answer them. one is how can we make it easier for you to use the 1332 waiver to set up a state reinsurance program as alaska and minnesota have done? as i understand it, miss winghire, you're not getting any more federal money. then you did before. you're just using it better because you're able to use some of the federal money to pay for 85% of the reinsurance program. state pays for 15%. and you lower premiums 20%. with basically the same amount of federal dollars. is that basically right? >> that's correct. our innovation waiver was based on the fact that the reinsurance program reduced liability of the federal government to pay the advance premium tax credits that would have been paid. >> here are my two questions. if we need reinsurance, why can't states do it?

the same taxpayers? maine, for example. me maine set up a reinsurance program. $4 per month. plus insurance, 90% of the premiums of the risk given to the pool and paid the first $7,500 in claims. the federal government has a $20 trillion debt. the federal government is paying an average according to congressional budget office $4,200 for each individual in the individual market who qualifies for a subsidy. if a reinsurance program is such a good idea, and alaska was able to set one up using some state funds and minnesota was using some state funds, why don't states do it? all it takes is money. and state budgets are balanced. the federal government's $20 trillion in debt. already contributing a lot. all of you could put a $4 tax on every policy, create enough

money to take the sickest people out of your individual market and lower premiums for everybody else. my questions are, why don't you do it, number one. and what can we do to make it easier for you to use section 1332 to pay for it? and if the answer is well, our legislature won't approve any more money, that's not a very good answer to those of us in this legislature who have a $23 trillion debt. so who wants to answer that? >> states that i have talked to, they like the concept of the reinsurance waiver and the application. but the requirement for alaska was we seeded the program for the first year. we do hear from states they cannot get the funds from their legislature for that first year. to show that there is an impact to the rates that would bring down rates so that there is the money in the premium tax credits that -- it's a chicken and an egg. that they want to see the results of the premiums coming down. so there is that savings and the premium tax credits. to then put the pass-through

funding back to state. >> there's nothing to keep you from raising taxes or putting a charge on every policy in alaska to help pay for your insurance fund, right? >> that's true. i will tell you in the state of alaska, we would have a hard time putting that tax through, strictly because we're such a small market. we would be taxing the market we're trying to help. the 18,000 that we're trying to help. >> who else has an answer? why can't states do it? what can we do to help you use 1332 to set up your own reinsurance fund at least initially? >> senator, what we can do is certainly make it an easier process than we have right now. so that the -- when you file for a waiver, you have a quicker turnaround time. you get key finti tdefinitive a. saving us from having to wait until our legislature's in session before we have to return to them. and states like washington and

oklahoma, where we're elected as insurance commissioners, turn it over to the insurance commissioners to make that decision. the other states, leave it to the governors to make the call. we're not asking to have -- increase the national debt at the federal level when it comes to 1332. what we're asking for is to make it more predictable as to whether it's going to work or not. and in the end, even though you might wind up having some impact on the federal budget, it's one that's going to have to meet the budget neutrality standard. and i'm in favor of that. i think that's not unreasonable to have that standard apply when it comes to these 1332s. so we're not asking for more money. just make it -- process work a little bit smoother than what we have right now. with some certainty. >> thank you. >> senator alexander. >> yes, and then we'll stop there. >> no, i agree with my other elected colleague from washington. is that let the states make up

more of their decision. in oklahoma, it's going to be two point, $2.15 charge for folks in the self-insured market to come up with approximately $300,000. it's a fee. you know, it's a tax disguised as a fee basically on oklahomans. but i think once this is, you know, it's up to oklahomans to decide how they should put this together and how we should actually come up with that money with a state that's having a very challenging time as you're probably going to hear from some of the other governors tomorrow. that's kind of where we are in oklahoma. >> thank you. my time's up. senator kaine. >> thank you. to the chair and the member, i'm happy we're here. hearing from people affected about what's good, what's bad, what needs to be fixed about our health care system. i'd like to make sure everybody knows what you do. you're expert witnesses. you're giving us some

recommendations. there's some significant consistency between you whether you work for democratic or republican administrations. i am correct that each of you, miss miller, until your recent promotion, the chief insurance regulator of your state, is that correct? are all of you active in the national association of insurance commissioners? and you're the incoming president of that, is that not right? >> that's correct. >> the naic has a mission statement. the naic says the mission of the naic is to assist state insurance regulators, individually and collectively, serving the public insurance and achieving the following regulatory goals. in a responsive efficient and cost effective manner consistent with the wishes of its members. protect the public interest. promote competitive markets. facilitate the fair and equitable treatment of insurance consumers. promote the reliability,

solvency. and support and improve state regulation of insurance. between, recognizing each of your states have your own legal peculiari peculiarities. is that a mission that each of you do? let me then ask this. miss mcpeek, you had this a little bit in your testimony. all of you support mr. doek with qualifications. all of you support the csr payments continuing. you said if we choose not to alter the current structure, that would be necessary. all of you support to some degree or another state or federal reinsurance. there are other areas of commonalty. none of what you're proposing to us today though is because you're trying to bail out the insurance companies, correct? >> that's correct. >> because i've heard colleagues in this body, the other body and outside say things like csr payme payments, that's bailing out

insurance companies or reinsurance. that's bailing out insurance companies. but as the chief insurance regulator in your state who's pledged to basically follow these goals, you're not here to bail out insurance companies, correct? >> that's correct. >> well, let me talk about one of these reinsurance. both the csr and reinsurance things have been talked about as if they're insurance company bailouts. i'm going to use my sort of meathead power point to see if i understand what reinsurance does. in a health market or any market. because we use reinsurance at the federal level for crop insurance, flood insurance, medicare part d. we used it for the affordable care act. but health care. families have different costs. some have low medical claims. some have medium medical claims. some have really high medical claims. if an insurance company has to write a premium to cover all that, they're going to write a premium up here. if you can provide a back-stop on the high-cost claim, they don't have to write the premium here, they can write the premium down here.

so it generally -- reinsurance is a tool you're all familiar with. for the low or moderate cost or the normal claimanclaimant, can significant effect in reducing premium, isn't that correct? and when you get to the high claim side, by providing reinsurance, what you're doing is you are providing a back-stop, senator enzi called it a back-stop. that has the effect of providing people protection. also by provide ago back-stop keeps insurers in the market that might otherwise vacate the market. isn't one of the reasons many insurers are vacating the individual market is because they are worried about these high-cost claims? isn't that one of the minute reasons they're vacating the market? >> yes, senator, if i can respond, you're exactly correct. in addition to that, when you have very limited carriers in the market like the majority of my state, if you are the one carrier writing in that market and you know you have guaranteed

issue, guaranteed renewability, and no ability to cap taitate risks. you have to rate everyone high because you're taking all comers. if you're able to say this is the back-stop and this is the ultimate level of risk that you would have for writing in this market, it does entice additional insurers to write in that market because they can better estimate the risk. >> so the back-stop ends up having a double benefit. it also allows them to do a premium that doesn't have to take into account all of the superhigh cost claims. but that premium then is more favorable to the average person. and by reducing premiums on most because so many folks get the advance premium tax credit, the subsidy, when you bring the premiums down on most, you also reduce the federal premium payment, which has a counteravailing effect. reinsurance costs something. but it also brings down the

federal government's obligation by reducing the advanced premium tax credit, isn't that correct? and that's what you're using in your state to try to use that reduced federal obligation down the road as one mechanism for paying for what alaska's doing with its state reinsurance program, correct? senator cochran and i have a reinsurance bill in that we think would basically go what we did with the first three years of the affordable care act and put a reinsurance provision back in that we think would accomplish all of those goals. it would reduce premiums for the overwhelmi ining majority in th market. it would provide a back-stop that would keep insurers in. by reducing premium, it would also reduce the federal obligation to pay the advance tax credit, the advance premium tax credit, which would have a countervailing effect in reducing the cost of the reinsurance program. i know that may not be the immediate issue on the table, i understand. but i'm happy to hear that to

some degree, this is a concept that these witnesses support. thank you, mr. chairman. >> thank you, senator kaine. next, senator young, then senator murray, then senator roberts and senator warren. >> i want to thank our panelists for being here today. i think each of you recognize that if we don't control the cost of health care delivery in this country, we're going to continue to see an increase in the cost of health insurance. whether that's at the consumer level or among taxpayers or some combination there of. a number of you spoke to that in your testimony. so i'd like to focus a couple of questions on that area. for each of you. what do you think the primary drivers of health care cost increases are, based in your professional experience? and what are your ideas for actually bending the cost curve down as we head into the future?

i'll start with miss mcpeek because i know in your testimony you spoke to the pornimportance incentivizing preventive care. perhaps you can fill in some details on that. >> thank you, senator. our experience is our claims costs in tennessee are extremely high. those are real dollars going out for real health care service also that are being provided. the majority of those seem to be going to prescription drugs. and also to, you know, co-morbidities. real claims and issues that need to be addressed for our population. now, bending the curve down is certainly something that can be affected through preventive care, wellness, initiatives and certainly an examination of the reimbursement costs to see, you know, is therediscrepancy that is reasonable.

>> what's the best way to your mindincentize preventive care? from a gym membership to seeing your primary care physician, what have you. it's a better wellness program for your life. >> we would certainly appreciate the ability to manage those outcomes for tennesseans. and we'll use some of those programs on our ten care side that have been effective for disease management, for health coaching, smoking secession and certainly the physical movement and wellness attributable to the fitness activities. >> thank you. i'm going to go down to mr mr. doak. because in your testimony, you spoke to the importance of price transparency. empowering the consumer based on the information of services provided and did not perceive value of those services.

and so it is a lack of transparency to your mind a primary driver of health care costs and, thus, health insurance premiums? if so, how do we improve the functioning of the market so there's a more transparent market? >> great question, thank you, senator. i think one of the question, one of the answers, as i mentioned in my earlier discussion, that was very near and dear to former oklahoma senator cobran is talking about price transparency. i would ask the committee, as we said earlier this morning, to possibly invite the ceo of oklahoma surgical center here to testify on behalf of what that -- what he's been able to do with transparency in oklahoma city and where some of those things are going. i think the more transparent we can be with our costs all through health care is that you're going to provide an empower consumers to be able to see the outcomes senator burr was talking about relative to the cost expenditures, and

there's various places around the state of oklahoma doing that as well, so i think that's a true opportunity. >> but you know how particular recommendations here at the federal level regarding obstacles we could remove or regulations we could put in place so it would facilitate more transparency. >> well, i think that's something worthwhile to consider. i'm always hesitant to have anything further done here in washington. i'd rather see it done at the local and state level quite frankly. >> oftentimes a healthy instinct from my perspective. i'm going to give others an opportunity to speak to this issue. >> i certainly put a high emphasis on pharmaceutical drugs. that is the one area where if you remove the shackles that are on states right now, as to what they wind up doing and contracting, either through their medicaid program or other programs they have at the state level, we can have a very strong impact. particularly if we join together with like-minded states to take

on that same approach toward bargaining when it comes to these drugs. that is the number one driver in the individual market. we see it with our filings. is on the cost of pharmaceuticals. >> i'm pretty much out of time here. i will give others an opportunity to respond to that question in writing. i would just say on pharmaceutical cost, we want to make sure we don't absorb an opportunity cost to future research and development, life saved and improved into the future by adopting some of the suggestions you put forward, thank you. >> thank you, senator young. senator murray. >> this has been really great. a lot of senators are participating. i think they really appreciate all of your testimony. thank you for being here. i want to ask you, in your testimony you talked about the cost sharing reductions are the difference between whether a 40-year-old in tacoma earning $23,000 per year has a $2,000 deductible or a $7,000 deductible.

consumers have really come i think to rely on these measures to lower their own health care costs. the same way employer contributions to help keep costs down for people who get insurance through their jobs. something changed this year. president trump has made patients and families and insurance companies and state regulators play this guessing game about whether those payments are actually going to be made. we know that failing to make those payments is going to spike premiums for the most popular plans in the marketplace by 20%. leading to an increase in the federal deficit of $200 billion. this is really an important issue. i wanted to ask you, what did you have to change about the way you view and improve insurance premiums this year because of that guessing game? >> senator, it's one where we have to sit down with the health insurers and really press them on it. the point has been made that if you get down to just one carrier

in a particular county, you don't have a lot of bargaining flexibility. they're in a position of saying, well, if you don't -- if you don't give me the rate increases i want, then it's -- we're looking towards the highway. then you don't have that insurer there. so we're under a lot of pressure. stabilizing the market is number one. you got to stabilize that market. and that's -- the csr's our number one. from the standpoint of what you can do immediately. have direct impact. get away from this idea of funding on a month by month basis. or even a year by year basis. it's going to be multiyear with some real predictability in the market. >> we've heard one year, two years. tell me what the difference -- if we just did a one year, what a difference that would make, rather than a two year? >> well, clearly one year is a whole lot better than month to month. but even two years is very tough because of the range of which the insurers are planning right

now as to what the rate increases are. i mean, any degree of increase in predictability that goes beyond this situation we have right now of being so tentative right now with just month to month is going to help. the longer we can give it, the better it will be. >> will help lower the cost? >> absolutely. >> all right. i wanted to ask you, commission, because i noticed when senator baldwin asked about the navigators and the money there, i think you testified that it's really needed in many remote parts of alaska. used, you know, a crocross the country in really important ways. the budget for navigators has been cut by 40%. tell me what impact that is going to have on you in alaska. >> we were very concerned it would have a major impact in our enrollment. i know the commissioner testified he did have insurance

brokers and consultants throughout much of his state. we don't. in most of being an arc outside fairbanks, juno, other cities. we rely on the clinics and the navigator programs to explain benefits in enrollment to the people living in rural alaska. this will be devastating to our population to know what their options are, to understand basic things from the dates of enrollment. there's also a part that is very cultural in alaska in the fact that we have a variety of languages and the navigators cross that bridge in being able to talk the native languages of alaska and other languages. they provide that service. we don't have that very readily in the insurance community unfortunately. >> right. >> commissioner, quickly, are states looking at a 1332 waiver, when applying for that kind of

waive, states have to show they're going to cover the same number of people, the same types of services and the same amount of out of pocket costs for consumers. those are the guardrails in the waiver. can you just talk really quickly about how important those guardrails are as you look at the waiver? >> senator, we've changed the insurance that we have right now. with health care delivery through insurance. because of the aca. we're now competing on quality and service because we have the standardized benefits. the essential health benefits. limitations on out of pocket expenses. so it's changed the dynamic of the game tremendously. so if we want to go forward and have the insurers in there, we've got participating, it's absolutely critical that we wind up making sure that those guardrails aren't eroded away. but focused on what can really make a difference. one, stabilized, second, being in a position to allow the

insurance companies to innovate without being punished with the reinsurance program to back them up. >> okay. and mr. chairman, i do want to submit four letters for the record. they're actually signed by hundreds of leading patients, disease, physician, provider insurance and business organizations that are requesting multiple years of certainty for out of pocket reductions and federal investment and risk mitigation programs like reinsurance we've heard so much about and preserving the protections for pre-existing conditions including essential health benefits. i would like to put them in the record for today. >> thank you, they will be. >> thank you, senator murray. senator roberts. >> yes, thank you, mr. chairman. thank you to all the witnesses for taking time out of your -- very valuable time to visit with us. as rates are failed and not failed to by some plans,

obviously exiting the marketplace like we've seen in kansas city, inaction serves absolutely nobody, so thank you for holding this hearing. i think it's important we focus on permanent or longer term reforms. so we can make -- help slow the growth of premiums and maintain the increase of insurance options for consumers as opposed to simply patching or providing an influx of cash to these markets which has been touched on by the witnesses. i know many are focused on the uncertainty surrounding cost sharing reduction subsidies. i think it's important to note we've had insurers leaving the market before this. premiums still doubled in kansas since obamacare's been in place. i think that's only one piece to the puzzle with regards to. tighter age rating bands can be

an answer. i know that's controversial. that's just a tax that's passed on to the consumer or the patient. other mandates that you've talked about. all add to the premium increases. we have 60,000 families paying 13 million bucks in 2014. 6 billion i think was the -- was the figure with regards to the nation as a whole. so as premiums continue to increase, we had something in the recent reform proposals that didn't pass obviously. considered by the house and senate. they took two different approaches to encourage, not mandate, folks to maintain continuous coverage. premier position insurance commissioner, which do you see easier to operationalize a penalty on premiums for lack of continuous coverage or a waiting period for enrollees upon returning to enroll in coverage

or anything else you might suggest? we'll start with mrs. mcpeek. >> thank you. i have a preference for the waiting period over the premium penalty for not maintaining continuous coverage. because there is an administrative issue for our insurers that have been participating in the exchange market with individuals coming in and out of coverage. and really trying to catch up with premium payments through grace periods and so i think from my perspective, a waiting period would be more effective to incentize incentivize customers. >> one of the things that's really been challenging for states is not all states have truly embraced the affordable care act. the expansion of the medicaid program had a very profound positive impact. creation of our own exchange. so we were more in control of

our own destiny. establishing network adequacy standards reflected our values in the state of washington is something we did. most states did not take those actions. as a consequence, they've seen more in the way of rate increases. our rate increases have not gone up until this last year. we were under 10% per year. now we've seen a marked increase. stabilizing the market is going to be the thing that's really going to make a difference from our standpoint. >> appreciate that. >> it's a tough call. because you hate to see anyone be without insurance. but we have the special enrollment periods for a reason. and that in itself brings into your waiting period. because you cannot just in all circumstances just go and enroll if you miss open enrollment. there's very few criteria that allows you to enroll if you miss open enrollment. alaska would probably be looking more at the penalty. >> yes, ma'am. >> you know, i think we all want to do everything we can to make

sure our risk pools are as robust as possible. i haven't seen an alternative to the individual mandate that would be as good an option to make sure that we've got the young and healthy. i'm not saying the mandate has been per fenfect by any stretch. >> oklahoma. >> i am not in favor of a mandate. you might be surprised. but i think there are other ways to reach, you know, plan design to reach this group that does not insurance, you know, avail themselves of more creative plan design relative to catastrophic plans to the young invincible to move them into possibly using health savings accounts as director hire mentioned. but i think there are ways yn and i'm not sold on this marketing campaign that some of these -- that a few of the senators talked about either. insurance companies have been marketing at every football game we watch. possibly if they enclient vised agents to sell this product they

might have better results than using navigators. >> that football game, oklahoma, kansas state? >> yes, sir. >> i appreciate that. i have a real quick question. i'm out of time. i a poll juice for this. how would increasing the age rating curve to 5 to 1 or maybe 4 to 1 as opposed to 3 to 1? that would be an intermediate change. if you so choose. if you so choose with regards to the individual -- or trying to get more younger people into the plan? for it, against it, what? yes or no? we can start with oklahoma. >> well, we're basically out of time. if you could be quick about it, then submit your -- >> they can submit it for the record, mr. chairman, i appreciate that, thanks. >> if you can make a short answer, that's okay. >> what was the question, sir? >> the question is on the rating ban. the exchange market doesn't have

enough of the young -- >> correct, yes, i'd be in favor of changes. >> i would have some concerns about increasing the rating ban. >> we have concerns with increasing rating ban strictly because our rates for the older population, are so high right now, ever be able to afford it. >> we say mature but go ahead. >> washington likes 3 to 1. we have in statue 3.75 to 1 currently. before the aca. so we weren't far off of 3-1 to even begin with. >> i would be in favor of expansion of 5 to 1 to bring the younger healthier into the risk pool with more affordable premiums. >> thank you, senator roberts. >> thank you for holding this hearing. thank you, ranking member. i think it's important we're having a buy partisan conversation about how to improve health care instead of destroy health care in america.

but at the same time that we're having this conversation, president trump is actively working to sabotage our health care system. he's using a lot of different tactics. but two of them include reducing federal help to keep out of pocket costs low. and cutting 90% of the advertising efforts so that people know about affordable health insurance. so we've talked to some about this. let me just see if i can do this first part quickly. i just want to ask about the first part. withholding the federal dollars that keep costs lower. commissioner mcpeek, are american families better off or worse off? if the president refuses to make cost reduction payments? >> if those payments are not funded, american consumer is worse off, certainly. not only the individuals that are eligible for those reduced co-payments and deductible amounts, but the individuals that would have to pay the increased premium dollars from the carriers associated with that lack of funding. >> okay.

and commissioner, if the government cuts advertising, fewer people will sign up for health insurance, but how does that affect the costs for the people who do sign up for health insurance? >> you want to encourage the people that are probably the least likely to sign up to sign up. because they're more likely to be healthier individuals that are now protected. they don't become the free riders in our system that rely on uncompensated care to take care of them. it adds costs to the system. the more accountable you make health care, the better it is for all of us. >> well, very strong points on both of these. the president has been perfectly clear about what he's doing. sabotaging health care and driving up costs for families. it's petty, it's going to hurt millions of people. if he won't stop on his own, then congress should stop him. but for me, that's just the beginning of what we need to do to really improve health insurance in this country.

secretary miller, did the aca put in place any sort of restrictions on how high an insurance company can raise its premiums in a given year? >> senator, i think aside from the fact that in many states we approve those rates -- >> i'm going to ask you about the states. i'm asking about the aca. >> there are no restrictions in the aca. >> that's right, no restrictions at all, right. but some states impose tough rules to protect consumers and they insist that the insurance companies have their rates approa approved by the insurance commissioner before those rates can go into effect. so let me ask, secretary miller, in the past years, before all the chaos that has come to the markets lately, did you let insurers in pennsylvania charge whatever they wanted for their plans? >> i did not, senator. >> you did not. commissioner, i understand that in washington state, like

pennsylvania, insurance companies have to get permission ahead of time. do insurers always come up with reasonable premiums the first time around? >> no, they do not. >> someone latughed out loud during that. go ahead. >> we a ply a very vigorous review. in fact, we're among those states that are the most vigorous. in fact, we're recognized by the federal government as being a state that can do that hard review. i think several of us are -- >> hard review. and i think you have some data on how much you push down the -- one of the most recent premium requests. >> we do. i'm not going to -- i can't remember exactly which one that was. >> maybe a 30% drop in average rates? >> it was something like that, yes. >> all right, good, good. i should say it the other way. yeah, 30% drop in average rates. the reason i raise this is because letting insurance companies charge whatever they want opens up price gouging.

rate review programs among various states have saved consumers about $1.5 billion in premium costs in just 2015 a lone in a single year. unfortunately, not every state is stepping up on this. and the difference is huge. from 2010 to 2013, just that short time period, premium increases in states with the weakest review programs were 10% higher than in states with the strongest review programs. and that's a lot of money that a lot of families paid out. for me, it just shows the kind of work that we need to do. right now, medicare restricts premium increases for most beneficiaries. but the aca doesn't. medicare has high standards for the medicare advantage plans while the aca in many cases has lower standards. medicare and medicaid plans

cover everybody who qualifies. aca plans can pick and choose who they get in the game with. let's be blunt. we can either make these markets work better for consumers or we can let insurance companies hold people hostage in order to maximize their own profit. in my view, if we're really serious about trying to make these markets work, we need to talk about the kind of rules that make them work best for consumers. thank you, mr. chairman. >> thank you, senator warren. senator whitehouse. >> thank you, chairman. let me first as a former insurance commissioner in my state welcome our distinguished panel and, again, thank the chairman of the ranking member for trusting this committee to do a fair and thoughtful bipartisan process. we did it to great success to eye unanimous significant bill out of this committee and i'm confident we can do something

very worthwhile here. i want to open by pointing out our health insurance commissioner in rhode island has written that the aca has worked in rhode island and we have a remarkable story to tell. including a letter from this january. rhode island has enjoyed market stability. over the last three year, premium increases in the individual and small group markets have been relatively modest. average premium changes in the individual market will range from a 5.9% decrease to a 5.9% increase based on issuer. in the small group market average premium changes in 2017 will range from a decrease of 3.1% to an increase of 3.6% based on issuer. so so my colleagues, please follow the hippocratic oath and do no harm to those of us who have states where this is all working very well. the last point i'll make before

i go to questions is that i hope the buy partisan process that we're embarked on here with respect to shoring u the markets can continue and be extended into other areas. patient safety and medical errors remains a huge issue with tens of thousands of american casualties every year. there's nothing republican or democrat about ending hospital acquired infections. the wild variations in care and outcomes is an issue that we can't address. it ought to be bipartisan to find the best states and the best practices and encourage those. there is nothing republican or democrat about high administrative overhead and continuing feuding between insurers and providers over payment. the care that patients want at the end of life ought to be something we can make sure they actually get. there ought to be no buy partisan -- no partisan

difference about honoring patient's and a family's wishes as they near the end of life. finally, payment reform so that doctors are compensated for keeping people healthy rather than starved on that front and compensated only when they do late-stage procedures once somebody's health is already compromised. another great area for buy partisan action. so i hope we will continue on those fronts. my questions primarily to director winghire. i appreciate you coming all the way from alaska. i want to ask you about the 1332 waiver process through which you created your reinsurance program. you created it not based on hitting a financial number. a dollar number in claims. and then having the reinsurance kick in. you created it based on

conditions, correct? >> yes, sir, we did. >> why did you make that choice? how did you choose the conditions? >> we did what we call a data call and had all the insurers that were in the market the first two years submit their claims. we submitted those, that data to an independent actuary. who then we had segregate the claims from the highest to the lowest based on the conditions so we could see what we were dealing with. what was causing the market for our rate increases to be roughly 40% for two years in a row. we then made the determination if we remove the top ten, the top 20, the top 30, we could put a caro lation to how that would impact the market as far as how our rates would stabilize or hopefully decrease. >> was that -- why pick conditions rather than, say, stop loss at $100,000 per claim or some other more numerical -- >> we were looking at the biggest impact we could have to

stabilize a market that was losing -- we were down to one insurer. we needed to stabilize the market to the greatest extent we could. and removing the entire claim or the entire person from a very small pool had the biggest impact or the biggest bang for our buck on our rates. >> what happens year to year as somebody goes into a new enrollment period or perhaps shifts their carrier? does the new carrier know that your reinsurance for that individual, because they have the requisite diagnosis, will follow them? or do they have to stay with their -- how does it work in terms of future enrollments? >> if we had a second carrier based on that condition, that person would be seated the first of every year or the first time they're treated and continuing the diagnosis, be it a chronic condition or a new condition. >> so the reimbursement, the reinsurance for the carrier follows the individual year to year for as long as the

diagnosis or condition remains in place, correct? >> as long as they're treating. >> did you consider setting up a risk pool rather than a reimbursement system for those individuals? >> yes, we did. prior -- >> why did you choose the reimbursement system, rather than the risk pool? >> we chose the reimbursement system, again, to have the biggest impact on a very small market. 20,000 people. 20,000 people, we had -- >> so the administrative problem was setting up a separate risk pool, would have been a problem for a small number of patients like that? >> we feel we had a pool to begin with. with the 20,000 we're in at the time was not succeeding. so to create a pool within a pool, needed to get those high cost claimants out of the pool so that the entire individual market we could reduce the rates and people could afford the premiums. >> got it. my time is running out here. but i would like to ask a

question to each of you. this will be a question for the record given the timing. if an insurance company came to you, to your organization, proposing to sell health insurance in your state, i'd like to know what steps such particularly as setting up a provider network, you would expect or require of that insurer. conversely, to turn the question to the other side, what concerns would you have about an insurer showing up in your state purporting to offer health insurance who was not prepared to create a provider network and go through whatever other steps you would require? so with that, i'm out, but i'd be really interested in your answer to those question, thank you. >> very good question. thank you, senator whitehouse. it's been a very good discussion. both the hour before we started and this. i want to ask senator murray if

she has concluding remarks. senator franken, do you have some concluding remarks? >> well, i was going to ask a question about prescription drugs. you want to conclude and i respect that. >> no, go ahead, if you'd like. >> well, and i just wanted to make -- ask kind of a rhetorical question about the cuts by hhs in advertising for the exchanges. mr. doak said that insurance companies advertise at every football game that we watch. are those insurance companies just stupid? or maybe insurance advertising works? that's the rhetorical question. i think there's a reason those insurance companiy ies advertis. and i think that the -- >> i guess the question is, are they funded by the federal government? does that make sense or not? >> i think the issue is does advertising work. if you're cutting it by 90%,

you're probably cutting the effectiveness of the advertising. whoever pays for it. >> we have thousands and millions of licensed a gents and brokers across the united states, senator, that have been doing a great job in the health insurance market before obamacare and could be doing the same answer. >> i really meant it as a ret realthetorical question. the point is they advertise for a reason. whether or not they sell through brokers or not. advertising does work. and that's why they advertise. i had a question on pharmaceuticals but i really don't want to eat up time. although i would like to thank the chairman. we had a hearing on. pharmaceuticals. i think we -- i think as you all have said in one way or another

that pharmaceutical spikes flaft three years or so has been one of the things responsible for premiums going up. i would love to hear your thoughts on how we can get those under control. maybe we can do that in a written answer so that the chairman and the ranking member can include. my favorite moment in the hearing so far was senator whitehouse thanking miss winghire for the hardship of coming from alaska. my favorite moment was seeing senator murkowski's expression. when he did that. >> thank you, senator franken. senator murray, do you have any concluding remarks? >> you're easily entertained, mr. franken. i want to thank all of our

witnesses today. this has been an extremely important first step. i know we have three more hearings. we to do have a very short time frame within with to do this and we need to seize this opportunity. i appreciate the opportunity today. >> thank you, senator murray. i think witness, too, you've been very patient. you've given us a lot of time. i thank the senators. i mean, we've had maybe hatch the senate involved this morning in this discussion. that's pretty unusual. and mostly on our best behavior. that's pretty unusual too. so we welcome that. i'd like to conclude with these remarks. one, just these facts from the navigator. i'm not sure what the right amount of money is for the navigator program. according to cms, in 2016, navigators receive 62 million of federal money to enroll 81,000 people. less than 1% of the total enrollees.

17 navigators enroll less than 100 people each at an average cost of nearly $5,000 per enrollee. the top ten most costly navigators spent a total of $2.7 million to enroll 214 people in the affordable care act. one grantee received $300,000 and enrolled one person. only 22, it of all navigators achieve their own performance goals. maybe it's an area that needs some oversight. go to a point that several senators have made, including senator franken, several others. and i've been thinking this especially for seven years we've been stuck in this partisan stalemate on health insurance. with most of the argument, not all of it but most of it about 6% of americans who buy their insurance on the individual market. when we really should have been spending more time on the fundamental problems with the american health care system. that have caused it to grow from

consuming 9% of the gross domestic product in 1980, about 40 years ago, to nearly 18% in 2015 and a predicted 20% in 2025. at the same time, as bhaengsed, we have this phenomena of 5% of those who received health care consumeded 60% of the costs. so we should be doing more on the larger question about addressing health care costs. there's no question about that. look being at what we pay to visit the doctor. how to get a test at the hospital. that's the transparency. what we spend on prescription drugs. several of you talked about that. how much excessive paperwork and administrative burdens increase our costs. what more can be done to encourage wellness. i mean, that's really the l low-hanging fruit in the whole issue of health costs. what can be done to prevent more

serious illness and disease and the high costs that come from being ill. we should be looking at the real ways to bring down cost of health care, which is the best way to reduce cost of health insurance. now, what i've heard today, just to summarize, has been very helpful. this has been a focused hearing on a narrow part of the market where we have most of the problems, the 6%. the people with insurance. and what we ask you to do was to focus on what could we do especially this month that might affect 2018. i heard three things mostly, reinsurance, cost sharing reductions and more flexibility from 1332. reinsurance, one way to do reinsurance of course is the way minnesota and alaska did it, which is to use some of the federal money you're already getting to do that. i'm not suggesting that's the long-term solution. senator cane has proposed a long-term solution. reinsurance has broad support

among republicans, i know. it's not a very complicated idea. it's just take this very narrow market, which is an odd market, small market, and recognize that some people are very sick and we need to find -- create a fund to pay for the costs of some of those people in order to lower the premiums for everybody else. that's what we're talking about. there are a variety of ways to do that, federal and state tax dollars, you can do what maine did, charge everybody something on their premium. there are various ways to do that, but clearly reinsurance is one part of the solution to a long-term fix for the individual market. now, for the short term, for something we might sit down in ten days and say, okay, we can agree on this much and try to ask the house and the senate and the president all to do it in time to have an affect on 2018, maybe what i've heard is adjust 1330 in any way that makes it easier for you to create your own short term reinsurance next year. that may be hard.

several suggestions for improving 1332 that ought not be too controversial, i mean, the six-month waiting period, no one mentioned the me, too, application, that is, if washington puts something in that's approved why can't tennessee come along behind it and say we want to do what washington did with one change, that ought to speed things up. the idea of letting the process go ahead with just the application of the governor or you've suggested the insurance commissioner and not wait for the legislature to have to pass a law. in some states legislatures only meet every two years. alaska submitted a list of reforms that we will take a look at. i thank you for mentioning those. planning funds as miller mentioned that, that seems an odd thing to have to do for a bankrupt federal government to give money to a balanced budget

state government for planning funds, but i understand the problem of quick providing of funds so that you can make your application for a longer term plan. and then i was intrigued with the suggestion, i've heard it often, of what can we do about the budget neutrality requirement and make sure that that doesn't keep you from doing what you would do to make a long-term plan, and is there any way to include the savings that you have in medicaid with what you're doing in the individual market, the two different waivers that the medical government has. i know that new hampshire has tried to do some things in that area and even though the democratic and republican governors both support it, they are not able to do it according to both the obama and trump administrations. so that's a short list of some things that might make some real difference in the 23 states that have actually -- actually

started the process for applying for a 1332 waiver. so i'm hopeful that maybe some combination of continuing cost sharing for a period of time -- and we can discuss what that time is -- and significant changes in flexibility for states probably mostly through amendments to section 1332 since it's already in the act might provide a basis for action we can take this month, and then if we act, then we'll count on the house of representatives and the president to take advantage of that, and my hope is that they would. that wouldn't end the process, that would only be step one and then we would go pretty quickly to step two on a long-term strong vibrant individual market, other changes that need to be made in the affordable care act, and i hope we can begin to spend most of our time on the larger issue of healthcare costs.

so if you have other comments that you would like to give to us, we'd like to have them in writing pretty quickly because we're moving pretty quickly. the record will be open for ten days for comments and questions. tomorrow our committee will meet again to hear from five governors to further discuss marketplace stability and how to advance many of the topics mentioned today. we have two more hearings next week and then we will see where we are and what we think we can accomplish. thank you for being here. the committee will stand adjourned. >> thank you.

hopefully senator murray and i can support it, maybe senator hatch and senator wyden can support it and get a consensus within -- within the senate. we recognize the finance committee's responsibility, plus we have seven republicans and two democrats who are members of the finance committee, including senator hatch. we're staying in close touch with the finance committee. >> your state's insurance commissioner suggested that a temporary bringing back of reinsurance would be useful until states have time to put together their own. i know you expressed concern about adding to the deficit -- >> thanks for coming.

i appreciate that. well, that would take new money. >> senator, you obviously questioned navigators, but are there things that you think this committee may do to ensure that the administration is supporting open enrollment, whether it's advertising or others? >> my whole focus is what i've said it is, it's what can we do to take a couple of steps to stabilize the individual market in 2018 to 18 million americans pay lower premiums. >> thanks, everybody. >> thank you. >> the hearing getting under way about three hours ago, we will show it to you in its entirety or much of it here shortly on c-span 3. other news happening on capitol hill, just a short while ago the house has cleared emergency aide for hurricane harvey relief,

nearly $8 billion in emergency funding, that now goes to the u.s. senate. meanwhile, at the white house today several reports including jennifer shut of cq roll call tweeting that president trump has agreed to back a three month debt limit extension and a three month continuing resolution attached to the harvey relief package. in fact, the minority leader chuck schumer issuing a statement after that meeting saying in the meeting the president and congressional leadership agreed to pass aide for harvey, an extension of the debt limit and a continuing resolution both to december 15th all together, both sides have every intention of avoiding default in december and look forward to working together on the many issues before that -- before us. more details and they are made available. and back to the issue in this hearing, looking at the insurance markets, this is the first of four hearings, the first of two this week, we will cover the one tomorrow beginning at 9:00 a.m. eastern with governors from five states, two

democrats, three republicans testifying tomorrow beginning at 9:00 eastern. related to this the grand junction sentinel out of colorado reports that the state's governor who will testify tomorrow is joining forces with ohio governor john kasich to craft legislation designed to improve the affordable care act. they write that six governors so far from signed on to the proposal and their plan they write would retain the individual mandate requiring people to buy insurance but it would allow states greater flexibility in covering essential benefits under the federal law. we will have the hearing again tomorrow, 9:00 eastern, live coverage here on c-span 3. in the meantime we will take you back to today's hearing chaired by senator lamar alexander.