A reasonable point of view from America’s Health Insurance Plans

You hear a great deal about the big bad insurance companies, especially from the Speaker of the House.  Here is a different point of view on suggestions made by the AHIP.  It’s a little late for for any meaningful changes, but at least some people try.

March 15, 2010

The Honorable Kathleen Sebelius


Department of Health and Human Services

200 Independence Avenue, S.W.

Washington, D.C. 20201

Dear Secretary Sebelius:

On behalf of America’s Health Insurance Plans (AHIP), I am writing to thank you for inviting our members to offer recommendations that address the affordability of the health reform legislation that the Administration is negotiating with members of Congress. 

During our National Policy Forum, you issued two important challenges to our membership: (1) that we increase transparency for consumers by releasing information on premium increases; and (2) that we provide additional recommendations on how to make the system more affordable and address the current cost crisis. This letter addresses both issues. 


To address your request for greater transparency, we immediately began working with the National Association of Insurance Commissioners (NAIC) to develop a template our members can use across the country to provide information on the factors that are driving premium increases. The NAIC’s involvement in this effort will be very valuable in ensuring that the information provided by health insurance plans is provided in a standard format and is both meaningful to consumers and helpful to policymakers. 

As you request transparency from our members, we urge you also to consider pursuing transparency for hospitals, physicians, pharmaceutical and device companies, and other suppliers. Consumers should have data on year-to-year March 15, 2010 price increases in these sectors, as well as quality performance information. We believe this is an opportunity to ask of all other sectors what you are asking of health plans. Pursuing transparency in these sectors is essential both to educate consumers about what drives health care costs and to ensure that patients and their doctors have the information and decision support tools they need to make informed decisions in accessing care and in choosing among providers and care options. 

Recommendations for Reform

Over the past four years, our members have demonstrated their strong commitment to advancing comprehensive health reforms to ensure that high quality coverage is affordable for all Americans. We have advocated that all Americans, regardless of their health status or medical history, should have the peace of mind that comes with having secure and stable health insurance coverage. To advance that goal, our Board has proposed guarantee-issue coverage – no exclusions for pre-existing conditions and no variation in premiums because of health status or gender – in conjunction with an effective personal coverage requirement and premium assistance to help make coverage broadly affordable. We also have made a commitment to help bring health care costs under control by standardizing and simplifying the administration of health insurance claims, which also will enhance the quality of care while freeing up valuable time for doctors to focus on patient care.

At the same time, the information that has come to light over the past few weeks about premium increases demonstrates the need to do more in the legislation to achieve enforceable, system-wide cost containment. Directly addressing the growth of underlying medical costs that are driving premium increases should be a central component of the health reform effort. Furthermore, it is critically important to ensure that the legislation does not include policies that would increase costs and undermine the goals of reform. 

We offer the following recommendations for your consideration. 

First, Do No Harm

We are particularly concerned that there are inadequate incentives in the legislation to bring everyone into the system, that new age-rating requirements would drive up costs for younger families, and that the March 15, 2010 proposed premium tax on health insurers would further drive up costs for consumers in the individual and small group markets. 

Establishing an effective coverage requirement is crucial to the success of the insurance market reforms that are widely supported by the Administration, by members of Congress, and by the broader policy community. As you acknowledged in your remarks at our National Policy Forum, risk pools are adversely impacted by the trend of young, healthy people dropping coverage due to the weak economy. Based on past experience in the states, we are concerned that the current legislation will not solve this problem because the coverage requirement lacks adequate incentives in the early years to bring everyone into the system and precludes discounts in pricing necessary to bring younger individuals and families into the system, resulting in a less well-balanced “pool” with substantially higher costs for everyone. Limiting the amount by which premiums can vary by age can have particularly significant effects for young adults, as moving from a 5:1 to 3:1 rating band (which is below the range allowed in most states and significantly understates the actuarial difference in costs based on age) raises rates for adults under age 30 by approximately another 30 to 50 percent beyond that projected for the population as a whole. Restricting the ratio below 3:1 would only exacerbate these impacts further. 

The current legislation, therefore, risks encouraging individuals to defer coverage until after they encounter health problems, and works at cross-purposes with the goal of bringing everyone into the system. This outcome would unfairly penalize those who are currently insured and raise premiums because the costs of caring for the uninsured are shifted by providers to people who have coverage. The impact of these effects will be especially pronounced in more than 40 states, making up approximately 85 percent of all of those with existing individual coverage, where a weak coverage requirement coupled with overly restrictive rating requirements is likely to cause rates to soar – a dynamic not immediately apparent when cost estimates are based on nationwide averages.

Recognizing the difficult discussion that Congress has had around monetary penalties, we have recommended several alternatives to build upon the relatively weak incentives that are on the table at this time. Possible alternatives that would complement the existing structure include: March 15, 2010 late enrollment penalties similar to those that currently apply under the Medicare Part B and Part D programs; ensuring the effective operation of clear enrollment rules that separate the decision to obtain coverage from one’s immediate need for services;

phasing in age rating rules in a way that takes into account each state’s starting point in the current system; and

the loss of tax benefits, such as the removal of the personal tax exemption for those who do not comply with the individual coverage requirement. 

By pursuing a package of strategies to boost enrollment, premiums and costs will be lower over the long-term budget window. 

Another proposal that would have unintended consequences and threaten the viability of reform, particularly in the crucial early years, is the proposed premium tax on health plan enrollees. We appreciate that the Administration’s reform proposal would delay the implementation of this tax. However, recognizing that this proposal, when combined with the proposed reinsurance fund, inevitably would impose a significant tax on people in the individual and small group markets beginning in 2014, we suggest reducing the burden or at a minimum ensuring that the tax applies to the broadest possible base of major medical coverage by expanding its reach to the entire market. We believe that a more aggressive approach to bending the cost curve, as discussed below, would make it possible to avoid this new tax and the heavy burden it would impose on working families. 

Setting An Enforceable Goal to Bring Down Health Care Costs

Health reform will succeed only if the nation as a whole makes a strong commitment to accountable mechanisms that will slow the future growth of health care costs. Enacting insurance reforms and coverage expansions without meaningful cost control will bring more people into an unsustainable, unaffordable system. The ultimate success of health reform will be determined by its effectiveness in reducing costs for families and small business, which requires an ongoing system of accountability to ensure that the Congress confronts political choices that are unpopular but necessary to a viable system.

The nation needs a systematic, comprehensive process to ensure that health care costs are brought under control and that coverage becomes and remains affordable for all Americans. Congress should set a national goal to bend the health care cost curve. For example, reducing the projected cost growth by 1.5 percentage points per year would produce an estimated $2 trillion in system-wide savings over ten years. In practical terms this would reduce future growth to a still robust 4.7 percent annual increase. This is the same goal suggested by the President’s Council of Economic Advisors last summer. This does not have to be the ultimate goal – but what matters is having a goal that is meaningful and measurable. 

The Senate legislation would establish a new commission to review Medicare and private sector health care spending. That is a start, but it will not provide the comprehensive oversight needed because it would exempt Medicare payments for hospitals, physicians, and other key services from review during the first five years. The country needs to have a clear objective, commit to real savings, and monitor and evaluate how the nation is doing in achieving results. This process should involve looking at all spending categories and shining a spotlight on areas that are not providing high-value, high-quality care. This would give the American people the assurance that cost containment and quality improvement continually are being assessed. 

Broadening and Expediting Payment for Quality

We recommend taking a much bolder step in establishing a multi-stakeholder process to allow for the widespread implementation of innovative payment and delivery system models that will help move the nation away from reliance on a fee-for-service payment structure and incentivize performance improvement across the board. Congressional action to create such a public-private process would provide the type of structured collaboration necessary to speed adoption of specific delivery reform elements and provide a mechanism for continuous improvement, while retaining opportunities for innovation. 

The multi-stakeholder approach also would ensure that new initiatives build upon existing public-private partnerships and complement existing reform models already occurring through collaborations with health insurance plans, providers, employers and government at the state and local levels. We believe key priorities for a multi-stakeholder process should include: (1) March 15, 2010 reducing variations in medical care; (2) reducing preventable admissions, re-admissions, hospital acquired infections, and never events; and (3) encouraging consumer choice of high value providers through transparency of cost and quality information. 

Specific Areas That Could Be Strengthened

Within a comprehensive framework for cost containment, we recommend broadening and expediting certain provisions of the Senate bill that focus on realigning incentives and promoting innovation. The following are several specific examples:

To reduce preventable hospital readmissions, we recommend strengthening the Senate bill’s proposal to require modest Medicare payment reductions for hospitals with unnecessary risk-adjusted readmissions for three conditions. Increasing the amount of the payment reduction and applying it to a broader range of conditions will create stronger financial incentives for improvements in patient care, thereby reducing unnecessary admissions that are contributing to higher costs while also improving patient safety and quality. 

To reduce hospital-acquired infections, we recommend building upon the Senate’s proposal to reduce Medicare payments by one percent for the worst performing hospitals on medical conditions identified by the Secretary. The Senate proposal would be more effective if it established a stronger financial incentive and applied to all “never events” identified by the National Quality Forum. 

To accelerate the adoption of payment reform and quality improvement, incentives under the Value-Based Purchasing program should be accelerated forward to begin in 2011 with final recommendations by 2015. By building on existing collaborations to tie hospital performance on quality measures to common high-cost conditions (AMI, Heart Failure, Pneumonia, etc.), we can more rapidly move away from traditional fee-for-service structures. Moreover, the program should be a focal point of the multi-stakeholder process described above to ensure consultation with a broad range of external stakeholders in adopting quality and performance measures.

To advance new payment reform models on a system-wide basis, we recommend that the Senate proposal for a CMS Innovation Center be expanded beyond Medicare and Medicaid. Focusing solely on public programs will not improve the overall health care system. Many of the quality programs and innovative initiatives being implemented in various markets across the country by the private sector would improve the delivery of care and patient outcomes in a more timely and efficient manner if public programs were part of the local initiatives. Thus, expanding the Innovation Center to focus on efforts that encompass the full health care system – both public and private payers – is an important step toward identifying gaps in care, pursuing opportunities for improvement, and evaluating innovations so adoption can occur more broadly. 

To improve the value of comparative effectiveness research and the proposed Patient Centered Outcomes Research Institute, we recommend that such research focus on both the clinical and cost effectiveness of treatments. Pursuing research on cost effectiveness is a necessary step toward providing meaningful information to consumers about which treatments with similar outcomes yield the greatest value. 

Provide Malpractice Protections for Doctors Who Follow Guidelines

To reduce the burden of defensive medicine, a fresh approach to medical liability reform should be adopted that combines a safe harbor for following evidence-based medicine and a system to ensure that harmed individuals are compensated adequately. As an alternative to the existing litigation system, we recommend an approach that offers protections for providers who follow established best practices and implement safe, accountable care models based on the latest scientific evidence. 

Strengthening Provider Credentialing

Ensuring that provider networks include high quality clinicians and hospitals is a key priority for health plans and consumers. To ensure the appropriate mix of providers within each network, it is necessary to identify provider specialties, board certification, and any actions by medical review boards. By ensuring that the credentialing process includes consideration of these actions, provider credentialing complements broader efforts to reduce fraud and abuse.

These priorities are addressed by the general acceptance of a uniform credentialing form and a common database, CAQH’s Universal Provider DataSource® (UPD), which has been adopted by many states and the provider community. 

Additional opportunities exist to significantly reduce credentialing costs and to reduce the lag time in the credentialing of new physicians. For example, we recommend that the uniform credentialing process be expanded to the Medicare and Medicaid programs to improve efficiency across the health care system. Additionally, we recommend that the multi-stakeholder group we have advocated should work with the hospital industry to develop core hospital privileging criteria to be implemented in the uniform credentialing forms. 

Promoting High Quality Care Delivery  

Based on our members’ leadership in continuing to develop innovative quality-based payment models, we also recommend specific initiatives to help advance more coordinated, patient-centered care and ensure that resources are put to their highest level use.

To ensure critical access to primary care, it is important to recognize the value of nurse practitioners (NPs) and physician assistants (PAs) to help meet the current shortage of primary care practitioners, and the surge in primary care capacity necessary to meet the goals of reform. To help address this shortage, existing Medicare policy should be broadened to enable NPs and PAs to bill Medicare beyond what is currently allowed in designated medically underserved areas. Furthermore, as a long-term approach to incentivizing medical students to enter primary care, the Medicare program should create a new transparent process that ensures sufficient primary care involvement in determining payment levels. 

Given the Administration’s commitment to broadening the use of health information technology to improve health care quality and promote patient-centered care, we believe disease or condition-specific registries, such as joint replacement registries, can help identify both opportunities for improvement and those devices that are best aligned with long-term safety and effectiveness. Such registries could be very effective in reducing repeat surgeries, preventable hospitalizations, and other avoidable complications.

Thank you again for taking time to address our National Policy Forum. We appreciate your willingness to consider our recommendations for strengthening the current legislation. We remain strongly committed to supporting the enactment of meaningful health reforms and enhancing transparency for health care consumers across all sectors of the U.S. health care system.


Karen Ignani


America’s Health Insurance Plans

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