Below are the comments as prepared for delivery of CMS Acting Administrator Andy Slavitt at the National Association of Health Underwriters 2016 Capitol Conference in Washington, D.C. on February 23, 2016.
Thanks for the introduction. I appreciate the opportunity to be here to talk about the major priorities for the Health Insurance Marketplace in 2016. Kevin Counihan is going to be here tomorrow to talk specifically about the role of agents and brokers. But talking today as I am to many of the builders of this Marketplace, I want to provide my broad reflections on how far we’ve come, take a look at what’s around the corner, and spend a little bit of time on near term steps we will take to get there as we move through the early years of a long-term journey to provide affordable, stable coverage to millions of Americans.
Health care coverage says a lot about who we are as a country and what we want for our people. Covering over 17 million newly insured Americans over the last few years is as profound a change as most of us have seen in our careers. When people have insurance, their lives change in profound ways besides just having a card in their wallets– from being able to afford preventive care to accessing prescription drugs for their chronic condition, or no longer worrying about the financial threat that would accompany a cancer diagnosis. But there are less obvious things that change – parents with insurance coverage who finally allow their kid to play on the sports team because they no longer fear injury and entrepreneurs and contractors who can more comfortably leave their jobs to pursue their passions or a better job. And there are of course the economic effects – like reducing uncompensated care and hospital bad debt – costs that are borne by everyone. Studies have shown no reduction in employer sponsored coverage and that there has been continuous and significant job growth during these early years of coverage expansion. Importantly all of this has been accomplished below the CBO cost estimates. We cannot declare victory – but I would call all of this a good base to build from.
In the last two years, we have participated in the opening of a brand new market for health insurance – one that has added to, not replaced employer coverage. Just like the launch of the Medicare Advantage markets and Part D markets over 10 years ago, the new Health Insurance Marketplace is filling a new need by bringing consumers together with private sector health insurers to create a new affordable set of benefits for consumers – and a new business opportunity for health insurers as the move to make health care more retail business, driven by the consumer, is on. And just like the Medicare marketplaces, the first years of health insurance exchanges are filled with both successes and important lessons. So it’s important that we continually assess the data from the first few years and address and adjust to challenges as they occur. Consumers must do this. Health plans must do this. Insurance commissioners must do this. And those that operate marketplaces must do this.
This assessment informs our 2016 priorities. 1- Continuing to build a market attractive to both consumers and health plans; 2- ensuring market rules are fair and promote rate stability; and 3- looking at the Marketplace not just for what it does today, but how it serves as a stepping stone to what I will call a “fully retail” health care system.
Marketplace Attractiveness
The Marketplace is still in the early stages. Consumers are still getting educated and health plans are experimenting with the right product and network designs and price points. Even as the market meets today’s needs and signs millions of new consumers up in record numbers, we are starting to move from a startup stage to a more mature stage.
We are fortunate to have an experienced team of operators and actuaries from the exchange world, the private sector and from our Medicare Advantage and Part D operation. The team listens to input, studies the data and meets regularly with stakeholders and takes a strategic view to determine what adjustments are warranted – whether in the form of consumer improvements or the regulations and operations of the Marketplace. Our experience tells us three things are necessary to make any marketplace attractive – it must be an attractive place for consumers to come and shop; it must be attractive to health plans to connect to and build relationships with desirable consumers; and it needs a predictable set of underwriting and other rules that compensate fairly for risk and keep the risk pool stable and balanced.
It would be easy enough to say that the tax credits that have finally made health care affordable to low- and fixed-income individuals have created an attractive market for consumers and it has. Eight in 10 people in the Marketplace can now get covered for $100 a month or less. But it’s more than that. The choice, competition and innovation that make any market work are fueling an attractive market for consumers who are by all accounts satisfied that they now have a market that is set up for them. 90% of consumers have an average of 3 insurance companies to choose from, translating into 50 plan options. And even at this early stage, innovations are taking hold to respond to consumer demands. Consumers can now pick a plan based upon the insurance their doctor accepts or the drug they are looking for. And, in a promising sign of products being designed around market need, the vast majority of consumers are getting direct services like primary care and generic drugs outside their deductible. A truly retail market with these type of organic innovations is important because it should attract even more consumers, including higher income and healthier individuals who will be attracted to better experiences and better services available on the Marketplace.
We are also seeing the characteristics of an attractive market for health plans to serve; a growing market; a growing base of new young consumers; and high levels of consumer engagement and responsiveness to new offerings. Over 12.7 million people signed up for a 2016 health insurance plan in this Open Enrollment period. And we’ve seen a significant influx of new consumers making it clear there is still a large untapped market to serve. There were over 4 million new consumers who gained coverage in this Open Enrollment period just on the Healthcare.gov platform. And the tax penalty is bringing more young and healthy consumers into the market.
We used a large portion of our marketing resources to make sure that consumers were aware of the increasing fee for people that go without insurance and our data tells us that drove significant enrollment – a potentially good sign for the risk pool. And 43% of all new consumers in HealthCare.gov states this Open Enrollment are under 35, compared to 40% a year ago. There are also unprecedented levels of consumer engagement – as 70% of renewing Marketplace consumers returned to make active decisions about their health insurance choices.
From what used to be a slow growing and highly selective individual insurance market before the ACA, competitors can win and grow meaningful market share with the right set of offerings. And while companies will set their own strategies and approaches, we, along with the state departments of insurance, are also committed to making sure there are opportunities for reasonable margins in this market.
Marketplace Rules
With a continually growing membership, a replenished risk pool, and an active set of consumers, this market represents a growing attractive segment for health plans, right alongside Medicaid, Medicare and Commercial segments. Now we know that individual markets are also designed to serve people who have transitional coverage needs as they move between employers. We also know that both healthy people and people with illnesses will enter the market, both during Open Enrollments and Special Enrollment Periods. And that’s OK – so long as the market operates as it’s supposed to, risk adjustment works, and health plans receive the data they need to act on. Based on our first two years of operation, there are three areas where we are taking action.
SEP
First, we think it is critical for us to enforce the integrity of the Special Enrollment eligibility process so that it serves those consumers who are eligible for them, not those who want to wait to buy insurance until they’re sick. SEPs play an important role for consumers who lose employer sponsored coverage or have another qualifying event. But, we are both reducing the number of SEPs available and overhauling the process to make sure Special Enrollment Periods meet their intended purpose. We will announce some specific changes later this week, which will include opportunities for market participants, consumer advocates and other stakeholders to have some input into our approach.
Risk adjustment
Next, we are committed to making sure that risk adjustment continues to work as it is intended and improves based on the most recent data and accounts for new trends that emerge like higher cost drugs. Later next month, we will publicly release our newest risk adjustment white paper, in which we will outline a number of topics we’re looking hard at in preparation for a public risk adjustment conference on March 31. At the conference, we will bring together market participants, actuaries and stakeholders to review the risk adjustment methodology so we can build in changes based on the first several years of experience. We have the tools to make certain the proper incentives exist to insure sicker populations.
Better Information
Third, we’re committed to getting health plans better information earlier so that this can inform their care management approach, their network strategy and their pricing. This year, we will be providing early estimates of health plan specific RA calculations everywhere we have enough submissions from health plans. We also launched backend automation functionality and policy specific payments January 1. This should improve decision making and reduce operating costs for plans participating in the exchange and allow them to offer better care management, customer service and the tools to build better relationships with consumers.
We have also announced that the reinsurance program, which paid out $7.9 billion for 2014, at a 25% higher level than expected, will pay out up to $7.7 billion for 2015. Just as that program has been a stabilizing force to date, the one-year moratorium on the Health Insurance Tax, of $13.9 billion will also help stabilize premiums next year as the transitional reinsurance program phases out.
I’m confident these focal areas – in our SEP approach, our risk adjustment, the technology and information wiring we’ve built, as well as the added stabilization – will lead directly to a lower and more stable rate environment for consumers now and in the future.
Health Insurance as a Retail Market
The launch of the Health Insurance Marketplace is happening at a time when health insurance is finally becoming a true retail market where you must sell, service and renew based on the consumer’s opinion of your value – and this is unmistakably happening across government, individual, and employer markets. I have had a number of conversations with health plan CEOs who see the Marketplace as part of the opportunity to transform for this more retail world, where building a trusted brand with consumers can be expected to extend throughout their health care lives – from Medicaid managed care, to the Marketplace, to Medicare Advantage and Part D – as these worlds become increasingly linked together throughout people’s lives.
Building brand and relationships with consumers is complicated by the fact that the market is new and requires experimentation. Companies are searching for the care management approaches, consumer engagement approaches, network approaches, product designs, loyalty strategies and price points that will work best for them in this Marketplace. We are already seeing companies experiment with innovative new consumer approaches for the exchange – staff model clinics, capitation, telemedicine, medical homes, and intensive case management – all designed for Marketplace use. Some companies have found niches and strategies that work and others are still adjusting.
But how companies treat consumers in this process is an important part of their ability to build the right brand in a fully retail health care world. Those that treat customers well – and make changes gradually and with clear explanations will build loyalty among consumers that could have lifetime value. Those that make sudden announcements, frequent changes that they don’t explain, or enter and exit markets sporadically will likely find that brands are built by consumers who have long memories. Watch the Health Insurance Marketplace. Great companies, products, consumer successes and brands will be built over the next several years and that holds great potential for how health insurance works for people.
Conclusion
Let me close by recapping the themes in our 2016 Marketplace agenda. It’s an exciting year that will be built on a great start but will continue to improve, with some important areas of focus that I’ve outlined that we are giving near term emphasis to. We think we are at the beginning of a big change in health care where the consumer becomes more and more empowered in a retail world and all of us must pay attention, invest, watch the data, learn and adapt. There will be new challenges and new opportunities as the market changes. It is thanks to you all, the agents and brokers, who take the time to invest in consumer needs and meet people where they live, that insurance coverage is a reality for so many people. I am excited to work with the many people who have gotten this started to see through this continued evolution of the Marketplace as it matures and thrives in meeting the needs of consumers.
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