Welcome. And thank you for coming to a session that allows us to look at a deeper level at what is happening inside the Health Insurance Marketplace. And I’m not talking about what’s in the headlines, but below the surface– what’s happening with millions of Americans as they get coverage– many for the first time– and also how the system is adapting. At the same time, the consumer is beginning through the Marketplace to shape many of the changes in health care as they make decisions about the coverage and care they want. My focus today isn’t really just on the success stories, of which I see many, but on the lessons we have learned and are still learning from what’s going on inside and across the Marketplace.
I stood up here a year ago and reflected on another program which served millions of people as it reached not its third year of operation, but its 50th– the Medicare program.
Before it became the beloved program that millions of Americans rely on for their health and financial security, Medicare had, for those of you that know the history, fairly controversial beginnings and has gone through a number of evolutions. In large part, Medicare has been successful because it has adapted to the progress of medicine and the needs of the consumer, moving from a medical benefit to prevention to the pharmacy and now to coordinated care models. Medicare today is not only a leading force in value-based care, but it also offers widely popular consumer choice and competition for services and benefits from private plans across Medicare Advantage. The Health Insurance Marketplace, in many ways, picks up right there, bringing private sector competition and services to make health care available in an even more open market fashion– and creating greater opportunities for us to learn to serve consumers successfully.
As I reflect on the progress of the Marketplace, I will cover three important topics:
-First, that the Marketplace is succeeding by almost any benchmark, but it is still in its early trial and error stage. Progress won’t be even and for the first five years, we will continue to be in a learning and experimentation period– where a lot will be tested before best practices are more widely developed.
-Second, that the Marketplace, stepping back from the daily headlines, is a highly strategic opportunity for those who see health care evolving into a more B2C market to create new competitive advantages.
-And, third, is that even though we are in the learning and experimentation stage, we are confident we have the tools to make sure the market is stable and succeeds for the long term
Success but Early
Secretary Burwell talked this morning about how far we’ve come thanks to the ACA and thanks to so many communities across the country– the many physicians and clinicians, consumer advocates, assisters, health plans and hospitals who have worked together to have a remarkable impact. We’ve brought the uninsured rate to a record low and for the first time, our country is providing access to care for people regardless of their medical condition or how much money they make. Competition has worked to create more affordable choices. Last year, as 4 million new consumers signed up for coverage, over 90 percent of them had an average of 3 insurance companies to choose from, translating into 50 plan options. Two-thirds of HealthCare.gov customers had the option of selecting a plan with a monthly premium of $75 or less after tax credits. And thanks to tax credits, consumer’s rate increases averaged only 4 percent.
But more important is what consumers are getting for their money. Commonwealth reports that consumers say they can afford primary care and prescription drugs they just couldn’t afford before. And a good-sized majority are satisfied with their coverage. So we are beginning the process, in community after community across America, of re-connecting consumers to the health care system. Employer-sponsored coverage has not been disrupted and yet employees now have options to move jobs without fear of their families being unable to afford and obtain coverage. And contrary to what some headlines may suggest, the Marketplace has launched at and maintained costs well below CBO estimates. This is true for both consumers and the government– even as we provide care more comprehensively and to many who had conditions that had gone untreated.
While this represents a good start, we are in the very early stages– particularly, in the context of how programs like Medicare developed. And the Marketplace is right in the middle of what i will call a 5 year “learning and experimentation stage.” During these early years, consumers are getting educated about their options, while market participants– payers and care providers– learn their needs and experiment with the best ways to meet those needs. We are hearing promising approaches every day. But it’s not every day, or even every decade, that a new market totaling in the $10s of billions of dollars is created and launched across the country– and in places as diverse as rural North Dakota and Center City Philadelphia– where consumers have a diverse set of health needs, languages, cultures and incomes. So today, I hope we recognize that while we have learned many things, we are still only in this first stage of learning how best to bring affordable high quality care and service to this new market.
Strategic opportunity with consumerism
A fair question is why is it worth investing in all of this learning in all of this experimentation to serve the individual consumer market.
What makes the Marketplace an important strategic opportunity is very simply how squarely it puts power into the hands of the consumer. I mentioned this when I talked about the development of Medicare into Medicare Advantage and Medicare Part D, but the Marketplace is consumerism in the purest form. Over the years, the consumer has been much talked about but had very little power to shape what they wanted and paid for. There have been a lot of forces over the years that have shaped health care. Until now, everyone but the consumer has had a say in it.
The Marketplace gives the consumer a voice they have never had before. And every day, the Exchange gives us unprecedented insight into how consumers behave and what they want from the health care system. There’s a short list of learnings and a far longer list of things to be learned.
Let me start with some of things that we have learned.
-First, Marketplace consumers are much more engaged and increasingly educated about what they purchase particularly compared to other health care consumers. 70percent of renewing consumers on the Federal exchange– seven-zero– came back to the exchange to proactively choose a plan instead of opting automatic enrollment. That creates millions of opportunities for consumers to find the right offering at every open enrollment. As they say in my home state of Minnesota, the hockey capital of Minnesota, many more shots on goal means more opportunities to score– useful as plans experiment with different offerings.
-The second learning is that many consumers actually want to shop for their health care, in addition to their health coverage. Last year, the Marketplace began to offer consumers the option of selecting plans not by looking at the plan first– but by first finding a hospital or physician or prescription . . . then looking at which health plan offers them. Even in a pilot year, consumers chose this path 3.6 million times in just the 38 Federal marketplace states.
-Third, consumers want access to routine services without a deductible, with 8 in 10 consumers selecting plans which provide direct services outside of their deductibles like primary care and generic drugs. Health plans are responding in what I think is a promising early example of the consumer shaping a need and the market fulfilling it.
-Finally, consumers are saying loudly and most clearly that affordability matters more to them than it does when they select a plan through an employer– and is the most important concern. 90 percent of people have selected bronze or silver plans. And those large number of consumers who came back to shop? Those who switched plans saved over $500. So if consumers want savings, what are they willing to compromise on? According to a recent Kaiser Family Foundation report, consumers would much prefer a narrower network to a higher deductible or higher premium. This needs to be explored more as it opens the door, not just to narrow networks, but to innovative contracting and network strategies. While we have long wrestled with affordability as a country, the Marketplace allows us to see it in a new way– through the eyes of a consumer as they seek out high-quality care they can afford. And that reminds us– the millions of us who work in health care– that affordability and affordable care must be a part of everyone’s job.
So, while we’ve learned a lot about consumer preferences, there is still a longer set of questions that can be explored and experimented with over the next two years. And here are seven of mine but I know there are many others.
-How do we reach out to and connect with communities that are still left behind?
-What role will quality ratings and consumer reviews play in shaping the market and in improving quality as they are piloted and promoted?
-What role will exposing the actual cost of services play in consumer decision making and in increasing affordability?
-Will consumers choose the ease of a more standard set of “simple choice” benefits or will they opt for more customization?
-What about consumer loyalty? Working on health means building relationships with consumers and I expect this to be a big area of learning. There are examples of highly active markets where people can switch frequently, like cell phone service, music subscriptions or auto insurance. Competitors in those areas have found innovative ways to build long-term loyalty. Several companies are aggressively experimenting on the Marketplace. One, Centene, with its Ambetters product, offers a loyalty account to consumers and deposits money for consumers to use towards deductibles, coinsurance, and other health care spending.
-Next, what are innovative and consumer friendly ways to help consumers manage the costs of care — particularly in rural or other under-served locations? Companies are experimenting with enhanced primary care access, telemedicine, personalized health interventions, and other approaches you’ve heard today. These innovations will be ripe for scaling well beyond the Marketplace.
-Finally, what Marketplace specific contracting approaches will create aligned incentives and reduce the underlying unit costs that are a significant part of a consumer’s premium? Health plans must be successful in partnering with hospitals– who have seen a significant benefit from the ACA in reduced bad debt and increased patient flow– to lower the cost of care for consumers.
The point is that consumerism brings a trial and error phase with new approaches to everything from network strategy, to care management models, to new product approaches, benefit designs and new customer retention. Many of the companies in this room and a number of others have found success and have passed that on to consumers in the form of lower and more predictable costs and innovative services. Others haven’t yet but are beginning to follow best practices or look for other competitive advantages. And some will end up as more pure B2B companies. In the age of Uber and the consumerization sweeping our economy, we need to allow everyone the opportunity to innovate in this space. Outside of health care, the B2C economy has upended businesses like stock trading, travel and even data storage that once had only a limited consumer presence but now give consumers the ability to do for themselves on their mobile phones what they couldn’t before.
For a number of health plan CEOs that I talk to, their view of the Marketplace represents the opportunity to accelerate their organizations into this B2C world and get in synch with consumer demands as many of them see health care continuing to shift across all areas from B2B to B2C. In our notice of rulemaking last year, we asked explicitly for ways we could make innovation and testing of new ideas and approaches easier and must look for more opportunities and flexibilities ahead.
Finally, as in all markets, strategies won’t succeed the first time, every time. Over the course of these five years, we need to allow for continued experimentation. But problems that have plagued certain health care markets for years, lack of access, higher prices, poor social determinants of health also won’t get solved overnight. Unlike the Medicare program, the Marketplace is a complete private-sector solution to covering the uninsured and competition and innovation take some time to work. Gaps, like low competition or higher costs in some rural communities that have existed for years, will remain and be even more visible while we all work on solutions to address them.
Part of our job in the Administration and overseeing the marketplace development is to create a predictable and level playing field for consumers, health plans and care providers and to create stability in these early years, even through these natural bumps and to allow for this experimentation.
Even as the market signs up millions of new consumers in record numbers, we are paying rigorous attention to adjustments that are needed as the Marketplace matures. We have an experienced team of career operators and actuaries, who have come from both the private sector and directly from our Medicare Advantage and Part D operations where we know how to set up and operate large successful marketplaces with a variety of risk structures. This team studies the data and meets regularly with all market participants and takes a strategic view to determine what adjustments are warranted.
This past January, I committed to complete a thorough review and making of adjustments on what we have learned to date. And over the past several months, we have taken a set of actions which strengthen the risk pool, limit upward pressure on rates, and provide a strong foundation for the Marketplace for the long term. This process is a continual ongoing commitment but we have made meaningful progress so far.
-First, we systematically review our policies towards Special Enrollment Period (SEP) sign ups. We eliminated many SEPs that were unnecessary or subject to abuse, clarified the process and added validation requirements and enforcement for those who have a need to enroll during a SEP.
-Second, we have proposed steps to align risk adjustment to account specifically for consumers who may need Marketplace coverage for only a partial year, reducing the unintended consequences. One of the aims of the Marketplace is to be there for people when people need the coverage and when people find work, insurance companies shouldn’t be penalized.
-Third, we have proposed further enhancements to risk adjustment so health plans can invest in serving sicker, hard to treat populations. This begins with incenting everyone to invest in the data and analytics to understand their members better.
-Fourth, we are providing health plans with earlier and better information for rate filings to reduce surprises and help them better predict the cost of medical care for enrollees and price their policies appropriately.
-Fifth, we have announced several actions that both help consumers get or keep the right coverage and improve the risk pool: by closing short term coverage loopholes; by significantly improving our Data Matching process to prevent consumers from unnecessarily losing coverage; and, by improving the transition for Medicare eligible consumers out of the exchange and on to Medicare.
-And, of course, in recognition of the still early stage we’re at with the end of the 3-year reinsurance program, the one-year tax holiday of $13.9 billion will also help stabilize premiums next year.
And later this year, we will talk about our innovative effort to focus on reaching young people in the fourth Open Enrollment period.
These changes will give health insurers, supported by state departments of insurance, the ability to become more confident in putting together affordable offerings for consumers as they finalize rates over the summer and fall. And more broadly, as new areas emerge, I am highly confident in the focus and expertise of the career staff at CMS, and at the tools at their disposal, to continue to make the Marketplace attractive, stable and successful.
In closing I would just like to emphasize a few points. I originally came to CMS to help lead the turnaround of HealthCare.gov and participate in the implementation of the Affordable Care Act. Thanks to the passage of the ACA, we have finally moved past the place where many of us have spent our careers– in debates about how we might address the uninsured or improve care, to a time when can now get busy actually covering people. It has been and is uniquely rewarding to be a part of. But health care didn’t automatically become affordable and accessible the day the law passed. It has taken incredible effort to see a system that hasn’t changed in a long long time begin to build this new market, but much more will be learned before best practices are more harmonized.
For all our success to date, new coverage must only be the start of things. We have the opportunity to change health care in America like we did 50 years ago at the dawn of Medicare and Medicaid, back when 1/3 of seniors lived in poverty to a time, now, when less than 10 percent of seniors live in poverty. And if we learn and experiment in these early years, we are just getting started. And part of the next leg of the development is not just how people’s lives change in profound ways, but how the consumer can force changes on the health system that wouldn’t happen– or happen as quickly– otherwise. Progress won’t be a straight line, but we are committed to working side by side with all of you in what will have far reaching impact to improving health care across this country. Thank you for all of the incredible hard work and innovation.