RD82 - Health Insurance Reform Commission Executive Summary of 2017 Interim Activity and Work – January 2018

    Executive Summary:


    Chapter 53 (§ 30-339 et seq.) of Title 30 of the Code of Virginia charges the Health Insurance Reform Commission (HIRC) with:

    • Monitoring the work of appropriate federal and state agencies in implementing the provisions of the federal Patient Protection and Affordable Care Act (the ACA), including amendments thereto and regulations promulgated thereunder;

    • Assessing the implications of the ACA's implementation on residents of the Commonwealth, businesses operating within the Commonwealth, and the general fund of the Commonwealth;

    • Considering the development of a comprehensive strategy for implementing health reform in Virginia;

    • Recommending health benefits required to be included within the scope of the essential health benefits (EHBs) provided under health insurance products offered in the Commonwealth, including any benefits that are not required to be provided by the terms of the Act;

    • Assessing proposed mandated benefits and providers and recommending whether, on the basis of such assessments, mandated benefits and providers be providers under health care plans offered through a health benefit exchange, outside a health benefit exchange, neither, or both;

    • Conducting other studies of mandated benefits and provider issues as requested by the General Assembly; and

    • Developing such recommendations as may be appropriate for legislative and administrative consideration in order to increase access to health insurance coverage, ensure that the costs to business and individual purchasers of health insurance coverage are reasonable, and encourage a robust market for health insurance products in the Commonwealth.

    The HIRC is chaired by Delegate Kathy Byron (the Chair). Senator Frank Wagner serves as the HIRC's vice-chairman. The other members of the HIRC are Delegates Lee Ware, David Yancey, and Eileen Filler-Corn and Senators Rosalyn Dance, Richard Saslaw, and Ryan McDougle. Commissioner of Insurance Jacqueline Cunningham and Commissioner of Health and Human Resources William Hazel serve as ex officio nonvoting members.

    The HIRC met twice during the 2017 interim, on May 9, 2017, and September 25, 2017.

    This executive summary of the interim activity and work of the HIRC is submitted pursuant to § 30-345 of the Code of Virginia.


    A. Legislation Referred for Study

    The following five bills were referred to the HIRC during the 2017 General Assembly Session:

    • SB 1513 which was introduced by Senator Wagner and relates to the assignment of benefits;

    • SB 1408 which was introduced by Senator Bill DeSteph and relates to step therapy protocols;

    • SB 1166 which was introduced by Senator Bryce Reeves and relates to abuse-deterrent opioids;

    • HB 2400 which was introduced by Delegate Chris Head and relates to drug pricing benchmark values; and

    • HB 2233 which was introduced by Delegate Ben Cline and relates to health benefit plans offered by foreign health carriers.

    Staff noted that the HIRC studied bills related to step therapy and abuse-deterrent opioids during the 2016 interim. Staff explained that, after consultation with the Bureau of Insurance (BOI), it has been determined that none of the bills referred to the HIRC would be considered a mandate for the purposes of the ACA. Therefore, the HIRC is not required to follow the two-step analysis process for reviewing mandates that is codified in § 30-343.

    B. 2018 Rate Filings

    Toni Janoski, Supervisor in the Health Rates, Life, and Annity Forms Section of the BOI, outlined the initial review process at the HIRC's May 19 meeting. The BOI received the 2018 Virginia ACA rate filings on May 3, 2017. Ms. Janoski stated that the BOI has received notice from United HealthCare of the Mid-Atlantic, Inc., that it is exiting the individual market for 2018. Several other carriers did not submit proposed rates but have not withdrawn from the market at this time. Aetna Health, Inc., Innovation Health Insurance Company, Freedom Life Insurance Company of America, and Golden Rule Insurance Company did not file rates to continue participating in the individual market. Piedmont Community Health Care, Inc., did not file rates to continue participating in the individual or small group markets.

    At the HIRC's September 25 meeting, David Shea, health actuary at the BOI, reported on the 2018 rate filings. Mr. Shea testified that this rate season was the most challenging of any year. Federal regulatory uncertainty, regarding whether or not cost-sharing reduction (CSR) payments would be guaranteed and whether or not Congress would repeal and replace the ACA, has created a cloud over the rate-filing process.

    Mr. Shea stated that Virginia has been immune to market instability in past years. However, this year several carriers have opted to leave the Virginia market or reduce their footprint in the Commonwealth. When it appeared that there would be localities with no coverage options, carriers did come back to ensure that every Virginian will have at least one carrier option in 2018. However, individual market rate increases are a major issue. The average individual ACA rate increases for 2018 are expected to be 57.7 percent. The major drivers are changes to child age factors, morbidity, and assumed lack of CSR funding. Because of uncertainty surrounding the individual market, carriers have to assume increased morbidity rates because they do not know if anyone else will be in the market to help provide coverage for the sick people who are more likely to get coverage.

    Mr. Shea explained that the small group market is functioning well. The rate increases in the small group market in the Commonwealth are basically market-trend. Changes to the child age factors are a driving factor in any additional rate increases.

    A rate-filing data sheet provided by the BOI lists the rating area that every carrier is in, but a carrier's participation in a rating area does not mean that it provides coverage in every locality within that rating area. The individual market rate changes are the highest Mr. Shea has seen.

    In response to a question from the Chair about regional rate changes, Mr. Shea explained that there are a number of factors, including how the population has changed and how the carrier expects the population to change, that affect the different rate increases. However, the need to assume a lack of CSR funding raised rates across the board.

    Mr. Shea noted that the rate-filing data sheet shows the changes in premiums but there will be changes in cost shares as well. These rates are before premium subsidies, which are available on the Exchange. There is a separate funding mechanism for the subsidies so that money is not coming directly from the people paying full price for their premiums.

    Delegate Yancey, in response to the discussion on morbidity rates, asked if an effort on the health care side, particularly in the "stroke belt" of Virginia, could help lower the rates. Mr. Shea replied that there are multiple initiatives, such as telemedicine in rural areas and an effort to coordinate care rather than duplicating services, that could help lower the morbidity rates. Mr. Shea indicated that they could look into similar efforts in other states.

    Senator Dance noted that the carriers had to assume a lack of CSR funding and asked if anything can happen to the rates if those payments come through. Mr. Shea explained that CSR payments have not even been funded on a month-to-month basis. The payments have been approved through September 2017, but they have not been guaranteed through the end of this year. The rates cannot change even if CSR payments are funded for 2018. The premiums will be higher than they need to be and that additional money will eventually work its way into the carrier's medical loss ratio and back to the insured.

    The Chair asked how any action by Congress will impact premium rates moving forward. Mr. Shea reiterated that in order to have any impact on the 2018 rates, the carriers would have needed to know about it two weeks ago. Currently, there is no proposed legislation in Congress that would fund CSR payments. Timing is critical, so anything that is debated for 2019 needs to be figured out by March or April of 2018 because that is when carriers will start to plan what they are going to offer.

    The Chair thanked everyone who worked hard to make sure that there would be coverage throughout the Commonwealth.

    C. Mandated Benefit Report

    Julie Blauvelt, Deputy Commissioner in the Life and Health Section of the BOI, provided materials and gave a presentation on the current mandatory benefits in Virginia. She explained that the survey provided in the materials was from 2009. Some of the benefits listed are mandated offered benefits but not mandated provided benefits. The materials list the mandated benefits in Virginia compared to those of other states and a summary of the mandated offers and mandated benefits in Virginia.

    The BOI sends a report on mandated benefits to the General Assembly every year and that report includes cost analysis data. The last available report is from 2016 and is based on 2015 information. The next report will be available in October of 2018 and it will be based on 2017 information. The Chair explained that the HIRC may be reviewing cost analysis data in future meetings.

    D. Update on the Health of Health Insurance Markets

    Kris Hathaway, Executive Director of State Affairs at America's Health Insurance Plans (AHIP), provided reports of state and federal health insurance markets at both of the HIRC's May 9 and September 25 meetings.

    At the May 9 meeting, Ms. Hathaway provided a summary of the number of Americans covered by different health benefits programs. In declining order: 155 million are covered by employer-sponsored insurance or self-insurance plans; 64 million are covered by Medicaid; 55 million are covered by Medicare; 18 million obtained coverage on the individual market or through an exchange; 9.4 million are covered by TRICARE; and 8.4 million are covered by the Children's Health Insurance Program (CHIP).

    Ms. Hathaway observed that the current federal health insurance landscape is dominated by the effort to repeal and replace the ACA. At the time of her May 9 presentation, the House of Representatives had recently passed the American Health Care Act of 2017 (AHCA) and the legislation was being considered by the Senate. One element of the AHCA that was enacted at the year's end as part of federal tax legislation was the repeal of the tax penalties for persons who do not comply with the ACA's individual mandate of coverage. This change may affect the premiums charged to persons who purchase coverage because, as Ms. Hathaway remarked, costs go up when there are fewer people, especially healthy people, in the insurance pool.

    Another issue that garnered substantial interest in 2017 was federal funding for CSR subsidy payments to carriers. Carriers are required by the ACA to allow qualifying low-income persons to purchase insurance policies with lower deductibles, copayments, and coinsurance than otherwise would be required. CSR payments are federal payments to the carriers to offset the cost of the CSRs granted to qualifying persons. The ACA requires carriers to grant CSRs regardless of whether the federal government appropriates funds to pay the CSR payments to carriers. In order to ensure that they are not damaged by the failure of the federal government to make the CSR payments, carriers may increase the premiums charged to other policyholders. In Virginia, itis estimated that premiums will increase by 17 percent to compensate for the loss of CSR payments. Additionally, premiums could increase to account for the federal government's failure to pay over $8 billion owed to carriers from 2016 reinsurance payments.
    Ms. Hathaway stated that some carriers' rate filings do not include CSRs, so there may be additional increases to the rates that have already been filed. Uncertainty about what the federal government will do is being taken into consideration when carriers submit their rate filings.

    Commissioner Cunningham asked if Ms. Hathaway seen carriers including CSRs in their rate filings. Ms. Hathaway said that the choice to include CSRs or not would be an individual one, by state and by carrier. Kyle Shreve of Virginia Health Plans testified that, anecdotally, the carriers have been citing per-unit costs and rising healthcare costs as the reasons for raising rates and very few have mentioned if they are assuming CSRs in their filings.

    Ms. Hathaway testified that there are five major factors affecting health insurance premiums. The first is prescription drug prices. The cost of specialty and brand name medications continues to soar and drive up premiums. Recent reports have projected drug spending nationally to grow to between $560 billion and $590 billion by 2020; such spending was $337 billion in 2015. While specialty drugs account for less than two percent of all prescriptions, they make up roughly 30 percent of spending on all prescription drugs. Almost half (47.8 percent) of the specialty drugs included in this analysis cost more than $100,000 per patient per year. Ms. Hathaway testified that drug companies generally defend price increases as necessary for research and development of future drugs. However, nine of the top 10 drug makers spend more on sales and marketing than on research and development. Ms. Hathaway explained that these high costs could lead to ethical dilemmas and tough conversations. For example, a new drug can prevent blindness for certain children but only if it is taken during a limited window. Carriers will have a difficult time keeping such a medication available at a reasonable price because, despite its benefits, demand is relatively low and its mass production may not be cost effective.

    The second of these five factors is the population covered by the plans. A sustainable insurance plan needs to have a balance between people who are older or sicker, and thus use more medical care, and people who are younger and healthier, and thus less likely to get sick or injured.

    The third factor is the number of health care providers participating in a network. If there are more providers in the network the costs will be lower. The fourth is value-based systems. These systems reward quality service provided rather than the quantity of services provided. They result in better care and lower costs. The fifth is taxes and fees, which lead to increased premiums.

    At the September 25 meeting, Ms. Hathaway provided an update on changes in the federal health care landscape. She cautioned that the individual health benefits market is facing big premium increases and market instability. Funding for CSR payments was called the number one priority for helping the individual market.

    Ms. Hathaway described methods that have been shown to reduce premium rates. Avalere Health released a study that found that guaranteeing CSR payments, stabilizing reinsurance, delaying the health insurance tax, and requiring continuous coverage would lead to a reduction in premiums of 17 percent. Drug price transparency, hospital and carrier competition, rural area incentives such as telemedicine, encouraging a healthy risk pool, and regularly reviewing the necessity of mandates are all state-level factors that could increase market stability and affordability. Encouraging a healthy risk pool will be particularly important because the federal government cut funding for ACA navigator marketing and reduced the ACA enrollment window, which will make it difficult to balance the sick people who will be more motivated to enroll with healthy people who may not know they need to act. Reinsurance policies have had different results in different states. For example, Minnesota has experienced financial losses due to reinsurance, but Alaska has seen positive results. Ms. Hathaway cited a report on Certificates of Public Need that concludes that consolidation leads to increased prices without a corresponding improvement in care.

    Ms. Hathaway described how a customer's premium is broken down. Many states are looking at ways to bring down prescription drug costs because prescription drugs make up a large portion of premium costs. Some states have required that if a company raises drug costs by more than a codified amount the company has to explain why, and others have required pharmaceutical representatives to include cost information when they talk about their drugs.

    Ms. Hathaway provided an overview of the then-pending Graham-Cassidy-Heller-Johnson bill. Though it has not been enacted by Congress, the Avalere Health report indicates that the bill would have resulted in a $3 billion increase in federal funding for Virginia from 2020 through 2026. The bill would also result in a loss of $39 billion from 2020 through 2036 due to the loss of ACA subsidies.

    Ms. Hathaway concluded her presentation by stating that prescription drug costs, ACA and Medicaid waivers, out-of-network billing issues, air ambulance, long-term care, and cybersecurity are the most important state health insurance issues.

    D. ENROLL! Virginia

    Jill Hanken, Health Attorney for the Virginia Poverty Law Center (VPLC) and Director of ENROLL! Virginia, provided the HIRC with an overview of ENROLL! Virginia, a navigator program. Navigator programs are tasked under the ACA with providing public education about health plans in the marketplace, distributing fair and impartial information, facilitating enrollment, and sending patient grievances to the BOI. Navigators also maintain relationships with various communities. Navigators are prohibited from receiving payment for their services.

    The VPLC has received funding for its navigator program since 2013. ENROLL! Virginia is the only statewide enrollment group in the Commonwealth and has subcontracts to do work throughout the state. Most of the work is conducted through legal aid centers, though it varies by locality. ENROLL! Virginia maintains a website with an online appointment system that enables people to find the navigator closest to them. Navigators can also be reached by a toll-free number.

    Ms. Hanken testified that all navigators are required to be certified annually. Certification requires 20 hours of training. All navigators are registered with the BOI and are required to undergo background checks. Examples of a navigator's activities include attending community events, health fairs, colleges, and libraries to reach people. ENROLL! Virginia reaches out to the Hispanic community through Spanish-speaking newspapers and radio stations.

    Ms. Hanken explained that the navigators work with small businesses in addition to individuals. They are busy year-round, but open enrollment is their busiest time. After open enrollment concludes, the navigators address issues related to binder payments and tax concerns. They also help with special enrollments when people become eligible to enroll outside of an open enrollment period. Navigators are also involved in rapid response situations, including large employee layoffs. They also help people who lose Medicaid coverage and people who transfer from the marketplace to Medicare at age 65. Navigators can help with marketplace appeals.

    Ms. Hanken stated that the navigator program faces many challenges for 2018. The biggest challenge may be the abbreviated open enrollment period, which lasts only six weeks. Ms. Hanken predicted that there will be confusion with plans leaving the marketplace and people not knowing which plans cover their region. Residents of many localities will have only one option, and people will be covered by different networks and providers than they had in prior years. She expressed hope that the BOI can help get information to the public to reduce the confusion. The federal government has cut back advertising funding by 90 percent and navigator funding by 40 percent. The 54 percent cut in ENROLL! Virginia's funding was causing cuts in staff and paid advertising.

    F. Public Comment

    At the September 25 meeting, Dr. Bruce Silverman, founder of Nephrology Specialists, introduced himself to the HIRC. He explained that he is from the Richmond area and practiced medicine for 34 years. He opened four offices that treated patients who had end-stage kidney disease. He was covered by Blue Cross Blue Shield, made all his payments, and has been healthy. He has a genetic enzyme disorder that requires a prescription medicine to survive. This costs over $500,000 per year and is covered by his insurance. He retired to care for his wife, who has been diagnosed with muscular dystrophy. Her care costs approximately $30,000 per year and is covered by her insurance. He testified that for 2017 he anticipates paying $30,000 out of pocket even though he and his wife are insured and their care is covered. Dr. Silverman suggested that the state work on solutions and look to the state health plan for guidance on how to better provide care.

    G. 2017 HIRC Legislation

    The General Assembly enacted House Bill 2107 in the 2017 Session. The bill, for which the Chair was the patron, revises the procedure for the assessment of legislation that proposes to mandate insurance coverage for a specific benefit or the provision of services by a specific provider. The bill provides that the Chair of the standing committee requesting the HIRC to assess a proposed mandated health insurance benefit or provider shall send a copy of such request to the BOI. The bill requires the BOI to prepare an analysis of the proposed mandate upon receipt of the copy of the request. Previously, the HIRC was required to request the Bureau to prepare such an assessment. The bill also repeals the July 1, 2017, sunset provision for the HIRC.


    The HIRC wishes to express its appreciation to two individuals for the assistance they have provided to the HIRC. Commissioner Cunningham announced in June 2017 that she will retire at the end of the year after serving for a total of 30 years with the BOI. She was appointed by the Commission to serve as Virginia’s 13th commissioner of insurance on January 1, 2011. Her contributions to the work of the HIRC, both as an ex officio member and in marshalling the BOI's resources to provide information to the HIRC, have been invaluable.

    The HIRC is also grateful for the efforts of Emma Buck of the Division of Legislative Services. She served as staff to HIRC for two years until transferring within the Division to become staff for the General Assembly's transportation committees.

    Materials provided by speakers at the HIRC's meetings in 2017 may be found on the HIRC's website at http://dls.virginia.gov/commissions/hir.htm?x=mtg.