‘Pricing now appears to more accurately match medical costs’

For the past two years, Marilyn Tavenner, who had bipartisan support when selected by President Barack Obama to run the CMS, has served as CEO of America’s Health Insurance Plans, the leading trade association for health insurers. She’s now seeking to marshal bipartisan support to save an individual insurance market dubbed a “disaster” by President Donald Trump and many Republicans on Capitol Hill.

Last week, just prior to her testimony before the House Energy and Commerce Committee, Tavenner spoke about the fate of that market and other issues with Modern Healthcare editor Merrill Goozner. The following is an edited transcript.

Modern Healthcare: Recent reports by the National Association of Insurance Commissioners, the White House Council of Economic Advisers and Standard & Poor’s said the individual market was headed for stabilization in 2018 after this year’s large rate increases. Is that your view?

Marilyn Tavenner: Those reports do indicate from an actuarial point of view that pricing now appears to more accurately match medical costs. I would agree with that, and it’s probably a good thing.

It’s an experience issue. But it doesn’t solve the problem that premiums are higher than they need to be. Now the question is affordability. How do we go about making plans more affordable?

MH: With rates due in just a few months, what must be done to keep the exchange-based individual market viable in 2018?

Tavenner: There is a sense of urgency around the cost-sharing subsidy, and around the issue of reinsurance payments that were due for 2016. Because of a court case, we’re making the request of Congress that they authorize funding for costsharing subsidies. Without those, it’s a problem for consumers, and it’s a problem for plans.

The second issue is we’d like the reinsurance payments to be paid.

Then we want the temporary transition policies to phase out. There was a decision to allow grandmothered plans to continue. They’re slated to go away at the end of 2017. That’s a good thing because those individuals will become part of the individual risk market and make it healthier. Some states already eliminated them (eight out of 50). It was a state option.

Most insurance commissioners understand that transitional policies keep healthier people out of the individual market pool. So they’d be OK with not growing transitional plans. Reinstituting transitional policies would probably cause more instability.

MH: Are there things that HHS can do to improve the individual market without congressional action?

Tavenner: There are a series of things that we think can be done administratively, things we’ve been talking about my entire time at AHIP. We need to adjust the authorization process in special enrollment periods to ensure people do not use insurance as just-in-time insurance.

The grace periods are too long for nonpayment. We’re recommending they follow policies in most states, which only allow 30 days rather than 90 days.

MH: What specific changes would you like to see in special enrollment periods?

“There is a sense of urgency around the cost-sharing subsidy, and around the issue of reinsurance payments that were due for 2016.”

Tavenner: There needs to be some type of authorization process. The CMS to its credit has started that in a pilot. That pilot was intended to grow by the summer of 2017, prior to the change in administration.

The fact that you relocate in itself should not be a reason to qualify for new insurance. It has to be job loss or something like that. Some loopholes need to be closed. Obviously marriage and divorce in some cases makes sense; but in some cases it doesn’t. We want people in a continuous coverage model, not coming and going based on when they need healthcare.

MH: An estimated 85% of people in the exchanges receive subsidies, which are crucial to the success of this market. What changes in subsidies would you like to see?

Tavenner: There are two types of subsidies: costsharing for low-income people and premium subsidies. These subsidies can probably have some changes made. Age band ratings can go to 5-to-1 (from 3-to-1 in the ACA). That would have the effect of probably giving more assistance to younger people, who are underrepresented in the market.

More and more actuaries are saying it’s not just young people you want in the market. You want healthy people. You want a mix of healthy and high risk, because that’s the way insurance works. So we’ve fallen into a trap of saying it is young people we want. It is actually healthier people we want.

There needs to be assistance for lowerincome people. If you look at the people who enrolled in large numbers, they’re in the 100% to 250% of poverty level range. It starts to go down above 250%. It’s partly due to having access to employersponsored coverage. But low-income people over 250% need more help.

MH: How did this year’s sign-up go?

Tavenner: Based on what I’m hearing from the plans, enrollment has been steady—at least equal to and in some cases more than last year. Some are doing better because other plans pulled out of the market. The auto-enrollment process sent some people to the plans that remained.

MH: What can consumers and firms expect in the employerbased market for 2018?

Tavenner: That’s still where the bulk of the business is, 180 million people. We’re seeing some pickup in medical costs. Pharma has definitely picked up, most of it in the specialty drug area. Our plans are seeing that pharma as a percent of the premium is approaching hospitalization—getting up closer to 20%. Even the CMS is seeing an uptick due to pharma.

MH: So will rates go up faster for employers?

Tavenner: I’m guessing, but maybe it will pick up by a half-percent or so. But in the ACA, we can’t say because it will depend on what they do with the costsharing subsidies and the premium tax credit. No one can price until it’s decided. That’s why we’re pushing for a decision. Time is of the essence.

MH: Most of the replacement plans floated in Congress involve relying on some form of high-deductible plans coupled with health savings accounts. Do you support that?

Tavenner: They’ve still not settled on a single plan or group of plans. Our team has spent a great deal of time with proposal after proposal. They’re still seeking information. We want them to make the right decision.

Having said that, HSAs will be part of their proposal. HSAs can serve an important purpose. We do not feel they’re just for high-income folks. HSAs are in the Indiana Medicaid plan. It’s a demo, but people are working with HSAs at lower income levels. We’ve worked closely with Chairman (Orrin) Hatch (of the Senate Finance Committee) prior to the election to make sure HSAs can serve a big role in the insurance market.

MH: Are you concerned about their impact on efforts to improve population health?

Tavenner: I don’t know if I’m black or white on it. But if your first $5,000 in medical care is out of reach, that’s not an ideal HSA. We have to start thinking about how we might want to use them today.

Think about it. If you’re in Medicare and you are high income, you are seeing your premiums go up more than you saw in the employer-sponsored market. HSAs, which can be given to your family members, can help with that. We have to begin thinking beyond the traditional HSA.

In Indiana, the money funded by the state for Medicaid HSAs was about $600 or $1,000. It’s a way to go. I think they can have a future.

MH: Did anybody from the Trump administration reach out to you?

Tavenner: We reached out to them. I have not met with them directly, but our team has.

MH: Given the political situation, do you foresee ACA plans continuing into 2018?

Tavenner: I hope so. More and more people are talking about making changes beyond 2019. There’s an understanding that in order to price products for 2018 and get them out in the market, it will be very difficult to make changes this year. We need at least an 18-month window since plans should always start on Jan. 1. It’s important for the consumer, and it’s important for the plans.

“So we’ve fallen into a trap of saying it is young people we want. It is actually healthier people we want.”