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Letter to Congress on Replacing ACA

Dear Majority Leader McCarthy,

I offer the following comments and recommendations in response to your letter dated Dec. 2, 2016, as the House of Representatives moves forward with the repeal of the Affordable Care Act and offers meaningful healthcare policy suggestions that place the best interests of the consumer and the market ahead of continued government marketplace meddling.

As the Oklahoma Insurance Department surveys the private individual health insurance market in Oklahoma, it is apparent that consumers, insurers and providers are in a combined state of distress. We see the expected marketplace failings, because of government intervention, of limited competition and consumer choice in both benefit plans and provider networks that have led to ever-increasing premium costs. Consumer confusion and dissatisfaction is prevalent and is shared by other marketplace stakeholders.

It is time we start thinking differently and move toward more innovative solutions that are working in other countries. We don’t know what health insurance is going to look like in 10, 15 or 30 years. We have to start putting the processes in place at the state level to allow for real innovation in this sector, one that has been totally hampered by government intervention for decades. To that end, one thing that has recently come to our attention that we think would be of interest to everyone is contained in the attached memo [at the bottom of this article] from Dr. David M. Dror, chairman of the Micro Insurance Academy and executive chairman at Social Re Consulting (pvt) Ltd. The memo focuses specifically on “health insurance to the uninsured and lessons from delivering microinsurance in low-income settings in India, Asia and Africa.” This memo is an example of innovative thinking that we need to consider for certain microsegments of the population in the U.S. We need to look for new solutions similar to microinsurance that have yet to be considered in the U.S. but that are working in other countries.

The current landscape presents us with a real opportunity to examine the principles on which we want to base our health insurance markets. For far too long, health insurance has drifted away from traditional insurance concepts (like fortuity) and has turned into a cost-sharing program instead. It is no wonder that health insurance premiums are spiraling out of control when every health insurance policy is required to pay for a very costly menu of benefits without regard to preexisting conditions. Health insurers should be allowed to underwrite for fortuitous risk and should not be forced to assume known chronic claims. Imagine how much we would pay for auto insurance if the policy was required to pay for all damage occurring over the life of the vehicle and even before the coverage was effective.

We have in front of us now a chance to reject this creeping sentiment that health insurance is an entitlement rather than an insurance product.

For the nearly 300,000 eligible Oklahomans who look to the individual market for coverage — including many of the citizens of tribal governments — Congress must take action that (a) stabilizes the marketplace for policy year 2018; (b) returns to the states the flexibility to self-determine the scope and depth of insurance coverages that best serve the citizens; and (c) restores the regulatory authority to state insurance departments that protects consumer interests and enables issuers to deliver value-based, affordable policies that best serve their constituents. 

See also: Obamacare: Where Do We Stand Today?  

A free market, grounded in fair and limited regulatory oversight — which is predicated on constitutional freedoms and rights — presents the best possibility of delivering sustainable access and affordability in this marketplace going forward. As we move forward, a properly designed policy must target improvement of health outcomes along with control of healthcare costs, reduction of administrative and regulatory burdens and advanced system sustainability.

Marketplace Stabilization

Vice President Mike Pence and Speaker of the House Paul Ryan recently discussed their intentions to have a “smooth transition” to stabilize the health market. Their approach will marry the White House’s planned executive orders with legislative approaches to stabilize the market as our country begins to repeal and/or replace the disastrous ACA. This approach, formulated and led by Congress and the White House, will be difficult. The states stand ready to do their part to ensure the transition is as smooth as possible. Promises by the federal government under the Democrats’ control have placed this country on a very dangerous path that will take time to unwind through a budget-neutral approach. Saddling this burden on the citizens without the funds to back it up is reckless and irresponsible.

There would be no more significant signal by Congress and the new administration of their intent to stabilize markets than to fulfill the payment obligations made by the federal government under the ACA Risk Corridor program utilizing any existing money to avoid deficit spending. These promised safety valve payments are not bail-outs of insolvent companies but rather the fulfillment of a promise previously made to insurers. Further stabilization initiatives for carrier participation in policy year 2018 and beyond would include an immediate fix of the Special Enrollment Period (SEP) eligibility problem using robust verification and documentation criteria and waiting periods for market re-entry; repealing ACA fees (PCORI, HIT and FFM issuer fees) that will reduce consumer premiums; and providing a clear decision on how Advanced Premium Tax Credits (APTC) and the Cost Sharing Reduction (CSR) programs will be administered under a replacement program. These initiatives will mitigate market instability and future issuer exits.

Moving Forward Initiatives:

My colleagues on the regulatory and state government side will be enumerating multiple initiatives that have been identified as important components of a replacement package. The following list represents concepts and changes I believe are essential to the repair/replace effort that Congress will undertake:

  • Permit sale of insurance across state lines under state regulatory enforcement.
  • Adopt policies that expand the use of health savings accounts coupled with more affordable high-deductible health plans.
  • Repeal the federal individual and small-employer coverage mandates. Consider a meaningful continuous coverage premium discount or a surcharge and waiting period for interrupted coverage.
  • Allow states to pursue innovative healthcare delivery mechanisms including, telemedicine and the expansion of the technologically based Project ECHO for rural America.
  • Support transparency in pricing for medical delivery like the Surgery Center of Oklahoma has done by posting prices for elective procedures on its website.
  • A federally supported but state-administered combination reinsurance and high-risk pool program that addresses the risk management challenges of high-risk enrollees.
  • Permit employers to extend transitional “grandmother” group plans beyond the planned 2017 expiration as changes to the individual market are implemented.
  • Cap monetary damages that can be awarded in medical malpractice lawsuits.
  • Repeal rules on short-term health plans that limit policy duration.
  • Replace the 90-day premium grace period with state-based grace periods.
  • Eliminate the dual regulatory scheme currently existing at the federal and state levels. Return all regulatory authority to the states.
  • Provide flexibility through state-based innovative pathways using 1115 and 1332 waivers to create affordable health insurance coverages for the uninsured.
  • Implement market-based deadlines for submission of insurance rates and forms
  • Establish a federal initiative to sunset fee-for-service reimbursement and make the transition to value-based reimbursement payments.
  • Allow states to enact new health reforms at the grade-school level that incorporate physical fitness and nutrition programs to deter preventable illnesses.
  • Let states determine the age at which a child can remain on his or her parent’s group health plan.
  • Enact legislation that protects consumers from unfair balance billing and surprise billing.
  • Provide federal support to accelerate the interoperability of electronic health records (EHR).
  • Reform FAA rules to give states authority to regulate air ambulances.
  • Acknowledge the existence of and promote the protections surrounding religious-based medical-sharing networks similar to companies like Medi-Share, where premiums are significantly more affordable in exchange for limited network access.

See also: Is the ACA Repeal Taking Shape?  

I appreciate the opportunity to provide my thoughts on moving forward and advancing meaningful healthcare public policy. As an experienced regulator and conservative leader, I understand the challenges of balancing budgets and managing deficits. I urge the House to deliver immediate changes that will stabilize the individual market for policy year 2018 and to design long-term solutions that address competition and affordability to participants in the individual market.

The following is a briefing note from Social Re Consultancy for Mr. John D. Doak, Oklahoma insurance commissioner, on health insurance to the uninsured and lessons from delivering microinsurance in low-income settings in India, Asia and Africa. 

Tornadoes: Can We Stop the Cycle?

Nearly every severe weather season, families in Oklahoma lose their homes — or even their loved ones — to a devastating tornado. Year in and year out, the insurance industry helps the victims rebuild their homes and their lives.

When insured Oklahomans replace lost homes, their new homes will be constructed according to existing building codes. When the next devastating tornado hits, the cycle repeats itself. But what if we could stop the cycle? While we can’t stop tornadic activity, we can build homes that are more tornado-resistant. The city of Moore, Okla., a community all too familiar with rebuilding, is committed to doing just that. And I believe the entire state should follow its lead.

A Tested Community

Moore experienced three significant tornadoes in less than 15 years, including the May 3, 1999, tornado that killed 44 people and caused an estimated $1 billion in damage. The May 8, 2003, tornado caused $370 million in damage, but there was no loss of life. The May 20, 2013, tornado killed 24 people and injured at least 200 more. There, property damage from the 17-mile long swath included an estimated 1,150 destroyed homes; the economic loss was estimated at $2 billion.

Breaking the Cycle

 Less than a week after the 2013 Moore tornado, a team of professors, scientists, civil engineering students and professional engineers conducted a reconnaissance trip to the disaster zone. Their goal was to investigate the tornadic impact on buildings and homes. They discovered homes recently built to higher-quality construction standards sustained less damage than homes built to a lesser standard.

Chris Ramseyer, OU associate professor of civil engineering, later presented the team’s findings to the Moore City Council. Ramseyer recommended the council modify the city’s residential building code to lessen the impact from tornadoes. The changes, Ramseyer said, would make homes significantly stronger while only raising the cost of construction 1-2%. The council voted unanimously to approve the new building code.

Embracing Recommendations

The new standards require building techniques that allow homes to withstand winds up to 135 miles per hour, rather than the old standard building requirements of 90 miles per hour. The new code requires roof sheathing, hurricane clips or framing anchors, continuous plywood bracing and wind-resistant garage doors. Engineers say a wind-resistant garage door is important because once it is breached, the rest of the home is extremely vulnerable.

While EF-5 tornadoes inflict the most catastrophic damage with winds up to 200 mph, 95% of tornadoes are rated EF-2 (or 135 mph) and below. Even in Moore in 2013, 88% of the damage was caused by wind speeds rated EF-2 or lower. If those homes had been built according to Moore’s new building code, 1,012 of 1,150 damaged homes would have withstood the destructive forces experienced that day.

It’s Time to Take Action

Since 1989, Oklahoma has experienced 1,575 tornadoes that have resulted in almost $32 billion in insured losses. If we assume 88% of those losses fall within the EF-2 or lower wind speed, the loss then falls to $3.84 billion. As we move forward, I will advocate the adoption of the Moore fortified home construction standard as our state standard for new home construction.

Insurance policies require that replacement construction meets existing code. If Oklahoma law requires fortified construction techniques, then insurance companies must cover those tougher requirements. More importantly, a stronger home would be a source of comfort to those who have been victimized by tornadoes.

For our industry and for our neighbors, it’s a win-win.