace plans and broadened 

eligibility for Medicaid were aimed at making insurance and health care affordable for people 

with incomes under 400 percent of poverty. Accordingly, people with the lowest incomes have 

made the greatest gains in coverage, but, for reasons explained previously, the gap in coverage 

between low- and higher-income adults persists. 

People enrolled in marketplace plans who arc eligible for tax credits must pay monthly 

premiums to insurance companies that are defined as a share of their income. The federal 

government pays the balance of the premium to the insurance company in the fonn of an 

advance premium tax credit. Recognizing that people with modest incomes might struggle in 

some months to pay their premiums, the law allows a three-month grace period for someone who 

1:1ils to pay their premium in a given month. While some have suggested that people use the 

grace periods to game the system and get free coverage, the actual rules governing the grace 

period are highly restrictive and are aimed at discouraging such behavior. 

When someone with subsidized marketplace plan fails to pay their premium, it triggers a 

three-month grace period37 The insurer still receives the tax credit for the enrollee from the 

federal government and is responsible for any claims incurred in that month. But if the enrollee 

still fails to pay his premium in the second and third months, the can-ier is not obligated to cover 

any claims costs. If the enrollee still hasn't paid premiums for months one through three, the 

can-ier can retroactively terminate his coverage as of the last day of month one. When coverage 

37 Edwin Park, Key Facts You Need to Know About: Premium Payments and Grace Periods, Center on Budget 

and Policy Priorities, December 3, 2015. 

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is tcnninated at the end of the third month, the tax credits for months two and three are returned 

to the Treasury. The insurer keeps the premium tax credit for the first month when claims were 

paid, but the enrollee has to pay back the tax credit amount through the premium reconciliation 

process on his tax returns. He also still owes his share of the premium to the insurer for the first 

month. 

The complexity of the grace period and the burden of the potential penalty for failure to 

pay (i.e., pay back of the tax credit while still owing his share of the premium) seems to provide 

a considerable disincentive for people to game the system. There is no publicly available 

evidence showing that people are using the grace periods to get fl·ec coverage. In fact, given the 

complexity of the grace-period rules, it is very likely that consumers with tax credits may not be 

aware of the three-month period and may assume that failure to pay in one month effectively 

tenninates their coverage. 38 Data on grace periods also indicate that people often enter them 

unwittingly, such as through the failure to cancel a marketplace policy when one becomes 

eligible for Medicaid. 

The proposed bill reduces the ACA grace period for marketplace enrollees from three 

months to one month. Such a policy change could mean a loss of enrollment in the marketplaces 

among enrollees of modest means and an increase in the number of people who are uninsured or 

have gaps in their coverage. Given the lack of evidence of abuse of the three-month grace period. 

the loss of enrollment might not be offset by any clear gains for insurers. And like the more 

onerous requirements in the bill proposed for new verification requirements, the policy change 

also would seem to also favor those who are most motivated to retain their coverage- those in 

poorer health. 

CONCLUSION 

Overall, the insurance provisions of the Affordable Care Act have been successful in achieving a 

number of goals including substantial declines in the number of uninsured Americans, and 

nationwide declines in out-of-pocket spending growth, cost-related problems getting care, and 

medical bill problems. The majority of enrollees in both marketplace plans and Medicaid are 

38 Edwin Park and Tara Straw, Center on Budget and Policy Priorities, personal communication. 

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satisfied with their health plans and their doctors. The marketplaces are competitive and appear 

to be producing value for consumers. The law's premium stabilization programs have mostly 

worked as intended with the exception of the risk-corridor program, which was barred from 

using federal dollars last year. 

But challenges remain. They include: 

lack of Medicaid expansion in 19 states 

need for ongoing effm1s to reach uninsured people who arc eligible for 

enrollment in both Medicaid and marketplace plans 

ensuring that consumers in marketplace plans and Medicaid have insurance that 

is affordable and designed with incentives and protections that encourage timely 

access to high value health care 

ensuring the stability of the marketplaces and reasonable growth in premiums 

over time. 

It is encouraging that the Committee is considering ways to improve the marketplaces and help 

consumers get affordable insurance and health care. In the end, the fundamental purpose of the 

marketplaces and the Medicaid expansion is to provide coverage to those who lack health 

insurance and thus cannot get needed care, and are currently suffering unnecessarily as a result. 

Thank you. 

25 
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Mr. PITTS. The chair thanks the gentlelady. 

That concludes the opening statements of the witnesses. We will 

now begin questioning, and I will recognize myself 5 minutes for 

that purpose. 

Ms. Turner, in my opening statement I spoke about the tremendous premium increases that are dominating headlines across the 

country, and we are looking for some solutions to this. In your testimony, you said that the President’s healthcare law was designed 

to provide people with choice. Would you expound on that, explain 

that? Under current law, do you think patients have choice? Please 

elaborate. 

Ms. TURNER. Increasingly, unfortunately, Mr. Chairman, they 

don’t, because many of the plans are dropping out in areas where 

they find that they are losing too much money to stay in the exchange market even though they made a commitment earlier on to 

try to participate in this marketplace. And one of the reasons is 

particularly because of the gaming of the system that that these 

bills are designed to address. 

I think it is very important, if we want to have a stable market 

of more affordable coverage, that these bills help stabilize the market. I know that there was a consumer advocate quoted in that 

New York Times article today from Pennsylvania who said that 

over time these markets will stabilize, that this is just a spike, because people are getting care that previously did not have health 

insurance. But it is not going to stabilize if people only pay their 

premiums when they need coverage and if they have paid their 

premiums for only 9 months and try to get 12 months of coverage. 

So I am concerned this is going to actually exacerbate problems 

going forward if these bills aren’t allowed to address the problems. 

Mr. PITTS. And in addition to the premium increases, what about 

the deductibles? Can you speak to that? 

Ms. TURNER. The deductibles are much higher. Many people are 

faced with a $6,000 deductible. They are paying $500 a month in 

premiums. And $12,000 out of pocket is often more than their 

mortgage payments. And so increasingly we have got to address 

this to give people more choices rather than the cookie-cutter kinds 

of plans that the ACA requires. 

Mr. PITTS. Thank you. 

Mr. Holtz-Eakin, you remarked that the President’s law was 

signed with the goal of providing accessible, affordable health insurance. And I mentioned my home state, the percent increase in 

premiums for individual plans. And the numbers provide factual 

evidence that plans have little room to innovate and adapt in today’s government-controlled exchange market. Might the bills in 

front of this committee today lead to lower patient cost as a result 

of giving states flexibility and plans the fairness to innovate? 

Would you elaborate on that? 

Mr. HOLTZ-EAKIN. I think that is right. Our estimate, for example, of the benefits of allowing wider age rating bands is that something like three million younger Americans might be able to move 

into the exchanges. That would be an incredibly valuable addition 

of low-cost purchasers into these exchange pools. 

One of the deep concerns that I have is that we are seeing these 

exchange pools become progressively more expensive, that we are 

55 

not in a dramatic death spiral yet, but we are moving in that direction. That serves no one well. Those who remain in the pools pay 

higher premiums. Others are excluded from health insurance coverage that was the basic goal of the law. 

Finding ways to innovate and allow low-cost insurance options 

instead of four colors that are getting increasingly expensive I 

think would be a very valuable thing, and the approaches that the 

committee has in front of it are a start on that course. 

Mr. PITTS. Ms. Turner, you mentioned that everyone must play 

by the rules. Can you talk a little bit about how people are gaming 

the system that hurts working families who are playing by the 

rules? 

Ms. TURNER. I think that is really the important point, is that 

those people who figured out that they can get 90 days of coverage 

after they stop paying premiums, that really hurts the people who 

are playing by the rules and paying a full year’s of premiums to 

get their coverage. 

So increasingly people will figure out: Oh, well, I can stop paying 

my premiums on October 1 and I can still get coverage until the 

end of the year and I can then go back and enroll in the same plan 

without having to pay the back premiums. That means that the insurance company has to build that nonpayment of premiums into 

the premium costs for next year, which gets to the problem that 

you asked Dr. Holtz-Eakin about, is that fewer and fewer people 

buy the coverage, making it more expensive for everyone. 

Mr. PITTS. And real quickly, so it is your view that giving states 

flexibility on grace periods and age bands, while tightening the special enrollment periods, could lead to lower costs for families? 

Ms. TURNER. Absolutely. And states have much more experience, 

decades of experience, in learning that those kinds of regulations 

really do help to stabilize the market so it can become more affordable. 

Mr. PITTS. My time has expired. 

The chair now recognizes the ranking member, Mr. Green, 5 

minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

And thank our panel for being here. 

Prior to the ACA, the individual market was deeply broken. And, 

again, having worked in health insurance, which wasn’t regulated 

in Texas, we did regulate some policies, but the ACA has made 

great strides and to make coverage more meaningful and affordable 

and expand access and stabilize the individual insurance market. 

Many of the challenges in the individual market are intrinsic to the 

market and have been around long before the ACA. One example 

is this churn. It is a term describing people moving in and out of 

coverage every year. 

Dr. Collins, can you talk about the churn and how the individual 

market was previously broken and why changes like churn are not 

unique and will continue to happen? 

Ms. COLLINS. That is absolutely correct. The individual market 

has long been characterized by high rates of turnover. But prior to 

the Affordable Care Act it was extremely difficult for people to get 

policies when they tried to buy them. They were very expensive. 

People were priced out of coverage if they had a preexisting condiVerDate Nov 24 2008 13:31 Aug 31, 2017 Jkt 037690 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-151 CHRIS
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tion, or even turned down. We estimate, the Commonwealth Fund 

Biennial Health Insurance estimates that about nine million people 

who tried to buy a plan in 2010 were turned down or charged a 

higher price or had a preexisting excluded because of their health 

and didn’t end up buying a plan. 

So the market was broken prior to the Affordable Care Act. The 

provisions that have been put in place under the law have made 

it vastly more accessible for people with health problems and people who have low incomes and couldn’t afford to pay a premium. 

Mr. GREEN. OK. Of the legislative type proposals we are considering, I am particularly concerned about the bill that would change 

the current 90-day grace period to 30 days. It is worth mentioning 

that Medicaid Advantage has 60-days grace period, Medicaid has 

a 60-day grace period. After reading the bill, I am worried my colleagues have become focused on that fraction of the people who try 

to game the system that historically have always tried to game the 

system, and that they have forgotten the realities of everyday life. 

Under this bill, a person who is eligible for an advanced premium tax credit misses a single premium payment, they would lose 

their insurance after 30 days and not be able to get coverage until 

the next enrollment period. I understand the need for oversight, 

but especially for this population we should be looking for ways to 

keep people insured and not the opposite. 

Dr. Collins, can you talk a bit about the population that is eligible for this advanced premium tax credit? 

Ms. COLLINS. Right. So people who are eligible for the tax credits 

have incomes under 400 percent of poverty, low and moderate incomes. The vast of people who are currently receiving tax credits 

have incomes even lower than that, more in the 250 percent of poverty and below. 

I would also like to correct some statements that have been made 

about how the grace period works. Carriers are only on the hook 

for the first month of nonpaid premiums and they get a tax credit 

to cover those expenses, this claims cost in the first month. They 

are not on the hook for the second and third months of that grace 

period. They receive a tax credit, but they do not have to pay 

claims costs. Those tax credits have to go back at the end of the 

year. 

Also, individuals who don’t pay their premiums for the full time 

of the grace period have to pay their tax credits back for that first 

month and also continue to owe the premium paid in that first 

month. So it is not true that carriers are on the hook for those 

claims costs in the second and third months when they are not receiving reimbursement. 

Mr. GREEN. OK. What impact do you think this policy would 

have on consumers in the risk pool? 

Ms. COLLINS. One of the biggest issues with enrollment right 

now is that we need to encourage people to come in rather than 

discourage them to come in. What a more restrictive grace period 

would do would make it more likely that healthy people would drop 

out because of failure to pay a premium in the first month. People 

who are highly motivated to stay in, the less healthy people, would 

likely try to make that premium payment in that first month and 

57 

stay in. So it would skew the risk pool away from healthy people 

and more towards sicker people. 

Mr. GREEN. Well, one of the concerns I have on this legislation, 

some of it may be adjusted, but the biggest concern I have is in 

our district in Houston, Texas, I have 50,000 people who would be 

covered if the State of Texas expanded Medicaid. I think that is 

something we ought to be concerned about instead of that. 

But also what happened because of the Supreme Court decision, 

we have people who are not poor enough to get Medicaid, but they 

also don’t earn enough money to get the subsidies. So they are 

caught in the middle, and that is something maybe we ought to 

look at and see how we can fix that for these people who are not 

the poorest of the poor but very close to it, because in Texas you 

have to be pretty destitutely poor to get Medicaid. 

Mr. Chairman, thank you for the time. 

Mr. PITTS. The chair thanks the gentlemen. 

And I now recognize the gentleman from Pennsylvania, Dr. Murphy, 5 minutes for questions. 

Mr. MURPHY. Thank you, Mr. Chairman. 

I thank the panel too for being here to give us some important 

insights. 

One of the subcommittees of this overall committee, the Oversight and Investigations Subcommittee, which I chair, has been 

conducting some pretty robust oversight over the state exchanges 

for more than a year. And specifically the subcommittee has been 

and continues to examine the expenditure of Federal funds on 

state-based exchanges’ activities and long-term sustainability challenges that these State exchanges face. And another significant 

component of this work is examining CMS’ oversight over these. 

Ms. Turner, in its oversight of the state exchanges, the subcommittee has held hearings and requested CMS on the statebased exchanges produce documents and information to our subcommittee and to the full committee. But most recently the subcommittee released a report detailing Acting Administrator 

Slavitt’s misleading testimony before the O&I Subcommittee on December 8, 2015, about $200 million supposedly being returned from 

state-based exchanges. 

Based on its ongoing oversight, our committee remains very concerned about the long-term sustainability challenges the statebased exchanges face and CMS’ lack of oversight over them. So 

given all this, I want to ask you, do you believe that CMS is performing adequate oversight over these state-based exchanges. 

Ms. TURNER. I don’t believe that there is significant evidence 

that they are. I believe that they have their hands full with many 

of the other provisions of trying to run this law and I think oversight of the states has really been lax. In particular with the failed 

state exchanges, they should have probably been more alert in the 

beginning to begin to see that States like Oregon and Maryland 

and Massachusetts were failing. 

And I commend you for the report, because when Acting Admin- istrator Slavitt said that about $200 million had been returned and 

your committee found that his own data showed that only a little 

bit more than $21 million had been returned, I do think that they 

need to square what one CMS agency is saying with what the AdVerDate Nov 24 2008 13:31 Aug 31, 2017 Jkt 037690 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-151 CHRIS
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ministrator is telling Congress and really get to the bottom of that. 

The taxpayers require that. 

Mr. MURPHY. Yes. And it is very important to us. Look, we want 

to make sure people have adequate health care, but between that 

unaccountability and other errors and fraud, we have heard from 

CMS that billions of dollars are unaccounted for. It is a problem 

for us. So what steps would you recommend that Congress take to 

make sure we have adequate oversight of these? 

Ms. TURNER. Well, I think what you are doing with the hearings 

and with the oversight, and if it requires subpoenas to get the information about why there is this disconnect between what he is 

telling you in your hearings and what the reports are showing, I 

think that the taxpayers need to have that information. Continued 

oversight, I think, is tremendously important. Thank you for that. 

Mr. MURPHY. So given that, are there any indications that CMS 

is actively trying to recoup taxpayer dollars that were provided to 

states for the purpose of providing these state exchanges? Do you 

see any evidence? We would like to know if there is anything positive. 

Ms. TURNER. Well, I understand that they have provided some 

very limited and highly redacted memos to your committee. It does 

not appear that they are being as responsive as they need to be in 

order, once again, to make sure that taxpayers are being well 

served and their money is being spent on the intent of this law, as 

you point out, to provide affordable coverage to millions of people. 

Mr. MURPHY. Thank you. 

Mr. Holtz-Eakin, good to see you again. I have a question for you 

on this issue about the most expensive plan can only cost three 

times more than the least expensive plan when it comes to the patients’ ages, and this 3:1 band has led to some problems. 

I received a letter from an association last evening that said 

modifying age variation in premiums would help balance risk pools 

and stabilize markets, and that is one of the bills this committee 

is reviewing. Is it fair to say that working families and sick patients would benefit from other balanced risk pools and stabilize 

the marketplace overall? Do you think so? 

Mr. HOLTZ-EAKIN. I believe so. I am concerned that we will see 

these exchange pools become increasingly unbalanced and thus expensive for those who remain in them and crowding some people 

out—— 

Mr. MURPHY. Particularly the younger? 

Mr. HOLTZ-EAKIN [continuing]. And working families unable to 

purchase insurance. That is at odds with the intent of the law. And 

I think stabilizing the pools is a priority. 

Mr. MURPHY. So one of the things we keep coming up with in reality, as was described among the panel here too, is that people 

may sign up for something and then drop it. It is sort of like people 

will buy car insurance when they need to get their car, and then 

they drop it immediately afterwards. I experienced that once being 

hit by a driver who dropped their car insurance. Didn’t help me at 

all. 

But the issues here, do you think that lowering that price and 

balancing those risk pools will be an enticement to have people 

stay in with insurance? 

59 

Mr. HOLTZ-EAKIN. I do. I know there is an immediate concern 

about the older consumer under this proposal, and I understand 

that. But those consumers of exchange insurance are going to be 

increasingly harmed by unbalanced risk pools. It is in their longterm interest to get the young and healthier into the pools. This 

is one way to do that. 

And in the end, if you look at all of the things that are being considered in this front, costs don’t go away. If they are not paid by 

an insurance company, they are going to be put into providers’ 

rates and they are going to show up in insurance premiums regardless. And so having people pay for the medical costs they incur 

through the insurance that they have bought is the primary objective and anything that aligns those incentives you should pursue. 

Mr. MURPHY. Thank you. 

I yield back. Thank you. 

Mr. PITTS. The chair thanks the gentleman. 

Now I recognize the ranking member of the full committee, Mr. 

Pallone, 5 minutes for questions. 

Mr. PALLONE. Thank you. 

The Affordable Care Act has made great strides in expanding 

health coverage to an additional 20 million Americans, but there 

are still Americans who we have not reached. Unfortunately, 2.9 

million Americans lack coverage because their states have not expanded Medicaid. But in the private insurance market there are 

still more than 10 million Americans who are uninsured and eligible for marketplace coverage, and 7 million of them are eligible for 

tax credits to help them pay their premiums. 

Before we consider revising or even backtracking on the progress 

we have made, one important thing we can do to stabilize the individual insurance market is to grow it, and we need to reach these 

people so that they know they are eligible. And the more people enrolled, the greater the risk pool, and the more stability we will see. 

So my questions are of Dr. Collins. What can we do to reach the 

uninsured? Can you describe the importance of outreach efforts and 

navigators and the role that you might see navigators occupying as 

we move forward? 

Ms. COLLINS. A lot of research has shown that outreach is critical 

to both letting people know about what their options are and helping them enroll. We see greater enrollment among people who get 

assistance in the enrollment process. 

I also think on the issue of young adults, this is particularly important. Most young adults who are eligible for coverage under the 

law have incomes that make them eligible for the tax credits, incomes that make them eligible for Medicaid. But disproportionate 

numbers of people enrolled in Medicaid are actually young people. 

So the change in the rate banding really won’t have much of an 

effect on enrollment of young people. It is really getting young people to enroll in the marketplaces and find out that they are eligible 

for subsidies, find out that they are eligible for Medicaid. States expanding their Medicaid programs would also significantly increase 

enrollment of young adults in the pools. 

The other important point about young adults is that they actually are a relatively large percentage of people enrolled in the marketplace. It is about 30 percent of people currently enrolled in marVerDate Nov 24 2008 13:31 Aug 31, 2017 Jkt 037690 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-151 CHRIS
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ketplace plans are between the ages of 19 and 34. Forty-six percent 

of those enrolled in Medicaid among the adult population are young 

people. 

So it is not really true that we don’t have any young adults in 

the marketplace. This is actually a pretty sizeable number of people who are enrolled who are in that age group. 

Mr. PALLONE. Now, what about navigators, do you want to talk 

about that and what role they could play as we move forward? 

Ms. COLLINS. So navigators continue to be very important. We do 

see that people are much more likely to understand the options 

they have available to them when they are choosing marketplace 

plans if they have some assistance. People are much more likely to 

complete the enrollment process if they have navigation. 

Mr. PALLONE. Now, I use that term ‘‘navigators.’’ How would you 

define ‘‘navigators,’’ basically? 

Ms. COLLINS. Basically someone who helps people through the 

enrollment process. Brokers can also help people through the enrollment process and they have also been critical to getting people 

enrolled. 

Mr. PALLONE. Just talk about insurance brokers. I think a lot of 

people don’t even realize they can still use an insurance broker. Is 

that an area where maybe we need to do more, to have actual insurance brokers play a bigger role? 

Ms. COLLINS. So brokers can absolutely help people enroll in 

plans. They have been critical. They have also been very important 

for small businesses getting coverage under the—— 

Mr. PALLONE. But even for an individual, can use a broker, 

right? 

Ms. COLLINS. Even individuals can use a broker. 

Mr. PALLONE. But not that many do, it seems. I am just doing 

anecdotally. I don’t have any statistics. But it seems to me that 

people in the individual market rarely go to brokers. 

Ms. COLLINS. Right. So part of the outreach efforts could be to 

inform people that they can get help if they aren’t able to do it on 

their own. 

Mr. PALLONE. All right. Then the last question, would the bills 

before us today help to enroll the uninsured in any way? 

Ms. COLLINS. The bills today would likely have a depressing effect on enrollment, particularly the change in the special enrollment periods, making people provide documentation. We know that 

very few people are actually using special enrollment periods. They 

were designed expressly for people who lose coverage between open 

enrollment periods and most of those are as a result of a job loss. 

And so we should be trying to make this process easier, make people aware of it. 

The reduction in the amount of time for the grace period would 

also likely lead to a loss of enrollment in the marketplaces and 

probably among less healthy people. The rate banding change 

would mostly affect older adults. Many of them would see their 

costs go up exponentially. They actually will pay much more in premiums than their average expenses. 

And there would be only a marginal effect on enrollment of 

young adults. And most of the change in the enrollment of young 

61 

adults that Rand is showing comes from a shift out of employer 

coverage and into the marketplaces. 

Mr. PALLONE. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

Dr. Burgess, 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. 

And, first off, let me just address the special enrollment period. 

I can remember some hearings we had in the past and maybe even 

some forums we did in the Health Caucus where we talked about 

community rating and guaranteed issue and the experiments that 

were tried in some states in the 1990s and the predictable effect 

of escalating premiums and then, subsequent, people dropping out 

of coverage. 

It did come up in my district. We had a constituent case earlier 

this year. Right after the closure of the open enrollment period, a 

fellow who actually has a medical background in my district—he is 

a pharmacist, and he called, and he said, ‘‘One of my employees is 

really, really sick. I am afraid she might have cancer. She has no 

insurance. Do you have any advice for me?’’ And I said, well, the 

open enrollment period had just closed. Why didn’t you encourage 

her to buy insurance then? He said, ‘‘Well, she wasn’t sick then.’’ 

And, that just kind of underscores—here is, again, someone with 

some medical knowledge. It just underscores the difficulty of what 

the special enrollment period can engender. Now, this individual, 

it turns out, our office helped, and she did have a legitimate claim 

to a special enrollment period and did receive the retroactive coverage. 

I have an e-mail that I received from healthcare.gov, and I don’t 

know if you can read that well enough, but I actually had an unsubsidized individual market policy in the Federal fallback exchange in Texas. And I had that for a couple of years until it got 

too expensive and I had to find something else. But it was hard to 

get into ObamaCare, and then it was hard to get out of. And I do 

want to stipulate, this was unsubsidized. These were my own dollars that I was paying for this coverage. 

Three months, 4 months after I have left ObamaCare, I am getting these e-mails. ‘‘The open enrollment period is closed, you 

missed your chance, but, doggone it, you can still get in.’’ And there 

is a big, yellow button there that you can click on, and we can perhaps help you find a backdoor back into ObamaCare if you would 

like. 

Now, the good news for people who are worried about us spending too much money, the yellow button didn’t work, and so there 

wasn’t really a way back in. 

But it just underscores the problem that we have with the special enrollment period. It really does lead to, again, what was found 

to be a very difficult time in an experiment with guaranteed issue/ 

community rating in some States that tried that back in the 1990s. 

I just wondered, Ms. Turner or Dr. Holtz-Eakin, if you had any 

thoughts on that. 

Ms. TURNER. This really gets to what you said earlier, Dr. Burgess, about where is this going. And I think that you have to look 

at the incentives that these provisions allow. They allow people to 

62 

wait until they are sick to get coverage. They allow people to really 

game the system in a number of different ways. 

And if people figure out they can do that, then you are going to 

wind up with unstable pools, you are going to wind up with higher 

and higher costs, and someone has to pay those costs. Maybe most 

of the people in the exchanges are subsidized, but the taxpayers 

are paying those costs. So, one way or the other, we are going to 

be paying for laws that encourage people basically to do the wrong 

thing. 

The individual mandate was designed to try to keep people— 

have insurance and can keep it, but these provisions really undermine that goal and, I think, undermine, therefore, the goal of the 

law. 

Mr. BURGESS. Well, and I of course opposed the individual mandate and continue to oppose it, but I guess it begs the question, is 

the individual mandate just not harsh enough? Are we not penalizing people enough to force them into these insurance policies? 

Ms. TURNER. Doug Holtz-Eakin mentions that in his testimony. 

Mr. HOLTZ-EAKIN. We testified last year on alternatives to the 

individual mandate, because it is clear it is not doing what it was 

intended to do in principle. And so some other approaches might 

be necessary. 

I mean, I think the history of those states that had guaranteed 

issue/community rating speaks for itself. I lived in New York State, 

and that was an insurance market that had self-destructed, and 

there is not a happy history on that. 

I think it is ironic that we are having this discussion today about 

shifting costs and there are some who would defend the cost shift, 

because the entire Affordable Care Act was premised on the notion 

that it was inappropriate to have these cost shifts and we had to 

get everybody in the pool. That same principle should apply in the 

discussion today. 

And it is also important to recognize, as a matter of arithmetic, 

you can’t count on the tax credits to cover all ills. ACA spending 

is projected to grow at a rate of 7.7 percent per year over the next 

decade—much faster than our economy, much faster than revenue, 

which is going to be 4 percent, and the most rapidly growing Federal health program. There are not infinite dollars to solve all problems. 

Mr. BURGESS. Thanks, Mr. Chairman. I hope we will have time 

for a second round. I will yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Thank you very much. 

Thank the witnesses for being here. 

And I want to yield just a few seconds to Gene Green, because 

he wanted to follow up on a point. 

Mr. GREEN. After this exchange, I have been around a while. It 

seems like in the 1990s the Heritage Institute is the one who recommended the individual mandate because people ought to be selfreliant. Is that correct? Do you all remember that statement? 

Ms. TURNER. The Heritage Foundation did. And they—— 

Mr. GREEN. Seems like in 1993 and 1994—— 

Ms. TURNER [continuing]. Have since rescinded that. 

63 

Mr. GREEN [continuing]. When we had the Clinton plan that that 

was one of the recommendations for that, so—but anyway. 

Thank you, and thank my colleague for yielding. 

Ms. CASTOR. Thank you. 

Well, thanks again. 

It is very important for us to continue to focus on improving the 

Affordable Care Act, but you can’t deny the success on behalf of the 

families we represent back home. I mean, we are at the lowest uninsured rate in the history of the country, at about 9 percent. That 

is pretty remarkable, and that has been a godsend to so many families. The ability to end discrimination in health insurance so that 

our neighbors and family members with a cancer diagnosis or some 

serious preexisting condition, they now can access affordable health 

insurance. 

The policy that you buy is so much more meaningful than what 

it used to be in kind of this scattershot pre-ACA market. Plus, the 

policies usually promote better health because we focus on wellness 

and there are certain incentives for preventative care, like no copays for certain things. 

And then all of my neighbors that rely on Medicare, Medicare is 

stronger now after the Affordable Care Act. And one of the stats 

that I love for the State of Florida is how much money the ACA 

has helped put back into the pockets of my older neighbors—it is 

about $980 million—just because of the closing of the doughnut 

hole and their savings on prescription drugs. 

Also, in Florida, we were the leader in the Federal exchange. We 

had a very high uninsured rate, a completely unbalanced market. 

So 1.7 million Floridians now have been able to access affordable 

coverage. And it is important to focus on the cost. In Florida, 72 

percent of the Florida marketplace enrollees obtained coverage for 

$100 or less. That is after the tax credits. 

And the competition is key. And in some states that don’t have 

these robust marketplaces, one of the things we need to focus on 

is how we incentivize greater competition. In Florida, consumers 

could choose from an average of 42 health plans for 2015, and we 

think this coming year it will be about that, if not a larger number 

of issuers and plans. 

And Ms. Collins is right that, prior to the ACA or as we were 

working through the early years, people were very concerned that 

younger folks would not enroll, but it is not true now. We have 

been pleasantly surprised that it is pretty balanced, and in Florida 

about 525 consumers under the age of 35 are signed up for marketplace coverage. That is 33 percent. So that is pretty good. 

So, as a reminder, open enrollment begins November 1. Go to 

healthcare.gov to check out your options. 

Americans are doing what they do best: they are going shopping. 

It is another surprise that they are actually looking at these plans 

and switching. We thought that many people would just stick with 

that one issuer, but they are pretty discerning if they have the information they need. So that is another area where we could work 

together to improve, to ensure people know the providers and the 

doctors that are being offered. 

But I would like to focus on premiums, because I think we all 

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changes remain affordable. But I worry that the bills that are 

under discussion today will actually increase costs and also harm 

access to insurance. 

And I am afraid that some of the headlines in the press sensationalize the premium rates and confuse consumers. For example, 

despite headline predictions in 2015 that, based on preliminary 

rate filings, there would be double-digit rate hikes in the marketplaces in 2016, the average cost of marketplace coverage for people 

getting tax credits went from $102 last year to $106, a 4-percent 

change, just $4 per month. And, in Florida, the premiums rose only 

2 percent, the average monthly cost of $84 in Florida with the tax 

credits. 

So, Dr. Collins, why did the preliminary rate filings differ from 

the actual rates? Maybe you can help clear this up a little bit. 

Ms. COLLINS. So there are a few different reasons for that. The 

high prices that were seen by some requests—requests by some insurers are preliminary. They are subject to rate review. And in 

many states—— 

Ms. CASTOR. At the state level. I mean—— 

Ms. COLLINS. At the state level. At the state level. Many states 

will just adjust those down. 

The other major factor is that people will shop around. So just 

because carriers are charging high prices in some markets doesn’t 

mean people are actually going to buy those plans. As you mentioned, 43 percent of people that shopped for plans changed plans 

last year. And we see the effect in the increases in premiums that 

people actually paid as opposed to those that we are hearing about 

now. 

So it is the rate review, it is people shopping, choosing the highest value plan for them, and it is the tax credits that protect them 

from these—— 

Ms. CASTOR. And active state regulators that will push back on 

some of the insurers’ requested rate increases. 

Ms. COLLINS. That is right. 

Ms. CASTOR. Great. Thank you very much. 

I yield back. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentleman from New Jersey, Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you, Mr. Chairman. 

And good morning to the panel. 

I would like to concentrate on cost-shifting. 

Dr. Holtz-Eakin, you say that the ACA is likely to increase 7.7 

percent—was that the figure you gave?—over the next several 

years, regarding the costs? 

Mr. HOLTZ-EAKIN. In the most recent CBO baseline, the average 

annual increase in ACA spending is 7.7 percent per year over the 

next 10 years. 

Mr. LANCE. And this is clearly higher than anticipated growth in 

the economy. Is that accurate? 

Mr. HOLTZ-EAKIN. Yes. The economy will grow at 4.1 percent, 

nominal, over the 10 years in their projection. 

Mr. LANCE. And, therefore, in your professional judgment, how 

will the difference be made up? 

65 

Mr. HOLTZ-EAKIN. It will come arithmetically by either cutting 

spending in other programs, raising taxes, or borrowing even more. 

Mr. LANCE. And I would certainly like the expert view of the 

other members of the panel—Dr. Collins—regarding that issue. 

And do you agree with the figures that have just been presented? 

Ms. COLLINS. Well, 7.7 percent is actually—what we are seeing 

in the marketplaces, in terms of rate increases, are very similar to 

what we are seeing in employer-based plans. 

Mr. HOLTZ-EAKIN. It is not a premium. It is a Federal spending 

number. 

Ms. COLLINS. Right. 

But, also, the other important thing to keep in mind is that costs 

have been much lower than were originally projected by the Congressional Budget Office. 

Mr. LANCE. I am speaking about where we are now, not where 

we may have been in the past. Are you in agreement that this is 

likely to be 7.7 percent each year, compounded I assume, over the 

next decade? 

Ms. COLLINS. I think that we can expect some growth in costs 

over the next year. We have seen a reduction in the rate of growth 

in healthcare costs—— 

Mr. LANCE. A reduction in the rate of growth. That is different 

from an increase. 

Do you agree or disagree—that is why we have experts on this 

panel who are not necessarily in agreement. Do you agree that it 

is likely over the next decade, a 7.7-percent increase in each of the 

next 10 years? And perhaps Dr. Holtz-Eakin is wrong. I am asking 

your professional opinion. 

Ms. COLLINS. That is a relatively moderate rate of growth in 

healthcare costs, relative to the past, over the next few years. 

Mr. LANCE. I am sorry. I didn’t understand that response. Is it 

likely to be 7 percent? Is it likely to be 2 percent? Or perhaps Commonwealth Fund doesn’t know. 

Ms. COLLINS. I think that you have to look at estimates in the 

context of where we have been in the past, what was projected. 

And these are likely in line, maybe slightly higher. But they will 

vary over time. Estimates are estimates, and we will have to see 

how that plays out. 

Mr. LANCE. Ms. Turner, your comments on what I am suggesting? I am persuaded that it is likely to be roughly 7 or 8 percent, and, of course, only time will tell. And, from my perspective, 

the economy is not going to grow at that rate. I wish it were, but 

I don’t think it is. And, therefore, I am asking where the difference 

has to be made up. And perhaps you disagree with me, but I would 

like your comments. 

Ms. TURNER. Well, certainly, if it is 7.7 percent, as CBO says— 

and Dr. Holtz-Eakin, as former Director of the CBO, I think is our 

most expert witness on this panel—— 

Mr. LANCE. Yes. 

Ms. TURNER [continuing]. Would suggest that it is growing much 

faster than economic growth. 

Mr. LANCE. Yes. 

66 

Ms. TURNER. And if, in fact, these provisions, which could help 

stabilize pools and, therefore, premium rates, do not go into effect—— 

Mr. LANCE. Yes. 

Ms. TURNER [continuing]. Then you are going to wind up with 

higher and higher costs of premiums. And even if the individual 

policyholder isn’t paying that, the taxpayer is. And that is really 

what this number is about, is overall taxpayer spending, the rate 

of growth of spending on health care. 

Mr. LANCE. Right. From my perspective, taxes could be increased. Those who were formerly insured and remain insured will 

have their premiums increase. Or, alternatively, as is always an 

option, there will be further deficit-spending in this country. I have 

seen estimates that the deficit annually is likely to increase at the 

end of this decade. We have done a better job since Republican control of the House of Representatives: $1.4 trillion, $1.3 trillion in 

the first 2 years of the Obama presidency, now roughly $450 million. In my judgment, it is going to go up again unless we get a 

handle on this. And these are the issues that concern me greatly. 

Thank you. I yield back 18 seconds. 

Mr. PITTS. The chair thanks the gentleman, now recognizes Mr. 

Schrader, Dr. Schrader, 5 minutes for questions. 

Mr. SCHRADER. Well, thank you, Mr. Chairman. And I appreciate 

the hearing. It is fun to actually be talking about ways to improve 

the delivery of health care, so I appreciate the opportunity to embark on that. 

I notice that the title of the hearing is ‘‘Patient Solutions for 

Lower Costs and Better Care’’ and point out for my colleagues here 

that myself and Congressman Bilirakis have introduced a bill that 

talks about lowering drug costs through competition. I would like 

to maybe get a hearing on that at some point in time. As you know, 

some of these folks come in with their hedge-fund money and buy 

up these drug companies and then charge exorbitant prices that no 

one can afford. And so this is a nice market-based solution for that. 

Just a little perspective—and maybe I am wrong. We have experts that can correct me. But the individual market that we are 

worried about really constitutes only about 5 or 6 percent of the 

total insurance market out there. We have Medicare, we have employer plans and everything else. So while we are working very 

hard to fix the individual market in particular, keep it in perspective. It is a small portion of our healthcare market. 

That doesn’t mean we shouldn’t work on it. It doesn’t mean that 

some of what happens there will influence certain healthcare costs 

in other arenas also. So I think this is worthwhile. 

I would also point out that the instability in the market is I don’t 

think unexpected. I did not expect, with the advent of the ACA, everything was going to be great. No one had any idea of what the 

uninsured population out there would really bring. The rate at 

which young people would sign up was always in question. And 

maybe some of these ideas will hopefully address that. 

Some competing information that I am going to be looking at 

from Commonwealth versus some of the other studies, the McKinley study for instance, it would be very interesting to get to some 

67 

of these things. And I, for one, would be interested in working on 

it. 

Let’s talk about the age bands a little bit. My biggest concern 

isn’t to the consumer; it is to the government. If we go to that 5:1 

age band—I think, Ms. Collins, Dr. Collins, you alluded to it—the 

costs to the government could be significant. My understanding is 

the subsidies will go up to match the increased premiums for a lot 

of these people. 

So the out-of-pocket expense to the senior, who is going to be 

paying a higher rate, may not be that much more, but the cost to 

the government could be in the billions of dollars. 

Could you comment on that, Doctor? 

Ms. COLLINS. That is right. So this is from research that RAND 

has done. And what happens is that people—the higher rate bands 

means that premiums go up for older adults significantly, and because many of them are eligible for tax credits, it means the costs 

of those plans will go up—— 

Mr. SCHRADER. Yes. 

Ms. COLLINS [continuing]. On the order of $9.3 billion. So that 

is the big source of—— 

Mr. SCHRADER. So I think, as we discuss this, we want to make 

sure we know how we are going to pay for that. Is the taxpayer 

on the hook? 

Mr. Eakin, do you have a—— 

Mr. HOLTZ-EAKIN. If I could, that is one piece of the story, but, 

remember, there would be a reduction in premiums for younger 

Americans, and many of them will be having subsidized insurance 

coverage as well. 

As the Congresswoman from Florida pointed out, preventive care 

is an important part of the design of the ACA. Presumably, getting 

those young people in and undertaking preventive care will make 

them less expensive risks when they age, so they simply won’t 

show up and be expensive, which is a cost the government would 

ultimately have to pick up. And an unbalanced pool is the greatest 

threat to the budget and to the premium costs. 

Mr. SCHRADER. Agreed. 

Mr. HOLTZ-EAKIN. I think you have to look at all those factors, 

not just the rifle shot to older purchasers, in the moment when you 

make the change. 

Mr. SCHRADER. Well, we have to because CBO will score this, 

and we have to find a way under the current rubric to find a way 

to pay for it. 

And I agree with you that, over the long term, the ACA will be 

a huge plus because of the preventative care. And we are in the 

worst possible situation right now. We have to pay for the expensive population that hasn’t had good health care and, at the same 

time, spend money to do the preventable healthcare work so that 

it won’t cost us too much later. 

On the grace period, I think, clearly, 3 months is too long. It is 

interesting to hear about the gaming of the system. I think 1 

month is way too short. And I think there is, listening to some of 

the testimony, maybe we keep it consistent with Medicare and 

some of the other insurance plans we have. Two months—pick a 

68 

number—I think that would be something that could be a little 

more reasonable opportunity for folks. 

And I guess I will stop there, Mr. Chairman. I will stop there. 

And I yield back. 

Ms. COLLINS. May I just make one quick point on the tax credits? 

There actually aren’t any savings for young adults that enroll, on 

the tax subsidies, on the tax subsidy side, because they are already 

receiving subsidies. So when the premium goes down for them, the 

premiums only go down very marginally, and there is really no offsetting savings for the young. There is very little offsetting savings 

from the lower premiums for young adults. 

Mr. PITTS. Did you want to continue, Mr. Holtz-Eakin? 

Mr. HOLTZ-EAKIN. I will just agree to disagree and would be 

happy to provide our analysis. 

Mr. PITTS. All right. Thank you. 

The chair thanks the gentleman and now recognizes Mr. Griffith, 

5 minutes for questions. 

Mr. GRIFFITH. As I hear the various folks talking today and I 

hear both sides talking about costs increasing and costs not increasing as much, I am reminded that when the American public 

was sold this plan that the President said repeatedly it was going 

to save the average or typical family $2,500 in their insurance premium a year. 

Nobody is arguing that we are anywhere close to that. The question is are the costs going up more than they would have otherwise? This is a failed promise that was made by this administration, and there is no way around that. 

Now, where are we at? We have some bills in front of us. I have 

heard a lot of discussion about some of the bills, and I am glad that 

folks realize that I am just trying to fix something with my little 

bill that ought to be fixed. 

But I also know that my colleague Mr. Allen has a bill that basically says that if a state exchange fails and says, ‘‘We are done,’’ 

that there ought to be an audit to make sure that any moneys that 

the Federal Government has given those state exchanges—we can 

see what happened to it. We can figure out later if there is money 

left over and try to get it back, but if there is no money left over, 

we may not have an opportunity. 

And I am just wondering if the three of you all would comment 

on that, because I haven’t heard anybody comment on that today. 

Mr. HOLTZ-EAKIN. I will repeat what I said at the outset, which 

is I believe this is absolutely what the committee should do. These 

are taxpayer dollars. They should be spent wisely, and there should 

be the oversight to make sure that is taking place. And if there are 

moneys left over, they should come back. 

Mr. GRIFFITH. Do any of our panelists disagree with that? 

Ms. TURNER. Absolutely not. 

And I think that Congressman Allen’s bill is very responsible. If 

a state exchange fails, then the Federal Government will go in to 

conduct an audit to require states to return any unspent funds to 

the Treasury. It is really hard to argue with being responsible for 

Federal taxpayer dollars, as this bill does. 

Mr. GRIFFITH. Ms. Collins, any comment? 

69 

Ms. COLLINS. I completely agree. Unspent funds should be returned. Spent funds is another issue. 

If anything, the marketplaces right now are struggling and in 

need of more dollars for outreach. So the issue before in much of 

the discussion has involved enrollment. States are facing dwindling 

resources for outreach and enrollment, so, if anything, more resources are needed to increase enrollment in the marketplaces. 

Mr. GRIFFITH. Another part of the original plan included various 

levels. And we have heard some discussion today about how many 

different plans are available in various parts. I represent probably 

the most rural part of Virginia that you can get as a district in 

toto. And in many of my areas, there is only one provider, so we 

are having some difficulties with choice in some of the areas. Some 

of the areas have two or three, but there are areas in my district— 

I represent 29 different geopolitical subdivisions, so it is a mix, but 

some of them only have one provider. 

And then I saw a headline recently that caused me concern, and 

that was that Group Hospitalization and Medical Services, a unit 

of CareFirst Blue Cross Blue Shield, will not offer the bronze-level 

plans through Virginia’s health insurance exchange in 2017. And, 

of course, the bronze level was the lowest. You have to buy a plan, 

but you can buy the cheaper version if that is what you want. If 

you were relatively healthy and you didn’t want to go to the expensive plans, you could buy this one. 

And some people think this might be an omen for the future that 

a lot of other companies will drop the bronze plan. But, in 2016, 

23 percent of the purchasers in the exchange were bronze-level 

purchasers. 

I am just wondering if any of you all have any comments on 

what—is that an omen, that this group has decided not to carry the 

bronze plan or offer the bronze plan? And what does this mean for 

rates for those folks who are trying to buy the insurance but are 

on the end where they either don’t want to spend more money or 

can’t spend more money to get the silver or better plan? 

Ms. TURNER. It is certainly not a good omen for participation in 

the marketplace by people who are just trying to afford the coverage they are required to buy. And if those policies aren’t offered, 

I think we will see fewer people in the pools, leading to the kind 

of spirals we have been discussing today that really wind up harming everybody that is in the pools and discouraging others from 

purchasing insurance. 

Mr. GRIFFITH. Is this just another sign of failure of the plan overall, the ObamaCare plan overall? 

Ms. TURNER. I think it is a sign of the failure to be able to have 

the flexibility to provide the kinds of policies that people want. If 

they don’t purchase the policies that are offered—and they are very 

cookie-cutter plans—then more and more people won’t buy them, 

and I think we will see a destabilized market, really undermining 

the goal that I believe we all share of what health reform should 

do, and that is provide more affordable coverage to more people. 

Mr. GRIFFITH. I don’t have any problem, Mr. Chairman. Mr. 

Holtz-Eakin wants to say something, but I am out of time. 

Mr. PITTS. He may proceed. 

70 

Mr. HOLTZ-EAKIN. I just want to emphasize that, on top of the 

issues that Grace-Marie has raised, the issue of high-quality competition, making sure there are many providers, many plans in 

every piece of geography, is a concern for me. 

And we have seen, if you do apples-to-apples comparison of the 

same plan that existed last year and then this year, in the most 

recent year the weighted average increase is 10 percent. That is 

sort of apples to apples. That is what is going on. With diminished 

competition, you can expect even worse performance, and I think 

that is a concern for the future. 

Ms. COLLINS. Most people are actually enrolling in silver-level 

plans, so the majority of the marketplace is at the silver plan level. 

That is where the tax credits are. That is where the cost-sharing 

reductions are. So most people are enrolling in those plans. 

That is where the price competition really is, and we are seeing 

very strong competition in many markets. Some markets, some 

rural markets, maybe less so. But, on average, competition is really 

high. It is delivering value to consumers. 

Ms. TURNER. But many of the people purchasing the bronze 

plans aren’t eligible for those subsidies. And we want them in the 

plans—we want them to participate in insurance, as well. And that 

is a real concern. 

Ms. COLLINS. I agree that there should be a range of choices. 

Mr. GRIFFITH. I yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from Illinois, Ms. Schakowsky, 5 minutes for questions. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

You know, I am the co-chair of the Senior Task Force of the 

Democratic Caucus, so I am particularly concerned about the impact a 5:1 age rating policy could have on older Americans and on 

the marketplaces in general. 

Dr. Collins, the Commonwealth Fund conducted a study on this 

very issue last September, and one of the most striking and almost, 

I would say, counterintuitive findings from this report was that implementing a 5:1 band, age differential, would increase total Federal spending by $9.3 billion. 

Can you elaborate on that? 

Ms. COLLINS. That is right. So RAND found in its analysis that, 

first, about 400,000 older people would lose their coverage because 

of the rate band change, but people who remained, older people 

who remained in the marketplaces would see their premiums go 

up, and that triggers an increase in their tax credit amount. 

The amount of that tax credit RAND estimates to be $9.3 billion 

a year, so a big, big increase in cost from the rate band being 

changed. 

Ms. SCHAKOWSKY. Well, thank you. 

And, Mr. Chairman, I would like to put at least a summary of 

the Commonwealth Fund report into the record. 

Mr. PITTS. Without objection, so ordered. 

Ms. SCHAKOWSKY. Thank you. 

[The information appears at the conclusion of the hearing.] 

71 

Ms. SCHAKOWSKY. And I have another one from the Urban Institute, ‘‘Why the ACA’s Limit on Age Rating Will Not Cause Rate 

Shock.’’ If I could put that in the record, as well. 

Mr. PITTS. And, without objection, so ordered. 

Ms. SCHAKOWSKY. Thank you. 

[The information appears at the conclusion of the hearing.] 

Ms. SCHAKOWSKY. I wanted to discuss the results of a different 

study about the Urban Institute study. This study concluded that 

a 5:1 age band would actually undercharge young adults relative 

to their actual expenses and overcharge older adults relative to 

their actual expenses. 

I wonder, Dr. Collins, if you could discuss this finding and any 

other relevant findings from these two reports. 

Ms. COLLINS. That is right. So the Urban Institute looked at people’s average costs over their lifetime, and the 3:1 rate banding actually tracks those expenses pretty well. So people who are young 

pay close to what their average costs are, maybe somewhat higher. 

People who are older pay a little bit lower than their average costs 

are, or around the same, in a 3:1 banding. 

When you change this to 5:1, you get premiums that are much 

higher for older adults relative to their actual spend, premiums 

that are lower for younger adults relative to their actual spend. So 

it actually is less efficient in terms of what people’s actual spend 

is over their lifetime. 

Ms. SCHAKOWSKY. Thank you. 

I also wanted to go back to an issue that has been discussed before, and that is changing to a 1-month grace period. We have been 

getting a number of calls from people about that, and let me just 

tell you and give you a couple examples. 

A family of four from my district was told that their subsidy was 

included in their premium payments. When there was an error 

processing her subsidy, the insurance chose to terminate the coverage. Now this family is facing thousands of dollars in bills for the 

care they received during the months when their coverage was terminated, and it was really no fault of their own. 

Another constituent, who used auto-pay to make their premiums, 

received a letter stating that their insurance had been terminated 

because of some kind of glitch in the auto-pay that was from the 

insurance company. And despite making those payments, the insurer continues to refuse to reinstate their coverage, claiming they 

violated the 3-month grace period. And now they will be without 

insurance until the open enrollment period. 

And what this means for people, if they got kicked off in February and the next enrollment period isn’t until January, they 

could be without insurance for a long time. 

So, this idea of gaming the system, we are talking about the 

most vulnerable people. Because they are getting subsidies, that 

means they make no more than 400 percent of the poverty level. 

And it just seems to me that 90 days would make—or is it 60? No, 

no, it goes to 30, but from 90, right? 

Yes, that changing from the 90 to the 30, I think, is really unreasonable, and that 90 is not unreasonable. 

I guess I am out of time. That must have to qualify as a statement then. Thank you. 

72 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentleman from Indiana, Dr. Bucshon, 5 minutes for questions. 

Mr. BUCSHON. Thank you, Mr. Chairman. 

First of all, Ms. Collins, you said that there is a decline in outof-pocket costs. Which group of patients are their out-of-pocket 

costs declining specifically? And be short. Because I just don’t believe that. 

Ms. COLLINS. So that estimate comes from CMS, from the national spending account data. And what they showed between 2013 

and 2014 was a slowdown in the rate of growth and out-of-pocket 

expenses. 

Mr. BUCSHON. OK. Let me repeat what you just said. It is a 

slowdown in the rate of growth. That is different than a decline in 

out-of-pocket costs. OK. There is no—— 

Ms. COLLINS. But they also found a decline in—— 

Mr. BUCSHON. You are on my time. 

Ms. COLLINS. Sorry. 

Mr. BUCSHON. OK. Thank you. 

Ms. COLLINS. Sorry. 

Mr. BUCSHON. So it is a slowdown in the increase. 

And the reason I say that is because that is very important, be- cause if a deductible goes from $1,000 to $6,000, if you have a medical problem, your out-of-pocket costs are going to be six times as 

much. And what I am hearing, from all of my constituents—I hear 

this every day, every business, every individual—deductibles are 

way up. 

So, a decrease in the rate of growth of out-of-pocket costs is totally different than saying there is a decline in out-of-pocket costs. 

That is just factually not true. And so you can respond to that. 

Ms. COLLINS. Well, right, there is a decline in the rate of growth. 

This is across the population. But they also found an actual decline 

in out-of-pocket spending on hospital care. And that is really—— 

Mr. BUCSHON. For which group of patients? 

Ms. COLLINS. That is the entire—— 

Mr. BUCSHON. Now, in fact, that could be Medicaid, because—— 

Ms. COLLINS. Right. 

Mr. BUCSHON [continuing]. It is true that if somebody had no 

Medicaid before and now they have Medicaid, of course their outof-pocket costs are down, because now they have coverage. Because 

there is no deductibles or anything for the Medicaid population, 

right? 

So I am going to—— 

Ms. COLLINS. Right. But this is across the—— 

Mr. BUCSHON. I am going to need to move on. 

Ms. COLLINS. Uh-huh. 

Mr. BUCSHON. Thank you for that. 

And the other thing you said is they need more money to tell 

people that coverage is available to them. I can tell you, since 

ObamaCare was put into law, if you don’t know that there are possible options out there to get healthcare coverage in this country, 

you haven’t turned on the TV or listened to any—I mean, the constant thing that ‘‘more people will sign up if we just convince them, 

if we just get the message to them that they can do this’’ is just 

not factually true. The reason people aren’t signing up is because 

73 

it is too expensive and because they are making a personal choice 

not to acquire health care. 

And, by the way, 9 percent of the American people is 28 million 

or 30 million people. And the number of uninsured before was 

about 47 million or 48 million people. So, I just want to make sure 

that we get all that stuff correct. 

So, normally, Dr. Holtz-Eakin, how do insurance companies determine their pricing? I mean, is it just a general—I mean, if you 

are an insurance company and you are going to determine prices 

for auto insurance, how do they do that normally? 

Mr. HOLTZ-EAKIN. You look at the—based on history, the projected frequency of accidents, you look at the cost per accident, 

what kind of vehicles people are driving, and repairs are increasingly expensive, and you look at the structure of the policy and 

whether people would be paying deductibles, and look at what is 

left. And what is left, the premiums have to cover. 

Mr. BUCSHON. Right. And you look at the type of risk you are 

assuming, right? 

Mr. HOLTZ-EAKIN. Yes, who is driving. 

Mr. BUCSHON. A 16-year-old who just got his license is much 

more risky. And, you can’t necessarily extrapolate that to health 

care, but they are generally higher-cost people, right? 

Mr. HOLTZ-EAKIN. Right. 

Mr. BUCSHON. And the rate is set by professional actuaries—— 

Mr. HOLTZ-EAKIN. Yes. 

Mr. BUCSHON [continuing]. That determine this. So, what we are 

doing in the ACA is we are creating a not-actuarially-sound system, so we are getting the result that we would expect. Would you 

agree or disagree with that? 

Mr. HOLTZ-EAKIN. I would agree. I think the actuaries are struggling to price, and we are seeing these large premium increases as 

a reflection of their past failures, given the instabilities. 

Mr. BUCSHON. Yes. 

So, you know, the average, it has been said, was one-five before, 

approximately? Just the average marketplace, the pricing difference, on average, was about that before, somewhere in that 

range? 

Mr. HOLTZ-EAKIN. Yes. I think this is an important issue. I 

mean, the CBO in February put out a report that said that the 

spending for 64-year-olds versus 21-year-olds, the ratio is 4.8:1. So 

that is the data on what is going on. The pricing should reflect 

that. And so 5:1 doesn’t seem unreasonable. 

And I just want to emphasize, nobody in this individual market, 

on average, is paying the costs. It is a heavily subsidized market. 

Mr. BUCSHON. Right. 

Mr. HOLTZ-EAKIN. And so, on average, no one is paying their insurance costs. 

Mr. BUCSHON. Yes. 

And, I was a practicing physician before, I was a cardiac surgeon. 

And so a lot of people ask me—because they know that—when I 

am in my district, they ask me about this subject. And when you 

create—and this will be a statement, and I will end, Mr. Chairman. 

When you create a non-actuarially-sound system, you get the expected result. We are just trying to make some modest changes 

74 

here to get us back on track so that we can accomplish the goals 

that we all believe in and get everybody health coverage. 

I yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

Mr. C ́ ardenas, 5 minutes for questions. 

Mr. C ́ ARDENAS. Thank you very much. 

I appreciate the opportunity to hear from you and your perspective on this important issue. 

And thank you for holding this hearing, Mr. Chairman. 

I was happy to see that the administration announced a series 

of actions which included a proposed regulation to help consumers 

who turn 65 make the transition to Medicare so the older consumers are served by the program designed for them to meet their 

healthcare needs. 

So, Ms. Collins, can you talk a little bit about how the administration’s actions will help seniors strengthen themselves and help 

the marketplace pools, as well? 

Ms. COLLINS. So that is right. So helping people move into the 

coverage that they are eligible for is very important. There are 

multiple different paths to coverage across the age spectrum and 

also dependent on income, Medicaid, marketplace plans. And now 

the transition to Medicaid is very important. 

So helping people move into the coverage that they are eligible 

for is extremely important, getting the appropriate subsidies for 

them and making sure that they are getting the coverage and the 

care that they need. 

Mr. C ́ ARDENAS. So one of the fundamental things of anything— 

private sector, public sector, et cetera—is if something is designed 

with actuarials in mind and formulas, et cetera, that are truthful 

and honest about how that should work if it plays out appropriately, part of that is that, in this case, that people are actually 

in the particular pools or in the particular categories, that helps it 

play out more to the reality of how it would work better than if it 

falls apart loosely. 

In this case, if people are not aware of their eligibility and they 

stay in one category versus another, that is part of what hurts any 

system. Right? 

Ms. COLLINS. That is right. So it is very helpful that people, as 

they age into Medicare, enroll in the Medicare program. And it is 

also better for them. If they continue on in marketplace plans, they 

are obviously losing subsidies. So it is very important from a financial perspective, from a coverage perspective that they are able to 

make that transition and are aware of it. 

Mr. C ́ ARDENAS. OK. Thank you. 

One of the things that frustrates me as a legislator when I was 

at the state level and the city council level and now in Congress 

is that when we start arguing about what is wrong with the current system or policy and yet at the same time we are not being 

honest with the public by juxtaposing that against what the system 

was like before the change. 

Like, right now, one of my colleagues extracted from some of the 

panelists some of the truths. A lot of complaints from our American 

citizens here that, their deductibles go up a little faster, what have 

75 

you, it is uncomfortable, they don’t want to spend that money, et 

cetera. 

But isn’t it true that, under the ACA, that the overall cap per individual, single person in a plan is $6,850 and it caps? And then, 

therefore, there is no more out of pocket. The plan takes care of 

the rest. And if you are a family, it can go no higher than $13,700. 

Isn’t that part of the ACA currently, that fact? 

Ms. COLLINS. That is correct. 

Mr. C ́ ARDENAS. OK. 

Secondly is, under the ACA, a person, whether they are on a 

public plan or private plan, et cetera, marketplace plan, they are 

not allowed to be kicked off for a precondition. Isn’t that current, 

the law in the United States, when it comes to healthcare coverage? Fact? 

Ms. COLLINS. That is correct. 

Mr. C ́ ARDENAS. OK. 

But, see, the thing is, what I think it is important for me to do 

in the last minute and a half of my time here is to point out that, 

before the ACA came into law, what was the deductible cap in 

America for healthcare coverage? Let me help because of the limited time. Did it cap at $100,000? Maybe in a particular plan. Did it cap at $200,000? Maybe in a 

particular plan. Wasn’t it legal for someone to sign up for a plan, 

an insurance company to give them that plan and have an unlimited deductible? 

For example, if a family member or several family members 

under one plan actually got cancer, you could have deductibles of 

eventually 20 percent of whatever the expenditure was. So if that 

cancer treatment in that family was a million dollars—which is not 

unlikely, correct, panelists? That is possible, right, in America? 

OK. That being the case, then the family could be on the hook for $200,000 in 1 year’s worth of coverage. But, today, the worstcase scenario for a family if you have cancer is $13,700. 

And my last point that I want to make is that it is inappropriate 

for us as legislators to remind America about the things that we 

don’t like about the Affordable Care Act without reminding them 

that if that family got cancer and then next year, for example, the 

father lost his job or what have you and then had to go to a different plan, before the ACA, they might not be able to find a plan 

because they had the right to be denied because of a precondition. 

And under today, one last question to the panel is, under the 

ACA, isn’t it illegal for someone to be not allowed to have coverage 

if they have a precondition? Aren’t they required to be able to be 

provided coverage by the private sector or the public sector? 

Ms. COLLINS. Yes. 

Mr. C ́ ARDENAS. Yes. 

Yes? 

Yes? 

Thank you very much. 

I yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the vice chairman of the subcommittee, Mr. Guthrie, 5 minutes for 

questions. 

Mr. GUTHRIE. Thank you. Thank you so much. 

76 

And the cap would actually lessen the impact of a rating band 

change, because if people are at the cap and it went from 3:1 to 

5:1, then they actually wouldn’t see an effect if they were at the 

cap, so the cap would fix that. 

But one thing that we are talking about and, trying to reach out 

to encourage more people to get into the exchanges without spending Federal dollars, if the marketplace worked like it should, then 

the insurance companies would be doing that. They would be marketing themselves and trying to attract people to come into their 

insurance companies, because that was kind of the concept. And so 

it puts into perspective what the problem is: The insurance companies are exiting the exchanges. 

And a month ago, we talked about plans, including the Nation’s 

largest insurer in the exchange. United has pulled out of over 25 

states because they project $650 million in losses this year. 

And this hurts patients. Plans exiting exchanges has the potential to severely limit competition in some states where patients 

may have only one option. And Alaska is an example. This week, 

their state legislature acted out of desperation to save their last remaining plan from running away from ObamaCare. They set up a 

$55 million bailout fund, paid for by insurance companies, to subsidize enrollees that can’t afford ObamaCare’s premium hikes. In the next decade, the Federal taxpayer will spend $568 billion on premium subsidies, $130 billion on cost-sharing programs, and, 

still, exchanges are collapsing. So all those people are getting benefits, but they are also coming at costs to the taxpayer that we have 

to balance. 

So, Ms. Turner, is the answer to a failed Federal program more 

Federal intervention? 

Ms. TURNER. No. At some point, I think you realize that the 

rules and regulations of the ACA are becoming counterproductive 

because people are figuring out how to game the system. And I 

think that is really what we have to look at. Where is this going? 

And could I just correct the record earlier about Dr. Collins saying that the 3:1 age band really reflects more the consumption of 

individuals? It is really closer to 6:1. 

And the 5:1 rating band that would be allowed under this legislation really still gives the states the authority to override this. So 

it basically says, states, we understand you have been regulating 

health insurance for a long time. If you know best, then you do 

that, but let’s not use wrong data. 

Mr. GUTHRIE. Well, Mr. Holtz-Eakin, would the age rating band 

change? How would that affect what is happening in Alaska today? 

Would that have a benefit to try to keep people into the marketplace? 

Ms. TURNER. Absolutely. Absolutely. If you want to get more 

young people in and if you—— 

Mr. HOLTZ-EAKIN. I agree with her. 

Mr. GUTHRIE. You agree with that? 

Ms. TURNER. Oh, I am sorry. Was he asking you? 

Mr. GUTHRIE. OK. Yes, you agree. 

Well, I asked for that, but that is fine. 

And in the time I have left—I was going to yield some time to 

Dr. Burgess, but he just stepped out, I guess. In the time I have 

77 

left, I would like to call attention to another number. There are 

23,000, that is the number of Alaskans that state lawmakers are 

hoping to save with a $55 million cash infusion. 

This is real life in the current law. It is not working. 

And, with that, I don’t see him here. I will yield back. 

Mr. PITTS. All right. The chair thanks the gentleman and recognizes the gentlelady from Indiana, Mrs. Brooks, 5 minutes for questions. 

Mrs. BROOKS. Thank you, Mr. Chairman. 

I am really pleased that our committee is focusing on market reforms for our healthcare system, particularly those that might give 

states greater flexibility to operate their individual markets in 

ways that reflect their respective needs. 

Before 2010, 42 different states allowed an age band rating of 

5:1. In 2010, of course, it was restricted to 3:1. As we have heard, 

this change has resulted in higher premiums for younger Americans, who have stayed out of the marketplace. And with fewer 

young Americans in the marketplace balancing out the premium 

costs for older Americans, this is leading to that more older and 

more costly insurance pool, which is providing no cost relief to seniors’ rates. So it seems to me to be a no-win situation, but it should 

have a solution. 

The State Age Rating Flexibility Act would give states the right 

to establish age rating bands that best fit their insurance market 

to be more reflective of the needs of their population. And it seems 

that our goal should be to attract younger, healthier patients to the 

healthcare plans. This would benefit everyone, the young and the 

elderly. 

And so I would like to continue to focus on that, and I will start 

with you, Ms. Turner. You indicated in your testimony making 

health insurance too expensive for healthier young people that we 

want in these insurance pools drives them away, increasing the 

cost of the insurance for everyone else who remains. 

Can we go deeper on this issue? And studies you have seen, analyses you have seen, moving that ratio back to 5:1, would it have 

an immediate impact on the cost? 

Ms. TURNER. Actually, I think Dr. Holtz-Eakin may have some 

data here that would inform that. 

Mrs. BROOKS. So, Dr. Holtz-Eakin, please. 

Mr. HOLTZ-EAKIN. These are not average premiums for singles 

and for families—this includes both the older and the younger ones 

which would fall in these markets. That is a benefit. That is going 

to lower the out of pocket, the sort of premium costs for individuals. It is going to lower the taxpayer costs for subsidies. This is 

a beneficial move. It matches the data on spending by those 

groups, and it leads to better long-run stability. 

So I would be happy to provide this analysis for the record. 

Mrs. BROOKS. We would certainly like that analysis provided for 

the record. 

And, I guess, Ms. Collins, how do you refute those studies? 

Ms. COLLINS. The RAND analysis shows an increase in premiums for someone who is 64 years old—this is the silver benchmark plan—of $2,000, relative to a decline, only a marginal deVerDate Nov 24 2008 13:31 Aug 31, 2017 Jkt 037690 PO 00000 Frm 00083 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-151 CHRIS
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cline, in someone who is 21 years old of about $700. So, much bigger increases in premiums for older adults. 

Mrs. BROOKS. And so, Dr. Holtz-Eakin, how would you compare 

what that RAND—because I am sure you have seen that RAND 

study that differs from the studies that you have. So how do you 

explain this discrepancy? 

Mr. HOLTZ-EAKIN. To be honest, I can’t at the table. But I would 

be happy to provide, along with ours, our analysis of the RAND 

study and why they have come to a different conclusion. That 

seems perfectly reasonable. 

Mrs. BROOKS. OK. I think that would be important to clarify this. 

Ms. Turner, would you like to comment? 

Ms. TURNER. I think one of the things that—there is a new study 

out, actually, this week by the Council for Affordable Health Coverage that shows that fewer than 40 percent of enrollees in the exchanges are younger than 35 years old, although they are 50 percent of the potential exchange market. 

So I think that really shows that the premiums, even now—and 

the first year, 2 years really did not reflect as much experience in 

premium setting as I think subsequent years were—already we see 

a smaller percentage of young people signing up for the exchange 

than are eligible for them. And I see that if we continue this same 

trend, allowing the gaming of the system and other provisions in 

this law, that is going to get even worse and we are going to see 

even more young people dropping out. And the costs are going to 

go up for older people in the exchanges, no matter what, if young 

people are not participating. 

Mrs. BROOKS. That is the point that I think is so important here. 

Would you agree, Ms. Collins, that if fewer young people don’t 

get into the exchange, prices will go up for seniors? 

Ms. COLLINS. That is exactly right. And—— 

Mrs. BROOKS. And our goal—— 

Ms. COLLINS. Right. 

Mrs. BROOKS [continuing]. Is to try to bring as many young people into the pool because that would lower the cost for seniors. 

Ms. COLLINS. Right. But most young adults who are outside the 

pool, outside the marketplace right now actually have incomes that 

make them eligible for the subsidies. So they wouldn’t actually be 

affected by the change in the rate. 

Mrs. BROOKS. Could you all respond to that? 

Ms. TURNER. We want more people in the exchanges who are not 

eligible for subsidies. And the only way to attract them is to make 

the policies more affordable. 

Mrs. BROOKS. OK. 

Dr. Holtz-Eakin? 

Mr. HOLTZ-EAKIN. And it is not a bad thing to have premiums 

be lower and have the subsidies be less of a drain on the taxpayer. 

Mrs. BROOKS. Thank you. 

I yield back. Thank you very much. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the vice chair of the full committee, Mrs. Blackburn, 5 minutes for 

questions. 

Mrs. BLACKBURN. Thank you all. And I know we are going to be 

running up against votes, so I am going to move on through this. 

79 

I have legislation that would deal with this open enrollment period. And I am so appreciative of you all being here. And this is 

a particular concern of mine because of what we lived through in 

Tennessee with TennCare, which was the test case for HillaryCare. 

And, Ms. Turner and Mr. Holtz-Eakin, I know that you both are 

familiar with the failures of that program and some of the strain 

that was put on that program because of extremely generous open 

enrollment and not doing the verification on eligibility. 

And, Mr. Holtz-Eakin, I appreciated that you had called the 

ObamaCare special enrollment period extremely generous. That 

was how we defined what was happening in Tennessee. 

Back in December, Chairman Upton asked CMS for details about 

the special enrollment, and we were trying to get numbers. We are 

told the insurance companies have those numbers, that CMS does 

not have those. But what we did get was a list of the special enrollment exceptions, which is loss of minimum essential coverage, a 

permanent move, a birth, adoption, placement for adoption, placement for foster care, child support or other court order, or marriage. 

So my question would be—and, Ms. Turner, I will come to you 

because you had made the comment—and we saw this in Tennessee too—that a growing number of people are using ObamaCare 

as just-in-time insurance. They only get it if they think they are 

going to need it. 

So, in your view, would going into a pre-enrollment verification 

process and applying that to special enrollment avoid part of this 

problem that we are seeing with the special enrollment programs 

and the just-in-time insurance? 

Ms. TURNER. Yes. And you can’t, Congresswoman Blackburn, 

have a system in which people aren’t following the rules of insurance. If you are going to have private health insurance system, it 

has to work like private health insurance. And if people can only 

buy the coverage when they are sick and then drop out afterwards 

and buy coverage again if they get sick again later, that is not 

going to work at stabilizing these pools over time. 

And people are figuring it out. A study with consulting firm Oliver Wyman said that people who enrolled during the special enrollment period were 24 percent more likely to have high costs in the 

first 3 months than regular enrollees and 41 percent more likely 

in the next year. So, over and over, we are seeing that this is a 

trend, and it is not a trend that is going to be sustainable over the 

long term. 

Mrs. BLACKBURN. Well, based on that, wouldn’t you say that 

doing pre-enrollment verification is really a fairness mechanism to 

be fair to everybody? 

Ms. TURNER. Absolutely. And there should be exceptions. If 

somebody has problems with the electronics of the system, which 

some people do, then certainly there will be exceptions to protect 

people who are trying to play by the rules, but to make sure people 

who are not are not incentivized to misuse this insurance. 

Mrs. BLACKBURN. Yes. 

Ms. Collins, would you agree with that, that the pre-enrollment 

verification would be fair to everybody involved in the process? 

80 

Ms. COLLINS. I really think it would actually discourage people 

from enrolling. And we really do need to make sure we have a lot 

of people in the risk pools, have young adults in the risk pools. 

Mrs. BLACKBURN. Wait a minute. You think that having to prove 

worthiness would be unfair? 

Ms. COLLINS. The new guidance by the administration, by CMS, 

is requiring people to submit documentation proving that they lost 

their job, proving that they got married, proving that they had a 

baby, which is probably the big source of costs that insurers are 

seeing. Babies are, by definition, more expensive when they are 

born. 

And the other thing the administration is doing, they have made 

an adjustment in their risk adjustment program to allow for—— 

Mrs. BLACKBURN. OK. Let me get back to the—— 

Ms. COLLINS [continuing]. Partial enrollment. 

Mrs. BLACKBURN [continuing]. Topic, though. But you would say 

that to submit to pre-enrollment verification would be an unfairness? 

Ms. COLLINS. I think that people should be able to enroll before 

they provide documentation. So we don’t want to—— 

Mrs. BLACKBURN. Oh, so you think—— 

Ms. COLLINS [continuing]. Discourage people from enrolling. 

Mrs. BLACKBURN [continuing]. They ought to be able to get the 

benefits before they prove who they are. I am going to disagree 

with you on that one. 

And, Mr. Holtz-Eakin, I am going to come to you on this. Because we are hearing that stability and balance in the programs, 

that is the goal—stability. And we know that verification leads to 

that. 

So wouldn’t it behoove these programs to do their verification on 

the front end before they let somebody in, rather than letting them 

in, letting them get what they want, paying the bills, and then 

kicking them out, or them just not paying the bill? 

Mr. HOLTZ-EAKIN. I think we have to look closely at this. The reality is that the term ‘‘special enrollment period’’ suggests the exception to the rule, a tiny thing. One in five of the enrollees comes 

through these SEPs. They are disproportionately expensive, so 

more than one-fifth of the costs are coming through this. They are 

disproportionately likely to stop paying their premiums, so costshifting comes from this. 

It seems to me a simple matter to make sure that if those phenomena are going to happen they should happen only with people 

who are genuinely eligible for the coverage. 

Mrs. BLACKBURN. Thank you. 

I yield back. 

Mr. PITTS. The chair thanks the gentlelady. 

And, without objection, we will go to Mr. Flores, who is a member of the full committee, for questions, 5 minutes. 

Mr. FLORES. Thank you, Chairman Pitts. I want to thank you 

and Ranking Member Green for allowing me to be part of this important hearing today. 

This hearing is about finding solutions that will better the 

healthcare outcomes for our constituents. And one of the issues beVerDate Nov 24 2008 13:31 Aug 31, 2017 Jkt 037690 PO 00000 Frm 00086 Fmt 6633 Sfmt 6633 I:\MY DOCS\HEARINGS 114\114-151 CHRIS
81 

fore us today is grace periods, which we are trying to address in 

my legislation as set forth in H.R. 5410. 

As I understand it, under current law, patients with subsidized 

exchange plans have up to a 3-month grace period to maintain coverage when they don’t pay their health insurance premiums for a 

given period of time. During that 3-month grace period, the plan 

they subscribe to cannot discontinue the service for the nonpayment of premiums. 

Given this payment structure, this means that patients receiving 

the advanced premium tax credits can pay for only 9 months of 

health coverage but receive a full year of coverage. 

Ms. Turner, is this correct? 

Ms. TURNER. Yes, that is absolutely correct. And a growing number of people are doing that, as studies are showing, and it—— 

Mr. FLORES. We will dig into that in a minute, so thank you. 

Mr. Holtz-Eakin? 

Mr. HOLTZ-EAKIN. Yes. 

Mr. FLORES. Ms. Collins? 

Ms. COLLINS. No, that is actually not correct. So if they don’t pay 

their premium in the first month, their claims cannot be paid 

and—— 

Mr. FLORES. No, no, no, no. Are they receiving coverage? They 

can go to the doctor, right, during months two and three and get 

treatment, correct? 

Ms. COLLINS. But their claims are not covered. 

Mr. FLORES. Go read the—— 

Ms. COLLINS. Their claims are not covered. 

Mr. FLORES. Go read the law. It does say that. 

And my second question is, in the first month, the plan must 

cover claims. And here is where you are correct, Ms. Collins, is that 

in months two and three, the plan may hold the claim, but the patient is still insured. And that is where you are incorrect. And after 

3 months, the plan may finally discontinue the coverage and reject 

the claims from the second and third months, and then the provider, the doctor, is on the hook to recoup the outstanding payments from the patient. 

So three questions for you. 

The first one is, what effect does this have on the economics of 

health care? The second one is, what effect does this have on premiums? And the third one is, what effect does this have on the providers, our doctors, to their cost and how do they have to recoup 

that? 

So, Ms. Turner, again, on the economics of health care. 

Ms. TURNER. I think, in particular, that we have to look at doctors because doctors and hospitals are on the hook for this. And one 

of the things that that does is discourage them from wanting to 

take exchange patients. 

Mr. FLORES. Right. 

Ms. TURNER. And so that is going to wind up having access problems, if people have a history of not paying their claims, because 

people are often repeat offenders in misusing this. 

Mr. FLORES. Now also, what happens—let’s say, if a doctor has 

to provide 12 months’ worth of procedures to a patient, let’s say 

you have got a chronically ill patient, but 2 of those months the 

82 

doctor doesn’t get paid for that. What does the doctor do with that 

2 months that they have to charge off? 

Ms. TURNER. Yes, they eat the cost. 

Mr. FLORES. And what happens then? 

Ms. TURNER. Their practices are increasingly threatened by nonpayment of premiums—or of bills and—— 

Mr. FLORES. How do they recoup it? They are not—— 

Ms. TURNER. They have to go after the patient. 

Mr. FLORES. OK. But if the patient doesn’t pay, then what happens? They have to raise the cost for everybody else. Right? 

Ms. TURNER. That is right. 

Mr. FLORES. OK. Mr. Holtz-Eakin—and what effect does it have 

on premiums, Ms. Turner? I am sorry. I didn’t mean to—on premiums. 

Ms. TURNER. Well, of course, it increases premiums because that 

has to be built in. 

Mr. FLORES. OK. Mr. Holtz-Eakin, on the economics of health 

care. 

Mr. HOLTZ-EAKIN. Costs are incurred. 

Mr. FLORES. Right. 

Mr. HOLTZ-EAKIN. And they will be paid in one form or another 

somewhere in the system. 

Mr. FLORES. Right. 

Mr. HOLTZ-EAKIN. They simply don’t disappear. 

Mr. FLORES. And so, theoretically, premiums would go up to offset the loss, the high claims but low premium receipts. Right? 

Mr. HOLTZ-EAKIN. The insurers piece, they will try to raise premiums to cover theirs. The providers’ piece, they will try to raise 

price to cover theirs. And if they can’t do that, they will stop seeing 

those patients or leave practices entirely. You will have fewer providers, costs will go up anyway. 

Mr. FLORES. OK. So this law is supposed to be about fairness, 

yet doesn’t this 3-month gap work as a penalty to patients who follow the law and follow their plans and pay for 12 months’ worth 

of coverage as compared to those who get 12 months of coverage 

but only pay for 9 months? Mr. Holtz-Eakin, does that sound fair 

to you? 

Mr. HOLTZ-EAKIN. No. Deliberate gaming of the system is inappropriate. 

Mr. FLORES. OK. Ms. Turner, does that sound fair to you? 

Ms. TURNER. Absolutely not. And it is going to discourage the 

people who want to play by the rules from doing so. 

Mr. FLORES. Ms. Collins, does that sound fair to you? 

Ms. COLLINS. There is very little evidence that people are gaming 

the system. If anything—— 

Mr. FLORES. Well, I disagree with you on that because I have 

got—I am not running out of time here. As Mr. Holtz-Eakin—this 

is in response to you, Ms. Collins. As Mr. Holtz-Eakin points out, 

this same report goes on to say that 57 percent of the patients who 

stopped paying for coverage are medium or high risk, and roughly 

have the patients admitted that they stopped paying for their plan 

in 2014 as well. 

So, Mr. Holtz-Eakin, as you note, and the current process could 

easily allow individuals to take financial advantage at the expense 

83 

of other paying consumers and taxpayers. What defense is there in 

not closing this gap? 

There is not any. OK. 

And I will just end by reading a quote from Ms. Turner’s testimony that I found to be particularly alarming, and that is, ‘‘Abuse 

of the grace period is undermining the concept of insurance and 

driving up the cost of coverage for others.’’ If we all bought 12 

months’ worth of car insurance and only paid for 9 months, then 

we would all wind up paying for 12 months of car insurance somehow somewhere. 

So thank you, Mr. Chairman. I yield back. 

Mr. PITTS. The chair thanks the gentleman. That concludes the 

first round of questioning. 

I have a UC request. The statement by America’s Health Insurance Plans submitted for the record. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. We are going to go to one follow-up per side. 

The chair recognizes the ranking member, Mr. Green, 5 minutes 

for a followup. 

Mr. GREEN. Thank you, Mr. Chairman. I appreciate the chance 

to do a followup. Again, I want to be sure we are trying to get 

more—the whole point of the Affordable Care Act was trying to expand coverage. The three bills limiting grace periods, special enrollment periods, prior authorization, and age rating would make it 

much harder to get and even to keep coverage. And I understand 

the churn because that happens every day. People buy auto insurance and then they get their card, in Texas, because you have to 

have mandatory liability, and then they cancel. And that is part of 

the system, whether it is Affordable Care Act or the private sector. 

So my concern is, Ms. Collins, would these three bills limit that 

opportunity to get more coverage instead of less coverage? Again 

recognizing it is a checkerboard. Because if the states didn’t expand 

their Medicaid, even though for the first 3 years it would be 100 

percent reimbursement—which, by the way, I introduced a bill that 

would require Congress to do it instead of just—because all my legislators said: Well, how do we know you are going to do it? Well, 

let’s put it in the law and make sure that happens. 

But will these three bills limit the ability to expand coverage 

under the Affordable Care Act? 

Ms. COLLINS. It will definitely limit enrollment. Requiring people 

to provide documentation before they enroll in a special enrollment 

period will definitely moderate or modulate people’s ability to do 

that. There is an under use, if anything, of special enrollment periods among people who are eligible for them, particularly people 

who lose their jobs. So they are experiencing gaps in coverage. We 

know there is much more likely to have a cost-related access problem or not get care when you have a gap in coverage. 

So that would definitely—and the reduction in the grace period 

would also make it likely that people wouldn’t—and I think most 

people probably think when they don’t pay a premium in one 

month that their coverage is over. So allowing people, making sure 

people are aware that they have a 3-month period to make up that 

premium would ensure that they are able to continue that coverage 

84 

throughout the year rather than just drop it and be uninsured for 

the rest of the year. 

Mr. GREEN. Well, I have to admit when I first saw the posting 

on these bills, I thought: Well, good. We are getting to some level 

that we can work on the problems with the ACA and expand coverage at the same time. And I think my colleague from Oregon 

mentioned, we might be able to work on the grace period, to match 

it with some other Federal—like some other Federal—but that is 

not going to happen. 

And again, I think the bottom line when we do some day get into 

saying, OK, let’s fix what is wrong with the ACA, the goal still 

ought to be to make sure we have more coverage. Because that is 

what the intent was and—of the bill or the law now. And I would 

hope that is the intent, to provide opportunity for people to have 

health care in our country instead of making it harder. And, again, 

the free market will do it. 

If I owned an insurance company, believe me, I would want to 

make sure everybody was healthy. We used to have examples—for 

seniors, for even Medicare Advantage I heard: If you can walk up 

these two flights of stairs, we will say you are Medicare Advantage. 

That is not something we need to do. People need health care no 

matter what their illness is. 

Now, again, ratings is ratings. And age is age. But the whole 

goal is to expand the coverage for people who don’t have it. Because 

right now we are paying for it. The private sector is paying for it. 

If someone shows up in our emergency rooms in Houston and 

maybe—and uncompensated care fund, I think they may get 10 

percent of whatever they—but believe me, those for-profit, even 

nonprofit, are somehow going to get reimbursed from someone, 

whether it be through the regular insurance market, the folks who 

have it. But to get those folks to have something, even if it is just 

Medicaid. 

Thank you, Mr. Chairman. I will yield back. 

Mr. PITTS. The chair thanks the gentlemen and now goes to Dr. 

Burgess, 5 minutes for a followup. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Ms. Collins, earlier this year the news reports were that 

UnitedHealth Group was withdrawing from covering in the exchanges. Do I understand that correctly? 

Ms. COLLINS. That is right. 

Mr. BURGESS. Do you know why they made that decision? 

Ms. COLLINS. Well, if you look at the data on UnitedHealth 

Group, they were very uncompetitive in most of the markets that 

they were operated in. So they were rarely the second lowest cost 

silver plan in most of the markets they were operating in. So they 

actually were probably not the choice of many consumers just because they weren’t pricing very competitively. 

Mr. BURGESS. Or perhaps they were pricing more sanely because—clearly, if a big group like that thinks they can make money 

in the system, they are likely to stay. And if they think they are 

going to lose money, they are likely to withdraw. Do you think they 

saw something that the other companies didn’t see earlier on? 

Ms. COLLINS. Well, they had very little experience in the individual market prior to entering the marketplaces. So they knew 

85 

less about their risk pool than some of the other carriers that had 

more experience in the individual market, so which might have 

been reflected in their higher premium rating. 

Mr. BURGESS. Might have been, but they also may have had the 

ability to peer over the horizon a little bit. Now, a company that 

does have extensive experience in the individual market in my 

state, in Texas, Blue Cross Blue Shield, and they have asked for 

a 60-percent increase for next year. Does that seem reasonable that 

they would come in with that sort of request? 

Ms. COLLINS. It seems very high. Again, these are preliminary 

rates, so they will be adjusted by regulators through the rate review process. And it is very unlikely that consumers would end up 

paying that size of increase, both because they may choose to enroll 

in different plans that are lower priced in Texas or that the tax 

credits will actually protect them from that kind of increase. 

Mr. BURGESS. Yes. But someone like myself who is in the individual market in an unsubsidized plan, there is no protection from 

a subsidy. You either pay the price or you don’t buy the product. 

Right? 

Ms. COLLINS. Right. But if you have other choices that are lower 

priced, then we have evidence that about 43 percent of people 

switched plans last year. 

Mr. BURGESS. I don’t mean to interrupt you, because time is 

short. What evidence do we have that the number of choices in a 

marketplace like Texas are going up? 

Ms. COLLINS. The plan offerings between 2015 and 2016 were 

relatively stable. We do know that most carriers—UnitedHealth 

Group is an exception, really, to the rule. Most carriers are committed to the marketplaces in 2017. 

Mr. BURGESS. I guess we will find out if that is correct. 

Let me just ask a couple of questions on the 90-day issue, because you made some comments earlier in the testimony that on 

the nonpayment part, after we have gone the 30 days, the carrier 

is on the hook for the first 30 days, I believe you said, then beyond 

that the insurance carrier is no longer on the hook for that. But 

the recipient, the insured, perhaps they would be required to pay 

the part that now was in arrears. Is that correct? 

Ms. COLLINS. Right. So if they didn’t pay their premium in the 

first month, and they don’t pay in the second month or the third 

month, they are responsible for continuing to pay the premium in 

the first month, but they also have to pay their tax credit back in 

that first month. The claims that they incur in the second and 

third months would not be covered by their insurance coverage. So 

by restricting—and by the design of that, of the grace period allows 

people who have fluctuating incomes, low income, who can’t come 

up with the premium payment in that first month, it gives them 

time to make up that—to pay that premium. It makes providers 

happier because their second month they will get coverage for their 

care. Third month, be able to get coverage for their care. Cutting 

it off at one month, they will continue to get care but have no 

health insurance for that care. Providers would be on the hook too. 

Mr. BURGESS. But let’s talk about that 60 days after the first 30 

days. That insured is no longer receiving the tax credit in those 

months. Is that correct? 

86 

Ms. COLLINS. The carrier receives it, but the insured is not covered. 

Mr. BURGESS. Is the carrier then required to pay that tax credit 

back? 

Ms. COLLINS. The insurer has to pay the tax credit back, if the 

premium is not paid in the second or third month. 

Mr. BURGESS. Does any portion of that recovered tax credit go to 

offset the cost of the care that was delivered to the insured that 

was being carried during those 30 days? 60 days? 

Ms. COLLINS. In the first month. 

Mr. BURGESS. No, I am taking about specifically the second or 

the third month, the second—the 60-day outlier part of that. 

Ms. COLLINS. Right. The carrier is not responsible for covering 

the claims in the second and third month the premium is paid. 

Mr. BURGESS. So is any portion of that recovered tax credit from 

the insurance company, does that go to somehow offset the cost of 

the care that was delivered? 

Ms. COLLINS. I do not think so. 

Mr. BURGESS. Yes. And that is inherently the problem here. And 

as much as—with all the affection that I have for Dr. Holtz-Eakin, 

doctors generally cannot increase their prices. We generally work 

under contracts. I know it is supposed to be a free market, but generally we sign contracts with insurance companies to provide at a 

set fee. So it is very difficult—particularly for the individual provider to raise fees to cover that which was not covered by the time 

the patient was in arrears. 

I thought you turned me off because my time was up. You let me 

go on. I do want to again thank the panelists for being here. It was 

an important hearing. I am glad we have had this opportunity 

today. 

Thank you, Mr. Chairman, and I yield back. 

Mr. PITTS. The chair thanks the gentleman. That concludes the 

questions from the members present. We will have follow-up questions in writing that we will provide to you. We ask that you please 

respond. 

I remind members that they have 10 business days to submit 

questions for the record. That means they should submit their 

questions by the close of business on Friday, June 24. 

Very interesting hearing, interesting back and forth. We thank 

you very much for your presentation today. 

And I understand, Ms. Turner, we should wish you happy birthday today. Thank you for spending your birthday with us. 

Without objection, this hearing is adjourned. 

[Whereupon, at 11:28 a.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

87 


21410.001

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June 9, 2016 

Dear Representative: 

On behalf of the 1.6 million members of the American Federation of State, 

County and Municipal Employees (AFSCME), I am writing with respect to 

tomorrow's hearing on "Advancing Patient Solutions for Lower Costs and Better 

Care." Specifically, we want to express our opposition to the proposals under 

discussion that would increase age rating for older Americans, restrict the ability of 

consumers to enroll in coverage during special enrollment periods and reduce the grace 

period available to marketplace enrollees. These proposals would not reduce costs or 

ensure better care. Instead, they would drive up costs and cause more consumers to 

experience delays and tennination of coverage. 

The Affordable Care Act (ACA) addressed one of the most pressing problems 

in our health care system, the inability of older Americans to afford or even obtain 

health coverage due to their age and health status. Under the ACA, insurers may not 

charge older adults more than three times the amount young people are charged for 

similar health care coverage. This key feature of the ACA has helped to cut the 

number of uninsured Americans, age 50-64, by half. Rep. Susan Brooks' proposal 

would allow insurers to charge older individuals five times the amount younger adults 

are charged. This proposal would not only drive up costs substantially for older 

individuals, it would increase the number of uninsured by an estimated 400,000 

according to research by the Commonwealth Fund. Moreover, the Commonwealth 

Fund found that the proposal would also increase federal spending. 

Our economy is large and dynamic, with large numbers of people relocating, 

moving in and out of jobs and in and out of Medicaid eligibility. We urge the 

Committee to be cautious about pursuing changes to the ACA's special enrollment 

periods (SEPs) that would force individuals experiencing changes in their lives to wait 

to access health coverage and tax credits for which they are eligible. It is not surprising 

that those who make greater use of SEPs tend to be less healthy. They are more 

motivated to seek coverage while some healthier individuals may be willing to wait 

until the next regular enrollment period. But Rep. Marsha Blackburn's proposal may 

actually create adverse selection problems by imposing obstacles that further reduce 

the number of healthier individuals who pursue coverage during SEPs. 

We also oppose the proposal to reduce the ACA's three-month grace period for 

nonpayment of premium, to the 30-day period established by most states prior to the 

A CA. Grace periods established by states were designed for very different 

circumstances. The state grace periods apply to coverage that is wholly paid for by the 

insured. In contrast, the ACA grace period applies to coverage that is paid in large part 

American Federation of State, County and Municipal Employees, AFL-CIO TEl (202) 429·1000 FAX (202) 429·1293 TOO (202) 659-0+16 WEB www.afscme.org 1615 l Street.NW, Wuf11ngton, DC 20036·5687 
88 


21410.002

-2-

by federal tax credits that cover 73% of the premium on average. As a result, insurers are paid a 

significant share of the premium for marketplace enrollees who are late or who fail to pay their 

share of the premium. In addition, state grace periods were established when there was no 

requirement that individuals and families have health coverage. It would be punitive to impose 

such a short grace period on those who would then be penalized for going without insurance. 

This is especially true when so many eligible for tax credits struggle to meet other basic needs. 

We appreciate the opportunity to convey our concern about these proposals. 

Sincerely, 

he~1~ Scott Frey 

Director of Federal Government Affairs 

SF:BC:rf 
89 


21410.003

I 

lun~ 9.,2016 

Dear Representative: 

On behalf of the APL-CJO, I am writing in regard to tomorrow's hearing in the Energy 

and Commerce Subcommittee on Health titled, ''Advancing Patient Solutions for Lower Cost 

and Better Care." We believe that three of the bills to be examined tomorrow represent harmful 

policy proposals that should be opposed. 

One of these bills would change the allowed age variation in health insurance premium 

rates from the current ratio of3:lto 5:1 in the Affordable Care Act (ACA) marketplaces and the 

individual and small group markets. Charging older adults up to five times more than the 

premium costs faced by the average consumer would have several negative effects. The 

Commonwealth Fund found that higher premium costs under this policy would cause 400,000 

seniors to lose their insurance coverage and the federal government would face $9.3 billion in 

extra costs. The net effect of this policy is to provide a financial boost to insurance companies 

while imposing substantial costs on seniors and taxpayers. We urge you to oppose this policy 

that picks the wrong winners and losers. 

A second bill would restrict the grace period that currently protects ACA marketplace 

insurance enrollees when they are unable to cover their monthly premium on time. Currently. 

when enrollees fail to pay their full premium on time, they have a three-month period in which to 

catch up with their payments before their coverage is terminated. This protection is particularly 

important for low-income households that may sec their income fluctuate from month to month. 

This legislation, however, would limit the grace period to 31 days or the length required under a 

state's statute. Presumably, this bill is intended to ensure that insurance companies will not face 

losses from the nonpayment of premiums, but their liability is already limited under current law 

to one month's worth of claims. Like the previous bill, this legislation puts the interests of 

insurance companies over that of working people. 

Another of the bills would require the Centers for Medicare and Medicaid Services to 

establish procedures to verify eligibility for enrollment in a marketplace plan when a person has 

experienced a major life change (such as the loss of a job or the birth of a child) that provides for 

a special enrollment period (SEP). The bill does not. however, provide for additional funding to 

ensure that the collection of new information will be efficient and user-friendly. In addition, the 

insurance industry has not produced data showing that these SEPs have been abused, and the 

Urban Institute has estimated that only 15 percent of the people eligible for SEPs actually usc 

them. Since this bill docs not target a significant problem and has the potential to creating 

barriers to coverage, we ask that you oppose it. 
90 


21410.004

We hope you will have an opportunity to explore the shortcomings of these bills at 

tomorrow's hearing and will work against their enactment going forward. 

Sincerely, 

William Samuel, Director 

GOVERNMENT AFFAIRS DEPARTMENT 

American Federation of Labor and Congress of Industrial Organizations 

8151&th St., N.W. • Woshington. D.C. 20006 ' 202·637 5000' www.atlcio.org 

RICHARD l. TRUMkA 

;:,','/,!l-"-1 

ELIZABETH H. SHUlER ')or~ r+- i AI(~- ;u~A);); ~:{ 

TEFER£ GEBRE 
91 


21410.005

Real Possibilities 

June 9, 2016 

The Honorable Joe Pitts 

Chairman 

House Energy & Commerce 

Subcommittee on Health 

2125 Rayburn House Office Building 

Washington, DC 20515 

The Honorable Gene Greene 

Ranking Member 

House Energy & Commerce 

Subcommittee on Health 

2322A Rayburn House Office Building 

Washington, DC 20515 

Dear Chairman Pitts and Ranking Member Greene: 

Thank you for holding this week's hearing entitled, "Advancing Patient Solutions for 

Lower Cost and Better Care." AARP shares the subcommittee's desire to examine 

ways in which costs can be lowered and better care provided to all Americans. 

However, charging older Americans more for coverage purchased through the 

Affordable Care Act's (ACA) federal and state insurance marketplaces via relaxed 

age-rating will achieve neither of these goals. In fact, not only will seniors' costs rise 

dramatically, ample evidence suggests that relaxing restrictions on age rating bands 

could increase- rather than reduce- federal outlays on health care. 

AARP, with its nearly 38 million members in all 50 States and the District of 

Columbia, Puerto Rico, and U.S. Virgin Islands, is a nonpartisan, nonprofit, 

nationwide organization that helps people turn their goals and dreams into real 

possibilities, strengthens communities and fights for the issues that matter most to 

families such as healthcare, employment and income security, retirement planning, 

affordable utilities and protection from financial abuse 

The Affordable Care Act's (ACA) Impact on Older Adults 

The ACA addressed key obstacles in availability of health coverage for Americans 

ages 50-64. The result has been stark and historic- implementation of the ACA has 

reduced by half the number of Americans 50-64 years old who are uninsured. 

Prior to the ACA. health insurance coverage was out-of-reach for many older 

Americans not yet eligible for Medicare. Many paid more for less coverage than they 

do today and a great number of state laws permitted insurers to charge older 
92 


21410.006

Americans five times or more than younger people for insurance coverage. In many 

instances, due to a pre-existing condition, coverage was not only unaffordable but 

also unavailable. In fact, for older adults without access to employer-based coverage, 

the average out-of-pocket costs for premiums and health care purchased on the 

individual market were typically two-and-a half times higher than those similar in age 

with employer coverage. The ACA's limit on age-rating of 3:1, combined with the 

law's coverage subsidies, are critical to ensuring that pre-Medicare eligible 

Americans can afford coverage. 

Proposed Changes to Age Bands Would Increase Federal Spending 

In September 2015, the Commonwealth Fund published an analysis entitled, 

"Charging Older Adults Higher Premiums Could Cost Taxpayers." 

Commonwealth found that increasing rate bands to 5:1 would cost the federal 

government more tax dollars than the current 3:1. This is because older adults with 

low to moderate incomes (below 400 percent of poverty) would face cost increases 

that rise above premium contribution caps, making them eligible for increased 

subsidies. 

Commonwealth concludes that". __ the increase in premiums caused by 5-to-1 rate 

banding would be financed primarily by the federal government." In other words, if the 

coverage is more expensive, the federal government would pay for a large part of the 

difference. In addition, they also found that such a change would result in 400,000 

older people losing health coverage altogether. 

In short, changing the age rating bands in current law to 5:1 would make coverage 

for older Americans more expensive, come at an increased cost to the federal 

government and result in many older Americans losing coverage_ 

A 3:1 Age Band is More Price Efficient for the Market 

According to a 2013 Urban Institute study, the 3:1 band, "results in age-based 

premiums that more accurately match age-related costs among likely purchasers 

than would a looser rate band." The Urban study goes on to say that higher rate 

bands "would significantly increase out-of-pocket rates" paid by older Americans and 

that a 5:1 band -as called for in one of the bills the subcommittee is examining today 

-tends to overcharge older adults relative to their actual health expenses.' 

Relaxing age-related rate bands is therefore a bad deal for Americans aged 50-64 

and leads to higher costs and reduced coverage. For these reasons, AARP strongly 

opposes efforts to expand age rating bands and shift more costs onto older 

Americans_ 

' Blumberg, Linda J. and Matthew Buettgens. Why the ACA 's Limits on Age-Rating Will Not Cause 

"Rate Shock": Distributional implications of Limited Age Bands in Nongroup Health Insurance_ 

Washington DC: Urban Institute, 2013 

2 
93 


21410.007

Thank you for the opportunity to submit written testimony. If you have further 

questions, please feel free to contact me or have your staff reach out to Andrew 

Schwab of our Government Affairs staff at aschwab@aarp.org or 202-434-3770 

Sincerely, 

?1-t-A~ Joyce A Rogers 

Senior Vice President 

Government Affairs 

3 
94 


21410.008

Junc9,2016 

The Honorable Susan Brooks 

1505 Longworth House Office Building 

Washington, DC 20515 

Dear Congresswoman Brooks, 

On behalf of the 1.3 million members of AMAC, the Association of Mature American Citizens, I am writing in 

support of the Srate Age-Ra!ing Flexihilily Acl. This timely and crucial piece of legislation, aimed at raising the 

current age-based premium ratios from 3: I to 5: I, has the potential to save all Americans significant money when 

choosing their healthcare plan. AMAC has been opposed to several mandates of the Patienl Prolecrion and 

Ajj(Jrdah/e Care Acl (PPACA), including its one-size-tits-all approach to age-based premium ratios. This 

legislation will remedy nationwide uniformity and allow the states more freedom when determining premium 

rates. 

Prior to PPACA implementation, 42 states had adopted 5:1 or higher age-based premium ratios ·spurning 

innovative thinking and free-market approaches to control healthcare costs within their states. As mandated under 

PPACA regulation, an age-based premium rate of3:1 was imposed on states unequipped and unprepared for such 

drastic changes to their healtheare premium calculating systems. In turn, these steep and rigid changes are forcing 

younger Americans to pay more for insurance than they have before. Relying on younger Americans to offset the 

costs of older Americans by paying higher premium rates is unacceptable. 

Although capping the age-based premium ratio at 3:1 as opposed to 5: I sounds good to many seniors, the 

economic repercussions of such caps on the American healthcare system are staggering. As premiums continue to 

rise for younger Americans, individuals are more likely to pay the end-of-year penalty for failing to be covered by 

insurance than to purchase costly, less-than-ideal insurance plans. Additionally, younger people arc more likely 

to visit the emergency room and enroll in insurance only after a traumatic health event has occurred ~once again 

causing increases in prices to the entire healthcare system. Lifting the age-based ratio fi·om 3:1 to 5:1 has the 

potential to save all Americans money by allowing the respective states the necessary tlexibility they need to 

adequately insure their residents. 

As an organization committed to representing the interests of mature Americans and seniors, AMAC is dedicated 

to ensuring senior citizens' interests are protected. Simply put, AMAC members-and millions more seniors 

nationwide--do not wish to see their children and grandchildren paying higher prices for the rest of their lives so 

seniors can save a few bucks. Though there are many more things to be done to fix healthcare in this country, the 

State Age-Rating Flexibility Act is an important step forward in the right direction to reduce costs for all 

Americans, 

Sincerely, 

Dan Weber 

President and Founder of AMAC 

--~-·-·-·-·-·-~~~~-

Association of Mature American Citizens· www.amac.us · 888.262.2006 
95 


21410.009

Statement for the Record to: 

COMMITIEE ON ENERGY AND COMMERCE 

SUBCOMMITIEE ON HEALTH 

U.S. HOUSE OF REPRESENTATIVES 

BlueCross 

BlueShield 

Association 

1310 G Street, N.W 

Washmgton, D.C. 20005 

202.626.4800 

www BCBS.com 

Hearing on Advancing Patient Solutions for lower Costs and Better Care 

Submitted by: 

Blue Cross and Blue Shield Association 

June 9, 2016 
96 


21410.010

The Blue Cross and Blue Shield Association (BCBSA) appreciates the opportunity to comment on 

legislative proposals under consideration by the House Energy and Commerce Subcommittee on Health. 

BCBSA is a national federation of 36 independent, community-based and locally operated Blue Cross and 

Blue Shield companies ("Plans") that collectively provide healthcare coverage for more than 107 million 

members one-in-three Americans. BCBS Plans offer individual coverage across the United States and 

provide coverage in the vast majority of the Exchange Marketplaces today. BCBS Plans have an 85-year 

history providing coverage across all markets in their local communities. 

BCBSA commends the Health Subcommittee for considering proposals that will help to ensure that the 

individual market is stable, affordable and encourages people to get the ongoing health care they need 

to stay healthy and manage their chronic illnesses. 

Three bills address existing policies that allow some people to buy health insurance only when they need 

care, making coverage more expensive. We believe these bills would help balance the overall risk pool 

and stabilize the market by: 

Ensuring individuals are eligible for a Special Enrollment Period before enrolling; 

Aligning grace periods for non-payment of premium with state requirements; and 

Modifying age variation in premium rates to 5:1 or a rate set by a state 

A system where people can get health insurance regardless of preexisting conditions can only be viable 

if people maintain continuous coverage and there are appropriate incentives for all Americans to 

participate. Experience from the past two and a half years shows that the newly enrolled individuals are 

older than originally projected; have higher rates of certain conditions (e.g., hypertension, diabetes, 

depression, coronary artery disease, HIV and Hepatitis C); use more medical services; and have much 

higher costs.' In addition, medical costs continue to increase with significant growth in prescription drug 

costs. 

BCBSA offers the following comments on the bills: 

1. Eligibility for Special Enrollment Periods (SEPs) should be determined up front before coverage is 

effective. 

Special enrollment periods (SEPs) play a key role in promoting continuity of coverage during 

important life transitions, such as job changes, relocations, marriage, and births. However, CMS 

allows SEPs for more events than either Medicare Advantage or employer coverage. The bill will 

ensure SEPs are used appropriately by requiring CMS to verify that consumers are eligible for SEPs 

before they are enrolled. 

Individuals who gain coverage through SEPs are a substantial and growing percentage of the 

Exchange population and they incur significantly higher medical claims than others. In the first two 

years of the Exchange marketplaces, up to one-third of those enrolled in coverage through SEPs. 

Moreover, these enrollees typically incur higher costs than those individuals who sign up during the 

open enrollment period. In fact, the actuarial firm Oliver Wyman found those individuals enrolling in 

1 BCBSA Health of America Report, "Newly Enrolled Members in the Individual Health Insurance Market after 

Health Care Reform: The Experience from 2014 and 2015". 

2 
97 


21410.011

coverage through SEPs incurred 24% more in health care costs over their first three months of 

coverage in 2014 than those coming in during the open enrollment period. Oliver Wyman found 

strong evidence that the relative cost of the enrollees signing up for coverage during SEPs was even 

higher in 2015. 2 

2. Grace periods for non-payment of premiums should be shortened to 30 days as required by 

almost all states. 

The ACA required a three-month grace period for certain individuals to continue receiving coverage 

without paying their health insurance premiums. The ACA requirement far exceeds state grace 

periods which are typically 30 days, allowing some individuals to stop paying premiums in October 

but continue to receive medical services through December and then re-enroll the following January 

without paying any outstanding premiums, causing premiums to rise for everyone. The bill before 

the Committee would address this issue. 

A recent national consumer survey shows that more individuals are using the grace period than 

before. It found that 18% of consumers stopped paying their premium in 2015 and then reenrolled 

again in 2016. Further, half of these consumers returned to the same plan they stopped payment 

for in 2015. Of the consumers that stopped paying premiums last year, 45% said they had stopped 

payments in 20143 

3. Allow states to determine the age rating factors to ensure appropriate incentives to enroll 

younger, healthier people. 

The ACA limited the amount premiums for adults can vary based on age to a 3 to 1 band. This has 

made premiums for younger people much more expensive than the actual medical costs they claim 

and resulted in fewer people age 25-44 obtaining health insurance. In fact, the uninsured rate is 

much higher than was originally projected for those ages 25-44. The bill before the Committee 

would help bring younger, healthier people into the system, making it more affordable for everyone. 

CONCLUSION 

Keeping premiums affordable for everyone is crucial to increasing participation among healthier 

individuals who help balance the overall risk pool and stabilize the market. The current risk pool is out 

of balance- with a disproportionate number of people who need significant healthcare servicesmaking health insurance more expensive for everyone. 

The legislation under consideration by the Subcommittee provides a needed course correction to ensure 

greater affordability. 

2 Oliver Wyman, "Special Enrollment Periods and the Non-Group, ACA-Compliant Market". 3 

http://healthcare.mckinsey.com/sites/default/files/McK%202016%200EP%20Consumer%20Survey%201nfographic 

_yf,QQf 
98 


21410.012

The Honorable H. Morgan Griffith 

United Stales House of Representatives 

1108 Longworth House Office Building 

Washington, DC 20515 

Dear Representatives DeGctte and Griffith, 

The Honorable Diana DcG.:tte 

United State House of Representatives 

2368 Rayburn House Office Building 

Washington, DC 20515 

Our organizations strongly support your legislation, H.R. 3463, the Aligning Children's Dental 

Coverage Act of2015. This legislation would provide greater clarity and consistency for 

employers offering health and dental coverage and would eliminate the current confusion in the 

small group and individual marketplaces outside the public Exchanges. 

1-l.R. 3463 would ensure small businesses can continue to offer families in off-Exchange markets 

access to the same variety of dental coverage choices currently enjoyed inside the public 

Exchanges. Without this clarification, small businesses must contend with the confusion of two 

differing standards for how dental coverage is offered-one inside and one outside the 

Marketplaces. In addition, consumers may find their choices limited in the future. 

We appreciate your leadership on this important bill and look forward to working with you to 

ensure that children and families have clarity in understanding their coverage options as well as 

expanded choices when shopping for dental coverage in the off-Exchange market. Families and 

small businesses should be able to choose dental coverage that best suits their needs. 

Sincerely, 

American Supply Association 

Council for Affordable Health Coverage 

Council of Insurance Agents and Brokers 

National Association of Dental Plans 

National Association of Health Underwriters 

National Retail Federation 

Small Business & Entrepreneurship Council 
99 


21410.013

Charging Older Adults Higher Premiums Could Cost Taxpayers- The Commonwealth Fu... Page l of 3 

Tlw 

COMMONWEALTH 

FUND 

Charging Older Adults Higher Premiums Could Cost 

Taxpayers 

us/expcrts/saltzmqn-evaD.) 

Tuesday, September 15, 

2015 

ill.!lill!l::!lfk~JJ£rui:illltllllJl!l:!CYJJ.D.l By Christine F.ibner (/about~ 

us/cxperts!elbner~christine_l 

and Evan SaltZt1J.illl.tt5!:.Q9utThis post is the second in a series analy::ing proposals that seek to change provisions in the Affordahfe Care Act 

First post.· The Ramifications of'~lf1w the Individual Alandate &1puhlicatfonsib!ogl201 5/auglthe~rami[ications-ot:repea!inz-theindividua!~mandate) 

The Affordable Care Act (ACA) requires that health insurers make coverage accesslbk and affordable to all individuals, regardless of 

age, gender, or health status. Under the ACA, people age 64 and older cannot he charged more than three times as much as 21 ~ to 2tl~ 

year~o!ds for the same plan (this is known as 3-to-1 "rate banding''}. In general, this ruk redw.:t:s pn;:miums for older enrolkes, while 

raising costs for younger enrollees. White the goal of the n~gulation is to make insurance affordahle for a!! age groups, critics argue that 

it discourages young, healthy people from enrol!lng. 

Severa! recent proposals, including one offered by Senators Richard Burr (R~N.C.), Orrin Hatch (R-Utah), and Rep. Fred Upton 

(R-Mich.), would allO\v insurers to charge older adults up to five times as much as younger adults (5~to~J rate banding) while 

simultaneously making olhcr changes to the ACA We analyzed the effects ofrela"{ing the ACA 's rate bands from J~to~ 1 to 5~to~ 1 

·while leaving other ACA provls1ons ln place, We focused on marketplace plans and other ACA-comp!iant health plans in the 

individual market, and excluded plans o!TereJ by employers (which are regulated differently). We found that \Vhi!e more-mostly 

younger~pcople would become insured under 5~to- l rate banding, federal health spending \vou!d incrca.<;e and 400,000 older people, 

who tend to have more health problems, would lose coverage. 

\\'e conducted our analysis using the RAND COlV1PARE microsimulatlon model, a too! that uses economic theory and data to predict 

how individuals and employers will respond to the A CA. Our technical appendix 

(!-imedia/ti!esirublications/bl.QELfOI5/eibner rate banding t..:ch append 090~l5 clcn.!U2J.JtdJ'Z.ill.":t;_!)_} describes the modd approach 

and methods in detaiL 

http://www.commonwealthfund.org/publications/blog/20 15/scpt/charging-older-adults-hig. .. 6110/2016 
100 


21410.014

Charging Older Adults Higher Premiums Could Cost Taxpayers- The Commonwealth Fu... Page 2 of 3 

Simulations using the COMPARE mode! suggest that. with 5~to~ I rate banding, people age 4 7 and older would face higher premiums 

than they would under J·to·l rate banding, while people under age 47 would benefit from lower premiums. For example, a benchmark 

annual premium for a 64-year·o!J would rise from about $8,500 under the ACA to $1 !,000 under 5-to·l rate banding. In contrast the 

annual premium for a 2l -year-old vvould n11! by about $700. from $2,800 to $2,100. As a result, our mo.deling finds that a net 1.8 

mii!ion additional people V\Ou!d be insured ;vith 5-to· 1 rate banding relative to 3-to-1 rate banding (Exhibit I). However. this 

change-a 6 percent decrease in the number of uninsurcd--......;;:omes with a hefty price tag, because many of the older adults facing 

higher premiums would surpass the ACA 's premium contribution cap. Because the young people who would newly enrol! would be 

mostly ineligible tOr subsidies. the increase in federal spending on older adults would more than offset any federal savings stemming 

from new enrollment among young people. We estimate that total federal spending would increase by $9.3 billion as a result of the 

rate-banding change. 

Exhibit 1. Estimated Number of People Without Health Insurance, 

by Age, 2017 

30.0 28.0 

3:1 lcl5:1 

25.0 

20.0 

15.0 13.1 

10.0 

5.5 5.3 5.6 6.0 

5.0 

0.0 

0-11 18-34 lS-46 All Ages 

Soune: Estima1u baud on the COMPAJ.'tf m!trosiml!hdion model 

To fully understand the shdls in spending and the numher of insured, it is he!pful to consider how changes in coverage vary across age 

and income gro11pS. Rel<txing the rate bands results in4A mil!ion people under the age of47 ne\v!y enrolling in the individual market. 

The vast majority of these people (88 percent) have Incomes too high to enable them to qua!!fy for subsidies. In addition, more than40 

percent of these new cnrol!ccs shift from employer coverage into the individual market, rather than becoming newly insured. About 75 

percent of those who me estimated to shift from employer to indivldud! market are under age 20 and enrolled on their parents' plans. 

(Families would money by moving a child or children to tbe individual market.) Meanwhile, a net 400,000 people over age 47 

lose coverage when the rate bands are relaxed from 3-to- 1 to 5~to- I, because these older ind!vlJua!s face higher marketplace premiums 

and have no a!tt:rnativc source of coverage. Most of those losing coverage are unsubsidized as welL OveralL younger, unsubsidized 

people benc!it from the chnnge, while o!dcr people race higher premiums. 

http://www.commonwcalthfund.org/publications!blog/20 l5/scpt/charging-older-adults-hig... 6/ I 0/20 I 6 
101 


21410.015

Charging Older Adults Higher Premiums Could Cost Taxpayers- The Commonwealth Fu... Page 3 of 3 

While few new enrollees receive subsidies, federal spending increases under 5-to- 1 rate banding because subsidy spending increases 

for existing enrollees. This increase in spending occurs because the ACA caps premium contributions for low- and moderate-income 

marketplace enrollees as a percent of income. If the premium exceeds the cap, the federal government pays the difference, as long as 

the enrollee chooses a benchmark plan or cheaper coverage. Older adults arc more likely to hit the contribution cap than younger adults 

because, although premiums increase v.ith age, the cap remains fixed. llecause many older enrollees already hit the cap under 3-to-l 

rate banding, the increase in premiums caused by 5~to~l rate banding would be tinanced primarily by the federal government. 

Simultaneously, revenue from the ACA's individual mandate penalty declines with 5~to~l rate banding, because more people become 

insured. Overall, annual kdera! costs associated with the ACA would increase by $9.3 billion dollars if rate bands were relaxed from 

3-to-1 to 5-to~! (Exhibit 2). 

Exhibit 2. Annual Federal Budgetary Effects of Relaxing ACA's Rate Rands from 3-to-1 to 5-to-1, 2017 

Budget Outcome 

Spendmg on suh.>tdies 

Loss ofmdtvidunl mandate revenue 

Total change 111 spendmg 

S<nm;c Estnn~tco bas~J 011 the RA:--10 C'O\WARE ml<.:rusimu!ation model 

Net Effect on Cost of ACA (in$ billions} 

$8.3 

$10 

$9.3 

Should policymakers wish to encourage enrollment among the young and healthy, 5~to~l rate banding may not be a cost-effective 

solution, given that federal spending for existing older enrollees would likely increase and the need for charity care among vulnerable 

older adults would rise. Other approaches, such as expanding outreach to younger enrollees, educating consumers about the bcnetlts of 

insurance, and improving the functionality of marketplace websites to make it easier to enroll, could yield higher enrollment at a lower 

cost to taxpayers. 

Tags· Affordable Care Act Upublicationsib!ol!fi[\'Wflacsfacet63677-'"[Affordablc Care A~,;!ll 

healthJnsuranceUpubhcationsiblo"#fii'iif:acsfacet63677-!health insurance)' 

health reform !e"is.lajion r/pubhcatior.sfblogllf'@fiat:~facet63677""fhealth reform !eg1slationli 

heHhh Insurance premtums Upubljcat!ons/b!ogi'f(/1Jftngsf.'lcet63677=fhealth insurance nremiumsD 

http:/ /www.commonwealthfund.org/publications/blog/20 15/scpt/charging-older-adults-hig... 6/1 0/20 16 
102 


21410.016

Summary 

As the 20Li start date for the ACAs full implementation 

approaches, insurers are calling attention to a potential 

"rate slHKk" -or substantial increase in health insurance 

premiums that will push young adults out of the 

nongrour insurance market, leaving them uninsured 

limit tlu: ouH1f-pocket health co:-ts individuals <md familiC!-i 

actually pay. 

Ovnall, we Jlnd that loosening the rate bands from .3:1 

to 5: l \Vould ha\'c very little impact on out-of-pocket 

rates paid by the youngest nongroup purchasers, once 

subsidies are taken into account. This is not only the case 

for all likely purchast'fs, but also for t\vo populations of 

particular concern: the 10 million 21-27 year olds \Vho arc 

currently uninsured and the 3 million who currently have 

nongroup coverage. 

and raising premiums for older adults. Accordingly, the 

industry advocates pulling back on the ACA's requirement 

that premiums for ad~!lts age 64 be no more than three 

times higher than the premium for adults age 21 for the 

s<:tn1(. cover-age (a constraint rdative to the tlvdold~ormore difference that applies in today's market). This paper 

compares the likely impact of the ACA's ;1:1 rate band to a 

·•Jooser" 5:1 alternative-using the Crban Institute's Health 

Insurance Policy Simulation rvlodcl (IIIPS:\1) to examine 

behavior of likely purchasers. Th-t.' analysis considers not 

only the ACA's rating requirements but also the impac:t of 

subsidks and ~kdicaid, ClliP or other coverage that \Vill 

The vast majority of these young adults will be protected 

by Medicaid/CHIP, subsidies provided through the 

t:xchanges. or by their parents' employer-based coverage. 

Br contrast, looser rate bands would significantly irtcn:ast· 

ouH}f:pockct rates paid by the oldest purchasers, who 

Introduction 

Considerable attention has been given 

to the possible "ralt.• slHKk" in nongroup 

insurance markets once the full rdorms 

asso<..'iated with the Affordable Care Act 

(ACA) an: implemented in 201-L The 

insurance industry \Varns, in particular, 

that rhe 3-to-l age bands included in the 

!a-\v will substantially increase premiums 

faced by young adults, pushing them 

out of the insurance market and leaving 

them unim;ured. 1 These age bands 

constrain carriers from ch;H·ging a 

(d-ycar-old more than three times th(• 

pn·mium of a 21-ycar-old for the same 

coverag-e. The industry believes these 

bands should more closdy align with 

thc premium variation by age seen in 

today's nongroup insurance markets 

(typic!lly at least S to l). 

This paper explores the full 

distributional implications of the 

5:1 bands relative to the "looser" 

hKk a parental option and are substantially less likely to be 

eligible for subsidks" 

policy alternative of S:I bands, -and 

specitka!ly examines what the young: 

adults curn·nlly covcn:d through 

the nongroup insurance market and 

those uninsureU will face once the 

reforms are fully in place. A <..'Omplete 

analysis, such as the one presented here, 

requires an assessment of how other 

changes forthcoming in the ACA could 

also .:1ffect this population, including 

eligibility for tax credits to offst't some 

of the costs of premiums and costsharing responsibilities, as well as 

Medicaid digibility. We use the Crban 

Institute's Health Insurance Policy 

Simulation Model (IIIPS:Yl) to examine 

these issues comprehensively. 

Tighter age-rating hands will increase 

pn..'miums charged for the youngest 

atlults older than 20 and lmver them 

for the oldest adults compared to 

looser age bands. However, most 

young adults curn:ntly covcn·d by 

Robert \\Qod Johnson Foundation 

nongroup insurance will be shidded 

from rhc full diccts of the narrower 

age-rating bands by the ACAs increased 

eligibility for Medicaid, the tax credits 

offered through the health insurance 

exchanges, or through access to 

employer-sponsored insurance. 

Methods 

We ust• the Crban lnstitute's Health 

lnsunHKC Policy Simulation Modd to 

estimate the effects of health reform 

among the nonddu!y popu!ation. 2 

Individuals eligible for 1\."let.Iicarc arc 

excluded from the analysis. 

HIPSM simulates the decisions of 

businesses and indiYiduals in response 

to policy changes, such as Medicaid 

t·xpansions, new health insurance 

options. subsidies for the purchase of 

l1ealth insurance, and insurance nmrkct 

reforms. The modd estimates changes 

II Urban Institute 
103 


21410.017

U&L&Z.& Lk£2. U£-Zi&L 

Table 1: CMS Proposed Standard Age Curve 

in government and privaH· spending. 

premiums, rates of employer offers of 

coverage, and health insurance coverage 

resulting from specific reforms. \Ve 

simulate the main coverage provisions 

of the ACA as if they \Verc fully 

implemented in 2017. We expect that 

behavioral changes by individuals and 

t~mployers to the 2014 reforms will have 

reached <.·quilibrium at most three years 

after implementation. 

Age rating is simulated consistent with 

the ;\lovcmbcr 2012 notice of proposed 

rulemaking's "CMS Proposed Standard 

Age Curve" reproduced in table 1, 1 

'\Vhich is referenced in the final ruk·s as 

well. 1 Coder this approach, all those age 

20 and younger are groupt'd together 

for pn:mium rating purposes. 21- to 

2·i-year-olds arc rated the same, and 

then premium rates increase each year 

through age G-1. Since the int<:ntion for 

the published 3:1 curve was to follow 

the natural distribution of costs hy age 

for a standardized population as mut'h 

as possible, the compressed rating was 

achieved by llattcning the curve for the 

very youngest (from 21 to about 27) and 

very oldest (about 57 and older). With 

the 5:1 rating, 'IVt' followed the same 

approach, except with modified age 

curves, loosening this flanening enough 

to achieve the higher ratios. Once the 

ratios were established, the level of 

the entire curve was raised or lowered 

to ensure that the aggregate insured 

costs of those enrolled were covered. 

Premium administrative loads are 

then added to these adjusted averages. 

;\Jongroup premiums arc constructed 

by summing the appropriate premium 

costs for each member of the health 

insuranrc unit, consistent with the 

notice of proposed rukmaking. 5 As 

a result, premiums will vary not only 

with agt', but also by the number of 

individuals in the family. 6 All individuals 

arc simulated to enroll in ACA-compliant 

insurant·e plans. 

W(' simulate age-rating bands of 3:1 (as 

written in the ACA) and compare those 

findings to looser age rating hands 

of 5:1, leaving all other provisions of 

the ACA constant, W\:' also assume a 

similar age gradient approach outlined 

by CMS, but S('aled upward to allow 

greater variation between the top and the 

bottom of the relevant age distribution. 

Additional methodological details are 

provided in the appendix. 

,_ : 

Results 

E:\·change~Based Nongroup Health 

btsm·ance Premiums. Figure I 

illustrates the average premium by age 

for a silver-tier policy under the ACA 

as simulated in HIPSM using the CMS 

proposed :->tandard age t'urvt'. Silver 

is tht,• tier to which premium and 

cosHharing subsidies in the nongroup 

health insurance exchange will be 

calculated. L'sing a bronze-tier plan 

would shift all the curves in the figure 

down; using gold or platinum plans 

would shift them up. While C:\.1S <mly 

delineates the age curve for ):1 rating 

since that is the approach required 

under the ACA, we adapt their gradient 

for 4:1 and 5:! age-rating bands by 

changing the relative differences 

between age groups proportionately. 

While the remainder of the analysis 

focuses exclusivdy on comparisons of 

3:1 and 5:1 ratings, Wl' show 4:1 rating 

in figure I as well in order to clarify its 

implications relative to the other two, 

particularly for phasing down from 

looser to tighter bands as some in the 

industry haw proposed. 

The orange line represents the 3:1 

premium gradient, the light blue the 
104 


21410.018

&i&K&&&.t.I&U!&&£2 

Figure 1: Premiums at Different Age Compression Ratios, 

New HHS Method 

31 41- •••••Actual 

1

-i-:1 gradient, and the dark blue lin<.' the 

S:I gradient. Since family premiums 

\Viii be constructed in the post-reform 

nongroup market by summing the 

age-rated individual premiums of each 

family member. these curves rctlect th(' 

age-rated premiums facing all nongroup 

enrollees expected to purchase coverage 

in the exchange, whether they would 

enroll in ·a single or family policy. By 

doign, there is very little difference 

bcnvccn the premium curves under 

the different age bands except for the 

youngest and oh..lcM adults. Pn.:miums 

are notiu:ably higher for those age 21 to 

27 under :):1 rating and arc noticeably 

lower for those age 57 and older. The 

difference between premiums charged 

on behalf of those age 28 to '56 are 

considerably smaller across the different 

rating approaches, \vith the premiums 

under _1: l slightly hight·r than under 

·i:I and '):L 

Tht· red dotted line represents the 

variation in premiums that would he 

expected if age rating varied by the 

average covered expt·nscs of those 

individuals at.:tually expected to cnroU 

in nongroup covt•ragc under the ACA. 

The 3:1 age gradient developed by C\1S 

is reasonably consistent \Vith expected 

enrollee expenses. particularly for 

those up to age 27 and for those age ··i2 

and older. Csing the 5:1 age gradient 

would tend to undercharge young adults 

relative to their actual expenses and 

overcharge older adults rdativc to their 

actual expenses. 

Table 2 shows the full an:ragt: premiums 

for exchange-based nong:r01.1p coverage, 

by policy type (single versus family), 

and agt· of those coven,'d for each of 

the t"\VO rating scenarios. The ovt.'raH 

an:-rages differ very little (less than 

,1 percent), due to slight differences 

in the age and health care risk of th(' 

nonelderly population enrolled in 

nongroup coverage and in the mix of 

poiit·ics purchased across the actuarial 

value tk·rs (bronZ<', silver, gold, and 

platinum): For family policies, pr('mium 

diffcrt·nn·s also reflect family size and 

age composition variation in those 

insured across the scenarios. 

&&& &&& 

The largest differences in average 

single premiums between the age-rating 

scenarios, as would be expected, occur 

for adults age 21 to 27 and age 57 and 

up. Premiums for 21- to 27-year~olds arc 

$850 lower under 5:1 than under :3:1 

rating. while premiums for the '57- to 

6-1-ycar-olds arc $1.770 higher undt·r 'i:l 

bands, on average. Average premiums 

for 18- to 20-year-olds arc $1'50 lower 

undt.·r 5:1 rating than under :):1 rating, 

about a '5 percent difference. Those age 

28 to '56 would also see considerably 

smaller differences in average premiums 

under the two rating so:narios, in the 

range of.-} to '5 percent 

Similarly, average family premiums 

for those with older family members 

(57 and above) but 'vithout members 

21 to 27 years old are significantly 

!ower under 3:1 than under 5:1 rating. 

Conversely, those families with at least 

one member age 21 to 27 but without 

members from the okkr age group 

would save under 5:1 rating compared to 

3:1. However, the savings for the younger 

units of moving to 5:1 rating would bt· 

about half the size of the increased cost 

that would be. imposed on the older 

families. Differences in premiums across 

the rating regimes arc much smaller for 

other mixed-age families. 

Net Cost to Families, Taking Accmmt 

(if Premiums, Out-of-Pocket Costs, 

and Subsi(Jies. As noted, premiums 

alone do not accurately portray tht' 

implications of different age-rating 

bands within the context of the ACA. 

Health care costs under reform also 

include out-of-pocket spending (e.g., 

d<'ductib!es, co-insurance), and fe<k'ral 

subsidies reduce these costs for those 

with modest incomes. Table 3 shows 

the average 20l7 health care costs faced 

by those insured through the nongroup 

insurance exchanges, by age, policy 

type, and income group, under the 

two age-rating band scenarios. For all 

insureds with incomes between U:3 

percent and 300 percent of the federal 

povt·rty level (FPL), within each age 

group, there is almost no diffnencc 

in net costs between scenarios. This 
105 


21410.019

liUkihJJU.&LJL. k " ilitJttLJ£ £Uk £LJW.££Ukik& ! ... WL.GUkJ 

Table 2: Average Premium for Exchange Based Nongroup Health Insurance Under Comprehensive 

Health Care Reform by Premium Age Rating Option and Age of Covered Individuals, 2017 

Table 3: Net Cost to Families for Nongroup Policyholders by Premium Age Rating Option, Age of 

Covered Individuals, and Income Relative to Poverty, 2017 

···· ···~·················~·············· ..................... ·~···················-~~··············~········~~ Timety Analysis of Immediate Healih Poficy Issues 4 
106 


21410.020

Ii£ . i££2.2Jii&UL.JLJl£iiJWULU&£.£2Jd 2 2£2 UW£1&1W££dd &dL 

consistency results from tht.· structure 

of the federal premium subsidks, which 

limit the amount of premium owed 

to a shan: of family innm1e, The same 

is largr!y true for those with incomes 

between :100 percent and 400 percent 

of FPL, as this income group is also 

c!igibk for federal subsidies. 

\Vc do, however, sec net costs 

somewhat lower for the younger adult 

age groups purchasing policies under 

the looser rating scenarios. With 3:1 

age rating, single premiums for a young 

adull in this income group arc generally 

greater than the amount they would 

Table 4: Number of Policies and Median Health Care Spending Relative to Income for Nongroup 

Insurance Purchasers by Premium Age-Rating Option, Age of Covered Individuals, and 

Income Relative to Poverty 

..................................................... ~ ............ ~- Timely Analysis of Immediate Hea!th Policy Issues 5 
107 


21410.021

~~ .. i, .. JJ.L .... aLJLii ... Ul ...... KL.k .. ",.i.XJUJ&Jiii&iUJ,JU£ .. WLL.ii& ... ULU!U. &at &Ell 

be required to contribntt' tmvard their 

coverage; the federal subsidy pays the 

excess of their premium over 9.'5 

percent of their income. lf age rating 

is 5:1 instead, premiums for this age 

group "\Yould somctim<..·s be lower than 

the 95 percent of income contribution 

requirement, in which case the federal 

suhsidy would be SO. Thc:-;c young 

adults would thus pay modestly less, on 

average, f()r single coverage under :;:1 

age rating even though they arc cligihle 

for subsidies hy virtue of their income. 

\!incty-two percent of adults age 21 

to 27 enrolling in single plans~' in 

exchange-based coverage have incomes 

belmv :)00 percent of fPL-in other 

words, the vast majority of young adults 

enrolled in these plans would not fae(' 

different health care costs regardless of 

the rating bands cho:.en because of the 

prott:ction afforded them by the ACA's 

subsidies (cakulated from number of 

policies providnt in table 4).') The same 

is true for 88 percent of 18- to 20-ycarold:-., 8'5 percent of 28- to 44-year-olds, 

...,9 percent of 15- to .:;6-year-olds and 

76 percent of those age ')7 and older. 

Only about 4 percent of the youngest 

age group purchasing singk· plans have 

incomes high enough to make them 

ineligible for subsidies, w compared 

with about H percent of the oldest age 

group. Over 80 percent of the youngest 

families buying coverage are eligible 

for financial assistance for exchangepurchased family coverage 

The largest differences in costs across 

th< . .' age rating scenario are apparent for 

those with incomes over 400 percent 

of FPL, tho~e who arc ineligible for 

~ubsidizt·d coverage. Average net costs 

for higher-income young adults age 18 

to 20 buying single ('0\'Cragt.' arc $150 

lower under S:l rating than under 

:):1, and the <.'OSt difference for 21- to 

27-year-olds is $470. In contrast, those 

age 57 and older purchasing single 

policies would face $1,100 higher 

average costs und<.·r 5:1 age rating than 

under :):1 rating. Similar patterns arc 

seen for families with different age 

compositions. Again, the gains to the 

young adult families from moving to a 

5:1 age rating approach \VOu!d be half 

the increased costs impos<.·d on the 

older families. 

~ct costs for older adults arc 

considerably higher than for the younger 

adults, not only b(·cause of age rating 

and its consequent higher premiums, but 

also because older adults' usc of medical 

care tends to be significantly higher. 

meaning their out-of-pocket spending 

is considerably higher as well. Thus, 

average spending under 3:1 rating by 

single 21- to 27-year-olds with incomes 

above 400 percent of FPL is $5,820, 

while it is $15,620 for singles age 57 

and older of the same income. Likewise, 

average direct costs for oldt'f families 

under :):1 rating arc $28,410 compared 

with $12,900 for younger families. 

llealtb Care Financial Bm··tleusfor 

Those Purcbasiug Excbange¥Based 

Nongroup Cot'erage. Tilblc ''~ proyidcs 

median direct health care expenses 

relative ro income for those buying 

health insurance coverage through the 

nongroup exchanges. As indicated hy 

the average expenses shm-vn in tahlc 3, 

the choic<.· of age bands has almost no 

effect on tht~ linancial burdens of those 

with incomes at or below 400 percent of 

FPL, '\Vhich account for about 85 percent 

of policies sold through the nongroup 

exchanges. While higher-income 21- to 

27-ycar-olds buying single coverage 

would sec a l.S percentage point higher 

h<:alth care financial burden under ):1 

than umkr 5:1 rating (9.6 percent of 

income compared with 8.1 percent), 

their 57- to 64-ycar-oll1 counterparts 

would sec their financial burdens Jesson 

hy over 2 percentage points (13,9 puccnt 

of income compared with 16.0 percent). 

The impact on the other age groups 

\vould be substantially smaller. Median 

financial burdens for 21" to 27-year-o!d 

single-policy purchasers outside the 

subsidy eligibility range would be about 

half that for those age 57 or older; the 

differential \Vould shrink under 3:1 

rating. but the burden~ would remain 

significantly highu for the older adults. 

Similar patterns are seen for family 

policies \vherc the members have 

different age compositions. 

Status of Current Nong1·oup 

Enrollees Under tbe AC4. Current 

(prc-ACA) young nongroup enrollees 

constitutt· a central concern related 

to the implications of new insurance 

market rules. This population is most 

at risk for experiencing disruptions to 

their current coverage. While tables 

presented aboV(' indudc all those 

purchasing coverage in the nongroup 

markets post reform (both those newly 

purchasing and those continuing on 

from prior nongroup coverage), we now 

change our focus to those with current 

nongroup coverage. 

Table 5, st·ction A shows the number 

(in thousands) of covered Jives in today's 

nongroup market by age and status 

under the ACA. 11 As we saw previously, 

the one group for whom 3:1 agerating bands potentially have the largest 

rlt'galive implications is young adults 

age 21 to 27. Of the 2.9 million adults in 

this ag<.· group with pre-ACA nongroup 

cowrage, 67 percent would be eligible 

tbr either :'\1cdicaid or CHIP under the 

ACA or for exchange-based subsidies 

for the purchase of private nongroup 

insumm-e, thus being protected from the 

potentia! negative effects of age rating 

on their premiums. Of the remaining 33 

percent, two-thirds arc up to age 26 and 

in families with an offer of coverage 

from an employer (data not shown), and 

thus could obtain coverage that way 

instead of through the nongroup market 

via the ACA's provisions regarding 

<.·xpansion of dependent coverage in 

private plans. i'\'lorc than three-quarters 

of the l million younger adults (age 18 

to 20) with nongroup coverage would 

also be eligible for financial protection 

under the law. Older adults \Vith 

current nongroup insurance cov<.•ragc, 

those most assisted by the ACA's 3:1 

age-rating bands, are significantly 

less likely to be eligible for flnancial 

assistance under the law than their 

younger counterparts. 

Status of Current{v Uninsured 

Undet· t!Je ACA. TableS, section B 

shows the post-reform eligibility status 

of those currently uninsured, by age. 

Young adults without insurance far 

outnumber those young adults with 

,,,,, .•. ,'", ,.,. '""'"."""""""···-"--'···-·~,~···--·-----,, ___ , Timely Analysis of Immediate Health Policy Issues 6 
108 


21410.022

Table 5: 

A. Post-Reform Eligibility Status of Those with Current Nongroup Coverage, by Age Group 

(numbers in thousands) 

B. Post-Reform Eligibility Status of Those Currently Uninsured, by Age Group 

(numbers in thousands) 

nongroup coverage today. For example, 

almost 10 million 21- to 27-year-olds 

today arc uninsured, compared with 

just under 3 million with nongroup 

coverage_ On:r 70 percent of uninsured 

young adults will be eligible for tln;mcia! 

assistance-either through l\'lcdicaid 

or the cxchang(·s--oncc the ACA is 

implemented. Over 80 percent of 

uninsun:d young atlults age 18 to 20 

will also be eligible for Medicaid or tax 

credits in the nongroup exchanges. 

Consequently, tht: vast majority of these 

young adults, a central target population 

tiJr enrollment in the nongroup market 

beginning in 2014. wiH also bt· shielded 

from significant financial effects of the 

change to narrower age-rating hands. 

Aggregate Costs and Rates of 

Insu1·ance Coverage. Consistent 

"\Vith our previous analyses on the 

distributional effects or age-rating 

options, 12 the current analysis shows 

virtually no difference in m·erall 

insurance coverage of tht· noncldcrly 

across age-rating scenarios (appendix 

table 1). In addition, there is extremely 

little difference in the distribution 

of insurance coverage within age 

categories. Also consistent with our 

earlier \Vork, aggregate government, 

employer and household costs under 

the ACA arc not significantly affected 

by the choke of age-rating bands, 

with aggregate costs differing by less 

than l percent bctwct·n :3:1 and S:I 

rating (appendix table 2). \.'?hile larger 

percentages of young adults arc eligible 

for exchange-based subsidies due to 

being lower income, l<nvering their 

premiums docs not decrease total federal 

subsidies significantly since the ;wcrage 

premiums for the older adults incrcasl' so 

substantially under '):1 rating_ 

Conclusions 

The modifled community rating rules 

that will be implemented under the 

ACA in January 2014 will change how 

individually purchased insurance 

premiums will be determined in the 

vast majority of states. The taw will 

significantly reduce the current market's 

variation in premiums between older 

and younger adults purchasing the 

same coverage. However, the claims by 

some in the insurance industry that this 

change will have dt·amatic implications 

for the out-ol~pockct costs of young 

adults arc unfounded. Those most 

afft·ct<:d by the changed rating rules will 

be those age 21 to 27, for whom average 

premiums will tend to be higher under 

3:1 rating than under looser rating 

rules, and those age 57 and above, for 

whom average premiums will tend to 

be lower under 3:lrating. However, 

the 3:1 age gradient developed by CJ\IS 

is a reasonable proxy for the health 

expenses of those expected to enrol! 

in the new nongroup marketplace, 

particularly for those up to age 27 and 

for those age ·i2 and older. 
109 


21410.023

E 

Appendix Table 1: Distribution of Health Insurance Coverage Under Comprehensive Health Care 

Reform by Premium Age Rating Option and Age of Covered Individuals 2017 

Appendix Table 2: Aa>aneo;>te Gc>vermnent. >-rrm~tw•.r and Household Costs for the Nonelder!y Under 

In addition, large majorities of the 

young adults purchasing nongroup 

insurance today, tho:.e uninsured 

today. and those expected to pur<·hasc 

nongroup covnage under the fully 

implemented AC\, \'-·ould lw shielded 

from the negative efk·ct.s of tighter agerating rules. This nnancial protection 

\vHI t'ome from the availability of federal 

subsidies for tht· purchases of private 

nongroup insurance and, for some 

current nongroup purchasers and the 

currently uninsured, the expanded 

Medicaid program_ 

by Premium Age Rating Option 2017 (in billions 

Appendix: Methodology 

\Ve use the Crban fnstitute's Health 

Insurance Policy ~imulation il'lodcl to 

estimate the ef!Ccts of health n:form 

among the nonddcrly population.n 

The core of the national model is 

two years of the Current Population 

Survey·s Annual Social and Economic 

Supplement, matd1ed to several other 

national datasets, induding the Medical 

Expenditure Panel Survey-Household 

Compont·nt. 11 Individuals cligibk for 

Medicare arc excluded from the analysis. 

HIPSM simulates the decisions of 

businesses and individuals in response 

to policy changes, such as .\1cdicaid 

expansions, new health insurance 

options, subsidies for the purchase of 

health insurance. and insurance market 

reforms. The model provides estimates 

of changes in government and private 

spending, premiums, rates of t'mployer 

offers of coverage, and health insurance 

coverage resulting from sp<·ciflc 

reforms. We simulate the main coverage 

provisions of the ACA as if tht•y were 

fully implemented in 2017. \X.-e choose 

2017 because we expect that bchavior-Jl 

changes by individuals and employers to 

the reforms being implemented in 2014 

will have reached equilibrium at most 

three )Tars after implementation. 
110 


21410.024

.&i!UI!&JJLUUJJJJJ!JJJJIWJiJ£& LJEEJIDJEE£1 , W£ JJJJ&JJ!J&J 2& 

This approach differs from that of 

the Congressional Budgt:t Office 

(CBO) or the Centers for \-Ictlican.· 

and Ylcdicaid Services (C:VlS) actuaries 

who by necessity provide IO~yt:ar 

estimates. Our approach permits more 

direct comparisons of various reform 

s .. :cnarios with each other. The key 

coverage provisions of the ACA aml their 

implications for coverage and costs \Vcrc 

summarized in an carlkr policy brief 

and are not repeated hcrc. ~ 

For purposes of this analysis, \-VC 

assum(' that the nongroup and small 

group markets are not pooled together 

in computing premiums. However, states 

choosing to do so could decrease th<-' 

magnitude of any nongrm1p premium 

increases associated with the ACAY' 

Small firms are defined as those of 100 

(full-time-equivalent) or fewer \Vorkers 

as all states must usc this tlctlnition 

beginning in 2016. We simulate the 

affordability exemption to the individual 

mandate that observers expect to be 

in the forthcoming regulations: this 

differs from the interpretation of the 

joint Committee on 'Etxation and CBO 

that \VC used in earlier modeling. \Ve 

assum(· that dqwndcnts will not incur 

mandat(' penalties if they do not obtain 

coverage and the lmvest available family 

premium is above S percent of family 

income. A family would stitl be barred 

from subsidized exchange cover;lge if 

the lowest single premium offered to 

one member was less than 95 pen:cnt 

of family income. The Basic Health Plan 

option \Vas not modded 

The Supreme Court'!'> ruling on the 

AC\ mean~ that state:; may deckle 

whether or not to expand \'ledi<::tid 

coverage to nonclderly adults. Our 

ana!rsis assumes that all states take 

advantage of the opportunity to 

increase eligibility to those with 

incomes below Fb percent of FPL 

Beginning in 2014, states do not have 

to maintain ,\1edicaid digihility for 

adults above 155 percent of FPL \"'\Te 

assume that states would discontinue 

eligibility for adults eligible under 

Section 1115 waivers or Section 1931 

\vho are above that income threshold. 

Other categories of adults could be 

aftCcted, notably the medically needy 

and pregnant women, but \VC do not 

modd any change in their digibility 

due to the difficulty in identifying 

them in our underlying survey data. 

We assumt.' that college student 

plans arc r('quircd to be Essential 

Health Benefit compliant plans 

starting in 2014. The structure of the 

CPS is intended to indudc students 

temporarily residing away at college 

in their par('nts' pt·rmam·nt residence 

if tht')" are tax dependents of their 

pan.>nts. Consequently, full-time 

students reporting on the CPS that 

they reside independently art· treated 

as independent tax units. I-fowevt·r, 

we rt·cognize that the survey may not 

correctly identify aU full-time students 

Jiving at school as to \Vhethcr they 

arc tax dependents of their parent or 

nut, partict!larly those living outside 

university housing. 

Age rating is simulated consistent \Yith 

the ;\!ovember 2012 notice of proposed 

rulcmaking's ''C:\1S Proposed Standard 

Age Curve"' reproduced in table 1, 1

-

\vhich is referenced in the final rules as 

wei!Y' Cnder this approach, all those age 

20 and young('[ ar(' grouped together 

for premium rating purposes, 21- to 

24-year-olds arc rated the same, and 

then pr·('mium rates increase t'ach year 

through age ()'L Since the intention for 

the published ,3:1 curve was to foHow 

the natural distribution of costs by age 

for a standardized population as much 

as possible. the compreSSl'd rating was 

achieved by flattening tht: t_·urn· for the 

very younge~t (from 21 to about 27) and 

\--cry oldest (about '57 and older). With 

·1:1 and '5:1 rating, >Ve followed the same 

approach, except with modifkd age 

cnn·cs. loosening this flattening enough 

to <Khi<.'vc the higher ratios. Once the 

ratios wt·re established, rhe level of 

the entire curve \Vas raised or lowered 

to ensure that the aggregate insun:d 

costs of those enrolled were covered. 

Premium administrative loads an: 

then added to these adjusted averages. 

Nongroup premiums arc (:onstnKted 

by summing the appropriate premium 

costs for each member of tht• health 

insurance unit, consistent with the 

notice of proposed rulcmaking. 19 As a 

result, premiums \Viii vary not only 

with the age, hut also by the number 

of indiYiduals in the farni!y. 20 

A number of factors that could impact 

pn:rnium differences by ag(' arc not taken 

into account here_ We do not model 

tht· option for catastrophic cov(·rage 

for adults under age 50 as provided 

under the ACA. This coverage option 

makes lmvcr-cost coverage with higher 

cost-sharing requirements than the 

bronze level available to young adults, 

creating a lower premium option than 

those modeled here. As a conscqm·nce, 

average prt•miums for the young adults 

presented will overstate the actual 

averages under full implementation of 

tht· law. In addition, w<~ do not model 

specific tohact'O usc-related premium 

adjustments (permitted in the small 

group and nongroup markets under 

the ACA) or premium adjustments 

due to wellness programs (permitted 

in the group market under the ACA), 

Tobacco adjustments are more likely 

to increase premiums of younger 

adults than older adults as they arc 

somewhat more likely to usc tobacco 

products. "1 \Vellness adjustments are 

more likely to increase premiums of 

older adults, as the health problems they 

most frequently target (e.g., high hlood 

prcssun·, high t·holcs[erol, abnormal 

blood sugar) are more likely to occur 

among the older population. Depending 

upon how widespread these premium 

rating approaches arc used, they could 

:;;ignitkant!y affect decisions of adults 

of different ages and their decisions 

to enroll in insurance coverage in the 

small group and nongroup markets, 

and thus could also affect premiums in 

those markets. 

We simulate age rating bands of 3:1 (a~ 

written in the ACA) and compare those 

findings to looser age rating bands of 

5:1. leaving all other provisions of the 

.r\CA constant and assuming a similar 

age gradient approach outlined by C.\ iS, 

but scaled up,varcl to allow greater 

variation between the top and the 

bottom of the relevant age distribution. 
111 


21410.025

~2LiLZ.Z"LU&ill£L&L&MULi.~.kU&JL&L&L&LUIJJtULE&LU£ :ZL:ua:::& 

Endnotes 

1 For example, Karen Ignani, says. 'Unless 

the restriction~ on age rating are loosened, younger people will face significant cost increases at the same time the 

broader coverage expansion begins to 

take effect in 2014''("Nov·.: is the time 

income at or belmv 300 percent of FPL. 

1.317 ,000/l A29,000 = 92 peret'nt 

10 Another "i percent of this age group has 

income between 300 and 400 perct·nt of 

FPLT!wy are eligible for subsidies by virto focw. on affordabi!ity;' http:/ /blogs. tuc of thdr incomt>, but as we saw earlier, 

r.n.U.t£5..,ElHJ.L&t~:J.J.:..1:;k_hm.s.::i.JJlL?J..\2ZLU!L under "l: I rating some will not actually 

omY .. i~:J:he:..tLm..rJ.P·.toh.n~·.f2.D:.he.<t.li.llc.tu:~: receive a subsidy because the premium 

affordaJ2JliD'.D cost tht•y \Vould face is Jess than !h(; 9.5 

percent of income premium cap they 

~ For more about IHPS:\'1'~ capabilities and receive from the federal government. 

a list of recent research using it, see 'The 

Urban Institute's Health ;VHcrosimulation 11 Here. wc include ful!"time adult studcnts 

Capabilitit•s," b.ltp:/13c.'""P1'-\~~urhi.Vl.~LuU reporting nongroup coverage under the 

llJ,.!llfu';ttion'>/·i 12 I S-i htm!.A more current system.Although much of this 

ttchnical description of the construction coveragt· is studt·nt insurance through 

of the model can be found at l!IU}.:i{'>Y.\):~';.'0~ colleges and univt·rsitit.'s. we are unable 

ndhllL0Xg/JlUbJiG!tiQmL!l:.!:-i:'"J.JJtPll to identify specifically tht· source of any 

4 blU:dL'0:'\Y...'TI:~Uf:Cg\lY/(2fRrpJQ;tzlj 

()FRData/2013:Q.1i..i5..11..P_\!f 

'A health insurance unit consists of the 

group of family members that can typically 

enrol! in private health insurance together. 

This includes married adults, their dependent children up to age 18, and full-time 

students age up to age 2:) 

6 For the remainder of this paper,"family" is 

used to retCr to the health insurance unit. 

particular nongroup plan 

1

" Blumberg LJ, Buettgens \1 and Garrett B. 

· Cpdate:Age Rating under Comprehensive Health Care Reform." Insight on the 

Issues brief. Washington:AARP, 201 O.Availah!e at http://assers.aaro org/rgc<·nter/ 

ppj/!Jea!th-can:lfOOO-ave-rating .pdf: and 

Blumberg IJ, Buettgens M and Garrett B. 

"Age Rating Under Comprehensive Health 

<:are Reform: Implications for <:overage. 

Costs, and IIouseho!d Financial Bunlens." 

Timely Analysis of Immediate IIcalth 

Policr lssucs.Wa~hington:Tl1e tlrhan 

Institute. 2009.Avai!ablc at lltt.n.dlm~ 

.l-.H:h;U.LQ££Ln.uWis.:aliilllSL!lJ..9.7J.Lbt!:nL 

-For example, in a small number of cases. 1' For more about HIPSii.J's capabilities and 

older adults purchase plans from a higher a list of recent research using it, sec "The 

tier under :3: l rating than they would un· Urban Institute's Health ~licrosimulation 

der '1: I rating because the mtlre compre- Capabilities," tlutLibY~vw . .Jd..dlil!l,Qrgi 

hensive coverage is more affordable under nJJ.!11iGUJ.tm~1LU.i:t.lnm!.A more technithe narrower rating bands. ct! description of the construction of 

x Single policies each cover one individual 

(i.e., number of policies is equal to the 

the mode! can be found at llt.tp~L/W"'-'>V. 

lllilillJ..&QUnll.blicatiQU.5L:i 124'7J.hunl 

1

" Ruettgens ~1, Garren B, and Holahan 

J "America under the Affordable 

Care Act."Washington:The lirban 

Institute, 2010. hJlllJl~~~:,.urhi.JJ.lDIU 

DtJb!icatiQns/-41226'7.html. 

lr, See Blavin E Blumberg IJ, Buettg<~ns M, 

Holahan_T and Mc;Vtorrow S. '·How Choices 

in Exchange Design f()r States CouldAffCct 

Insurance Premiums and Levels of Coverage." I Icalth Affairs 31 (20 12):2290- 2298 

Rcl<ttedly,The November Notice of Pmposed Rulemaking on market rules O.l!..U2JL 

~'WJ~J}S1.£9Y.Lt!l~IH.v.kg£I]k.~.Q12.:.U:.f0.L 

pJJfaQ.l4:.2B:i4B.-n.ill) specifically a!lov .. ·s 

small groups and small group issuers to 

"deconstruct"' group premiums. assigning rhe underlying age-adjusted (and 

tobacco-adjusted) cost of coverage to each 

member of the group. Depending upon 

the frequency with which ~mall employers and carriers use this option, and 

depending upon hO\v those employers 

structure their premium contributions and 

how that affects workers of different ages, 

some workers could change their insurance enrollment decisions, which could in 

turn affect small group and nong:roup risk 

pools and premiums. We do not take this 

possibility into account in the estimates 

presented here. 

~- lWJ2Ji.JY.~Y2i:-.Wil£P.Jt:i.fJ.l.!:l)§!,12.l<:gLER.-_~.0 .Lf: 

l.UiYnil.U2iU2:;!1:Lt48.,mtf 

1s http://w"'\V'-V.ofrgov/OFRl;p!oad/ 

!Jf.lmat!LfDJ3:!l)'")-)'J .PLr:K!f. 

19 A health insurance unit consists of the 

group of family members that can typi· 

cally enroll in private health insurance 

together. This includes married adults, 

their dependent children up to age IB, 

and full-time students up to age 23. 

number of people coYercd by those 11 IIIPS:\1 uses data from seveol national "n''Family''is used to refer to the health 

policies). Each t:m1ily policy covers more datasets:the :\larch Current Population insurance unit 

than one person Survey (CPS) Annual Socia! and Economic 

Supplement. the February CPS Contingent n Trends in Tobacco Use. Wa~hington: 

9 92 percent is calculated from table -"t as 

follows: In 201 .... , \VC estimate that the 

total m1mber of ~ingle policies for adults 

age 21 to 27 held through nongroup 

exchange plans will be I ,1-29.000,\'t''e 

also estimate that l,j 17,000 of those 

policies will he held by individuals with 

·work and Alternative Employment Supplement, the ~1edical Expenditure Panel 

Survey (~1EPS), the Statistics of Income 

(SOl) Public l3se·ntx File and the Statistics 

of C.S. Business. Distributions of coverage 

are based on :\1arch CPS data with adjustmenrs for the Medicaid undercount. 

American LungAs~ociation, 2011. 

Available at ht.UJ_:/L"\Y~\Y.J~JJJZJ.)...rgL 

.llnstiJJ£;(\.lJl'~'lill.U!::.l'CSl'ill.:£hLttTnd-r<'J2Q.!:.lliL 

'foll;Kco-Trend-Report.pdf. 

~·~~,~~·~·"~~··-~~~~~·~·~-"~~~,.~,<-,··~""~~<~~···-"'·---~~~·"-·~·- "-~··~··~····~",.~ ... ~ ............. Timely Analysis of Immediate Health Policy Issues 10 
112 

Æ 


21410.026

Institute, its trustees, or r'ts r:"na'ers. 

About the Authors and Acknowledgments 

About the Urban Institute 

nonpartisan policy research and cdtlcation;;l organization that examine:-; the social, economic 

govern;mc<o probl<:ms facingthe nation. For more information, visit www.urban.org. For more information spccitkally about 

th(' Institute's Health Policy Center and its work, visit www.healthpo!icycentcr.org. 

About the Robert Wood Johnson Foundation 

si~;~,~c,,:~~· ~~~~t~'';!~; cane iS!JUCS facing our· country. As the nation's larg:cstphilanl:hrc>pydevotc•d c><clusin:ly to ""l·'"""'g"'c h< can:: otaliAm•rrlcans, the Foundation works with a 

diverse group of organizations and individuals to ickntify solutions and achieve comprehc,·nn~;s:i:v;c~··, :~~~~:~:~~ •;;:~~:~~:~b~'~'~'~'gc. For nerrrly'!O ·ycar:s tire Foundation has brought experience, commitment and a rigorous, b; 

health care of those it serves. When it comes to helping Americans 

they need, the Foundation expects to make a difference in your lifetime. For more information, visit www.rwjf.org,