we are going to talk about the results of a five state study on how competition is working in the affordable care act marketplaces and what we might learn from this study and how we think about competition in the marketplaces going forward. >> this is one of my favorite places to work with colleagues. the bookings in rock feller institute fuelled network study of the competitiveness you mentioned of marketplaces and health insurance individual nol group health insurance marketplaces in five states. california, florida, michigan, north carolina and texas and we have a summary report and five reports almost big enough from the five authors or author groups of the individual states that i just mentioned. each the author of the summary report is michael morris. mike is at texas a&m, did the research and is the author of a widely used, and i would add current and informative textbook on health insurance. he is my teacher. i know a lot about the subject which isn't the subject i grew up on. he is the lead author of our summary report. wa head of rockfeller institute is here. it is field network research and is the second author of the summary report that mike is going to present. the writing group includes other people, me and mark hall and mark hall is the author of the north carolina report. mark is the turnage professor of law. it is on argue noiorganizing th conference and producing in a report in a form that i think is very accessible. i hope you'll download all of the reports and read the summary report. it will be helpful it is our california colleague often reminds me in local markets. chip said all politics is local and indeed health insurance markets are local even within markets. there are differences that we learned about and we have written about. we are out in the field in depth, interviewing experts, using every piece of economic demographic and program data you need to know they are snurnumbe and put them together with implementation. it is a big subject that i'll touch on. but this is typical of american federalism it is to present your summary findings. what they see, what they wrote about, how their story fits into the overall story. it is along with two of our associates, michael luke from colorado who is head of the colorado health institute. many have health institutes and they are very valuable resources for the kind of work they do. you're doing something different now. you have got a moment in which you -- which they banned from doing medical underwriting. so everybody can come in, preexisting conditions and guaranteed issue. it is fundamental to the health insurance and it is big if not bigger than any other industry and sector in our economy. we have issued 27 baseline and follow-up reports on what states decided to do. we expected most of them would say we are not letting the feds in here. we are going to do it. indeed the feds are operating most of the marketplaces. this gets to the heart of how american health care has changed institutionally and relying heavily on many sources of data and many people's expertise. we have examined 25 local markets, five in each of the states. you can read the reports. we will describe what we learned collaboratively. what do we know about the changes that effect the cost and character of health care which most of all effects millions of people who are in these systems which isn't the whole of it. there is a lot more to what we are looking at. it's where the big changes are. platform is yours. >> as dick indicated this is a team effort. i have to say, it really sort of relied heavily on the ability to put all of this together and keep us focused and keep our feet to the fire in answering the questions we were charged with. i can't say enough about dick and his ability to put together a network of field researchers across 40 states, calling people up to say we are doing this interesting project. it is a really strong set of field investigators throughout these states and as dick indicated across all of the states. what we want to do is begin to experience the experiences in the state and how it effected the exchanges. indeed it was our presumption going in that the states were going to be very different. thirdly, we want to develop hypotheses about how it might evolve and to offer those as sort of testable opportunities to other researchers but also to perhaps sort of serve as a road map for all of us as we look at repeal, replace and repair. there isn't much background that i think i have to provide for this audience. it is important to appreciate that there are rating areas in each of the states. rating areas are geographic areas in which they offer coverage in that area must quote the same premium to people of the same age and smoking status. the thing to appreciate is states are very different in how they con figured rating areas. others metro areas are unique rating areas and the rural counties make up sort of the last of rating areas in the state and others use geographic sections of the state. it is important to realize they approach some what differently. it is important they don't have to participate in all of the rating areas or in all of the counties within a given rating area. it is important to appreciate just from that that states are potentially very different and very different kinds of insurance responses within the states because of the flexibility that's granted by this rating area approach. so why these states? we chose california because it's a democratic state that expanded medicare. it adopted a state based exchange of the active purchaser we chose michigan that expended. florida is an oppositional state that uses the federally facilitated exchange. there was early evidence there that insurers were working with local providers to program products that would allow them to compete with the dominant insurer. we wanted to see how we were working out. texas is an oppositional state. it uses the federally facilitated exchange. it suggested there was potential for substantial and we wanted to see how it all played out. overall we looked for some geographical diversity. there is also racial diversity in all of this. we looked for strong research teams. we have got what i think is a very good set of places to observe. a little bit on methods. it looked at structuring the networks within the insurer plans and it looked at changes in the environment that potentially took place as we watched the four years unfold. having said that, it's not just sort of a set of questions that we follow. it is a more fluid discussion that follows from the discussion that proceeds it into where the issues are from the point of view from the people on the ground. we come away with a very knrich sense of what the states looked like. the field teams conducted 15 to 90 minutes of provider and provider networks, with insurance agents and brokers and with navigators and with policy exper experts, some times the media. you can't generalize from five states when one is they are all very different. first the key finding is that health insurance markets are local. now, i have been looking at health insurance markets for 20 years or more. it is only in the last three or four years and certainly through the field work that we have been doing here that i appreciated how local these markets are. it is a mistake to sort of think of idaho as a market. it is a mistake to think of texas as a market. the insurance markets are much more local than that. there is a lot of divergence within the state. that's just the beginning of it. there are big differences of it between urban areas. insurers are managed care entities. they form networks. to be able to get successful in a local market you have to have a network of hospitals and physicians and other providers who agreed to prices you believe can make it competitive. if it's the case you can't establish you can't establish a network, it's well ney impossible to be able to offer an insurance product in that setting. clearly, that's the case in lots of rural america. it's also the case in modest-size urban areas. there's a single network. sometimes a single hospital. you decide you want to come in and compete against the dominant carrier in the state, you've got to be able to negotiate meaningful prices with that provider. and that turns out to be difficult to do, to give you a competitive advantage in the insurance side. it also turns out to be a problem sometimes in large metro areas. in texas, for example, we talked to one insurer who'd said we were pretty successful in putting together what we think was a very good network in houston. but we could never get something to work in dallas. so it's not just a matter of we are here, we're in the state, and because we can provide it on the eastern side of the state we can provide it on the western too. it depends on the local market. so big implications there. first, it's unrealistic to expect you're going to find similar results or indeed that there are similar solutions everywhere. second, premiums as we have found are lower in areas where there are greater numbers of hospital and other providers. without that competition at the provider level it's difficult to see lower prices at the insurer level. and indeed we've been told from our interviews that the decades of consolidation that we've seen in the provider markets have made it difficult for insurers to compete. having said that, if indeed these markets are local, that suggests that there's opportunities for regional insurers and other insurers who co-brand with local providers to establish a successful niche in their local market where they can compete pretty successfully, or at least we think they can. and we've seen some evidence of that. the other point, though, is if indeed these markets are local and they depend on the nature of those local networks of providers, that says at least to us that meaningful interstate competition among health insurers may be very difficult to achieve. it's not enough that regulatory barriers are reduced. it's putting together the networks and that's the difficult thing. second major finding. claims costs substantially exceeded the insurers' expectations. in the first year or two of the exchanges the insurers actually had very little information. they have been insuring this pool of individuals at all. they had some information perhaps from their existing individual market. they had some information from the small group market. maybe they went to national data like maps. but in any event, they had remarkably little data on these individuals. and as a consequence a lot of them were very timid about entering the market. but after that first year where they saw that premiums sort of drove enroll sxmt that enrollment was relatively low, we saw lots of new entry in 2015. again on the expectation that they could experiment in the market and we saw entry and we saw potential for real competition there. but then 2016 rolled around and insurers had data that their actuaries believed. and those data were scary. they were high utilization, largely across the board. and that led to concerns about high utilization and led to withdrawal from local markets and from states. and it's important to point out here, it isn't just that some national carriers withdrew from full states. it's also the case that carriers who remained withdrew from some markets, from some counties and rating areas and withdrew some of the products they were offering while still remaining in the exchanges. and it was also the case as you all know that we've seen substantial premium increases as a consequence to that. the implications of this is there's certainly an open question as to whether those rather large premiums that we've seen in 2017 are able to sort of get ahead of the losses that the insurers have anticipated. there's concern about the extent of adverse selection relative to the general sickness of the risk pool and what carriers are able to do about it. and there's an open question about those special late open enrollment provisions. as i'm sure you've all heard, there are opportunities where people can enroll in an exchange plan after the open enrollment period closes. and some insurers have argued that was an enormous drain on them, that late enrollees were extraordinarily expensive. and the administration past and present are sort of working at alternatives to tightening those. and it's an open question to how meaningful those claims are both in terms of the original assertions and whether or not changes would make a difference. it turns out that there were from our review mounting losses that stem from high utilization, and those losses can overwhelm competition. in all of our states we saw the withdrawal of insurers. in north carolina and texas some metro areas went from five and nine insureser to suddenly having only three. florida had three insurers withdraw. michigan and california also saw withdrawal of carriers although this view was it's not as big a problem as elsewhere. we saw the plateauing of alternative forms of insurance innovati innovation. and certainly insurers have viewed they themselves as having enrolled sicker folks. and that suggests that there's an issue of risk mitigation. and certainly there's a view across many of our states that the risk adjustment mechanism and the short-term other transitional mechanisms were inadequate selection that they saw. particularly true in florida and texas. as one insurer told me in texas. so in the first year we set our premiums relatively high and we got in my words a sick draw of the population. we lowered our premiums to try to attract more people and a healthier draw and we did but six months -- and we made money and six months later we got the risk adjustment fee and lost money. we set our premiums high and lose money. we set our premiums low and lose money. they withdrew from the market. the risk mitigation issues matt matter. and the point is if we wanted to prohibit insurers from using pre-existing conditions to set premiums as the aca does and as many have said must continue to be the case in the future, that means we have to somehow deal adequately with the risk adjustment, risk mitigation problem. maybe that's the better funding of some of the existing mechanisms. maybe that means looking at other mechanisms like high risk pools. another finding is clearly what we've seen in all of this is a shift to narrower networks. and all of this is well under way. there's very good evidence over the last 20 years that narrower networks allow insurers to negotiate lower prices with providers by essentially trading volume for price. clearly that is in the mind of insurers as they have moved largely from ppos to hmos. there's an underlying thread in all of this as well, though. and that has to do with whether or not moving to a narrower network can affect adverse selection or your fear of attracting high-risk folks. so if one excludes premium providers, potentially that leads people with related diseases to seek insurance elsewhere. there's some evidence of that. but there's also evidence that premier providers are some of those that have been working with insurers to co-brand. and it's certainly the case that medicaid managed care planned have -- while they have their own relatively unique nature of their networks, they have also sort of provided access to coverage in some of the premier networks. some of the premier providers, excuse me. so narrower networks continue. there's concern amongst brokers and agents and policy experts that consumers are only beginning to be aware of what the narrower networks mean to them. there is pretty good -- well, actually, there's very good evidence that narrower networks are cost reducing. but in some sense this can be misleading given the nature of the local markets that we've talked about. as one provider said to us, we're the only hospital in town. the insurer moved from a ppo to an hmo, really didn't have much of an impact here. outrch t consumers may be critical to enhancing enrollment. insurance is complicated. even for those of us who have coverage. consumers have been largely focused on price but increasingly the navigators tell us that they are able to appreciate the nature of deductibles and co-pays. the new challenges have to do with narrower networks, with balanced billing, and with planning withdrawals and having to move from one plan to another. some states have been very good at outreach. florida in particular. california and north carolina as well. it's important also to appreciate that it isn't just the navigators that provide information. safety net providers often play a critical role in opportunities like enrollment fairs to encourage enrollment. and brokers and agents certainly feel that they have -- lack the incentives to be able to participate. the ability to increase enrollment in the plans depends critically on the ability to have an informed set of consumers and to provide mechanisms to do that. an additional point is that insurers may indeed be waiting in the wings. yes, we've seen a lot of withdrawal from the plan, from the exchanges. from the most part insurers that have withdrawn from the exchanges have remained in aca compliant off-exchange plans. much of that has to do with the fact that if you withdraw from the state entirely it's five years before getting to come back. so there's a sense in many of the communities we've looked at that insurers have hedged their bets. they've withdrawn from the exchange products but they've kept off exchange products there so that they can sort of rejoin the fray if the economic and political circumstances change. so what that suggests is a replaced, repaired aca. may see relatively rapid re-entry of insurers. and indeed that if that's the case much of that new growth may be local and regional insurers rather than national players. the other interesting finding has to do with medicaid managed care insurers. they have been particularly successful where the more conventional insurers have struggled. it's an open question as to why that's the case. the medicaid managed care type insurers tend to have narrower networks often made up of special -- of safety net providers. they also have a pool of enrollees who often transition back and forth from medicaid. and the relative question is to what extent that kind of experience can be generalized to the rest of the populations. and indeed whether or not it can. finally, while the individual states don't sort of talk about the effect of medicaid expansion per se, when you look across our five studies what you see is those states where there was a medicaid expansion the role of that expansion in the exchanges was not discussed. but in the other three states it was. and the assertion by people in the field was medicaid expansion would have helped, it would have taken those people at the 100% to 138% of the poverty line, put them into medicaid and arguably taken them out of the risk pools that the insurers faced. and it may also be the case that the provision of medicaid expansion brought people in, they discovered they weren't eligible for medicaid but they wrel jibl for a subsidy and they enrolled. in any event there seems to be a strong sense that medicaid expansion matters. there's also a point in north carolina that was emphasized about, as you may recall, in the first year of the exchanges states have the option to allow non-compliant plans to continue or not. and the argument is by preventing those from continuing that mitigated some of the potential adverse selection problems. so future research for us. we think that we need to know a whole lot more going forward about how insurance competition is going to fare post repeal replace repair. do insurers enter? if they can offer a wider range of confirm how does this affect premiums, enrollment? how do risk adjustment mechanisms work? do more flexible interstate insurance opportunities enhance competition or as we fear not do much? how do local insurance markets evolve? do local regional insurers grow and prosper? does continued provider consolidation inhibit competition? what about acos? do they enhance competition? do they retard it? will we see a rise of cobra ending with providers? and what's the future of narrow networks? there's much to learn and little time. thank you. [ applause ] >> thank you very much. i'm tom gaze. i'm director of the rockefeller institute. and we will have our state panelis panelists. well, we're going to start -- you can sit anywhere you want. i will tell you who goes when. i think it's fine just to sit here. is that okay with everyone? >> yeah. >> all right. thank you very much. there's always been a discussion about the field research network and how they operate. we've been doing this -- okay. we're getting adjusted right w now. thank you very much. we are adjusted. i do want to thank brookings. i want to thank alice and dick. kaitlyn, madeline, everybody else here who's been wonderful. and bob bullock at our institute in putting this together. the rockefeller institute does have a long history, many thanks to dick nathan for putting together these field networks which we've done in medicaid, we've done it in welfare reform, workforce development, many other areas as well. and we've often had some very good researchers in our research teams across the country when we have these multistate systems. but this team is particularly great. we have some very distinguished folks, and they're all quite diverse too. that's one of the nice things about it as well. the -- you know, this is a kind of inductive research approach and it's nice to have people with different backgrounds, different disciplines to be able to have -- develop insights, different types of insights in understanding and observing how these national initiatives are implemented on the ground. this team in particular and especially the five people here do have a number of differences. we've got differences in disciplines. we have two economists. we have a political scientist, a lawyer, and a public health specialist. our careers have been different as well. three of them are traditional academics, though not too traditional. they've also been very applied, very active people. one non-profit research advocacy organization. and then one former top government executive who's now leading the research center at a major university. so all of them bring different sensitivitie sensitivities, different trainings to bear in their thinking. what i'm going to do, since you do have your bios of everybody, you've already been listed in terms of their major titles, i will just simply say that we're going to start off with just a few minutes of a summary of their major findings for each one of them. and then we're going to have a series of questions. i'll ask a few questions. and then at some point i'll let everybody else ask questions as well. and your questions will be brief and to the point when i give you that opportunity. we're going to start off with the blue state of california. we're going to end with the red state of michael morrissey in texas. michigan will be second. third will be florida. fourth will be north carolina. michael weinberg is president, bay area council of economic institute. from michigan we have marianne udall phillips, executive director of center for health care research and transformation at the university of michigan. patricia bourne will talk about florida. she is the paine h. and charlotte hodges eminent scholar in risk management and insurance at florida state university. patty, since we've already used 15 seconds of your time, you get a little less time. north carolina we have mark hall, who's director of health law and policy. fred d. and elizabeth l. turn ij professor of law, wake forest university and a non-resident senior fellow at brookings. same with you, mark. and then finally we have texas and mike. so micah, start off. >> all right. wow. i'm intending to win the oscar for best presenter today. and to do so i'm going to tell a story about "la la land." in this case by "la la land" i mean region 16 of covered california, california's aca marketplace. that is the western half of los angel angeles. what i talk about will really reinforce the conclusions michael just shared with the entire group, but i'll give you some local flavor. so the western region of los angeles actually in and of itself has 5 million people who live in it. it's as large as many states. a very diverse population, obviously a very urban area. and there is a lot of -- as well as a lot of insurer competition. on the provider side, the broader los angeles area there are actually over 80 hospitals. there's not as much hospital consolidation in los angeles as there is in places like san francisco and other urban areas. there are seven different insurers compete hg in this area. of many different types. kaiser permanente, which is our sort of closed network integrated delivery system. you have some conventional insurers putting together ppos and hmos, our anthem plan, our blue shield plan. you have oscar, the plan sort of new wave. we're going to use a lot of telehealth and be run by jared kushner's brother plan. hasn't done very well. and then -- but i'm sure we'll get a tweet to get more enrollment in oscar pretty soon because that's a totally legitimate thing to do. and then you have a very interesting couple of medicaid managed care plans. and so the state active purchasing exchange did a lot of different things. active purchasing isn't just negotiating with insurers for prices. it's really thinking about do these marketplaces work, do they have enough competition and is there something we can do to bring more competition into the marketplaces? the funny thing about california is so it's a bunch of people that would prefer to be implementing a single payer system that actually did the best job at implementing a marketplaced reform. they said all right, i guess we like this now and really thought about if we're going to have competition we need to have competitors. no xeers competitors, no competition. hsas don't make competition where there's one hospital in your town. so a lot of competition in los angeles. and one of the really interesting things is you hear these big headlines, insurers raising premiums 45%. of course almost everybody doesn't pay that because they're subsidized. but in los angeles a big issue was that last year malina is an insurer that lowered its premiums. in absolute terms. it's primarily a medicaid managed care plan competing in the individual marketplace in california. and actually lowered their premium. now, the issue with lowering your premium is that means that all of your competitors who are raising their premiums and people purchasing through their competitors actually see a real substantial premium increase. and we've seen that consumers increasingly are shopping on price. in the first couple years in california they didn't do it because they didn't know what was going on, let's just default to the brands we'd hard of. but in the last couple years they've really started shopping on price. they'll buy malina. they'll buy l.a. care. they don't need to buy blue shield of california just because that's a name they're familiar with. and they'll seem fairly pleased with these networks. that's something folks are finding, which is that ultimately most health care doesn't work and you die. right? so no matter what facility you choose, right? ultimately you're going to be disappointed with this consumer product because you'll be dead. so they choose molina or l.a. care and they seem fairly happy with this product and it's substantially lower priced. so this is creating a tremendous amount of pressure on the higher cost hospitals in los angeles. and we are seeing them negotiate absolute rate concessions with the insurers to remain competitive in these networks. so this is actually bending the cost conserve. there's a lot more to say. but the thing that makes me completely want to tear my hair out, i ran into mark hall yesterday. he's like micah, your beard is a lot more gray than the last time i saw you. i was like thanks, mark. but the reason it's more gray is i actually see -- like shocker, you implement a law and it works, right? so one of our conclusions is if you just don't do this huge part of the law, the medicaid expansion, maybe it doesn't work that well. well, surprise. right? if you are an oppositional state and do everything you possibly can to keep a law from working, then you complain that the law isn't working, it just makes no sense. you've got somebody, you know, you want them to run a 100 yard dash and you cut their legs off at the knees and then you're like they're not running quickly enough, this is a failure. right? well, if you actually focus on making the affordable care act work, then shocker, it might actually work. and if we repair and replace and do whatever but then all the blue states decide we're not actually going to do this, we're going to fight it in the courts, it's not going to work there either. you actually need to choose a system and implement that system. and when you do it in a place like california it can work. but the important thing i'll just conclude on is again, local markets, local competition. so you can't put together compete networks in an area with only one hospital system. right? so if we really care about competition we need to care about competitors. and the competitors we care the most about are actually not the insurance plans but rather the providers. so you've got somebody like david brooks, who should know better, writing a column about can you shop in health care and talking about do hsas work or don't they work. that's beside the point. you can't shop in health care if you have no choices to shop among. right? that's what we should care about if we care about shopping and markets and all the rest of these things and not something that's totally non-ideological that's going to be important for the better way, it's important for the aca, whatever kind of policy framework you put in place. and los angeles shows it. that's my comments. >> i was going to say you can tell who's not the academic in this group. >> academic by training but i thought i'd have some fun. >> i'm not the academic but i'm not competing for the oscar because i am from the heartland, right? the purple state of michigan. you may not blame us for where we are today. but we have had a contribution. i thought mike's summary was fantastic. and actually, i thought, micah, what you said i totally agree with. but i want to add something to the perspective that mike gave you because i think it's really fundamental to understand in part why it's unfortunate we are in the change discussion that we're in right now, because health care markets, health insurance markets take time and to build something takes a tremendous amount of time. and where we are today in the affordable care act pretty much builds on the history of where all of our states have come from. and to see what's happening now you have to understand that history. i want to go back a little bit in history for you to understand a little bit about michigan. in many ways i would say michigan is the model of what the affordable care act intended the health insurance marketplace to look like. we are a state that even though we have a republican governor and an all-republican legislature we have a state that actually approached implementation of the affordable care act tremendously pragmatically. we were not a state as you'll hear from some of the others that was oppositional. we're a state that we will wanted to make it work. our governor, governor snyder-s a businessman by background. his focus was on the economics of it. he got the economics of it. xhvth, he said after the law was passed even amidst all of the rhetoric early on about how terrible the law was. he said if it had been up to him he would have created an exchange independent of the federal law because he understood that it would make health insurance easier for consumers and he wanted to make the market work better for consumers. sew and his administration always approached the health insurance exchange market from that standpoint in a similar way they approached the medicaid expansion from that standpoint. it was controversial with the legislature, passed by only one vote, and actually that was a vote that switched from a no vote to a yes vote after three hours of horse trading. but we did get the medicaid expansion which was implemented in april of 2014. so there was a little bit of a gap but mostly early on we were one of the -- certainly one of the first republican states to go for the medicaid expansion. and again, it was a very practicing natick decision based upon the economics. there was a coalition built across the state that included all the business leaders, all the providers. all the consumer advocates. all the health plans. there was just widespread support because of the economics. it's a state that got the affordable care act. and as a result we have a fair amount of competition even today with the affordable care act. we have ten insurers. in 2014 when the act passed we had 13 issuers in the state. so yes, we lost a couple. we lost the co-op -- none of us ever thought the co-op was ever going to succeed to begin with. we lost a couple of the national insurers from the exchange. but they were very small in the marketplace to begin with. they were sort of irrelevant to the market. and frankly, aetna, united, they don't really know how to work with the individual market. we never expected they would be successful. we continue to have a robust market. we now have -- i think we started with something like 70 different plan options among the 13 insurers. today we have 167 plan options. so it's a robust market. yes, not everywhere in the state. the upper peninsula of michigan which some people think is better aligned with wisconsin but they are part of michigan today. trade for toledo. they have two issuers. actually both blues. blue care network, which is the hmo, and blue cross and blue shield of michigan, the ppo. so there's not tremendous competition. and as a result indeed premiums are higher. that's how the market works. but they still have choices of plans. and we just completed at our center some consumer surveys -- we've been surveying consumers since 2009. and actually consumer satisfaction on the individual market is higher than it's ever been with the plan choices they have. and i think there's been sort of some collective memory loss about how bad markets were before the affordable care act for people in the individual market. two words about the history of michigan so you can understand why we're in the place we are today, and then i'll turn it over to my colleagues. so michigan has always been a state that has provided coverage on a guaranteed issue basis for the individual market. and actually, if you want to know what will happen with the requirement for preexisting conditions to be covered with guaranteed issue, without a mandate, look at michigan because blue cross and blue shield of michigan, since it was formed in 1939, was required to be the insurer of last resort. had to cover all comers. could not exclude anybody based upon health status. and as a result they had the sickest population and indeed a failing individual market. the rates were heavily regulated and they were losing millions of dollars and had been lobbying the legislature for years to change their structural status to become a non-profit mutual insurer which they achieved in 2014 with the passage and implementation of the coverage expansions of the affordable care act. so they dominated the individual market. it was a old and very sick market. i think the average age in their individual market prior to the affordable care act was 55. and as i said, they were losing millions in that market. they had 72% of the individual market. with the advent of the affordable care act many new entrants came into the market predominantly, as mike said, managed care plans, many of whom had been predominantly serving the medicaid market. and i think that's the other piece of history that's important to understand in michigan. michigan medicaid converted to a predominantly managed care market in the 1990s. it's one of the states that has really heavily gone to managed care and medicaid. and so those plans were ready with the networks that they needed to serve a population like the individual market. i think it's why they've been successf successful. many of them are making money. the blues have not. the blues have lost market share. actually, they're happy about that. in the individual market. the health plans, the hmos have gained market. sought blues are now something like 60% of the individual market while the managed care entities have gone up quite a bit. we can talk a bit about the questions about what is going to happen in 2018. very pessimistic about -- just because of the chaos that is happening in the market right now and some of the utilization trends we're seeing of consumers who are afraid they're going to lose coverage in the market. so i can answer your question now. the rates that were set for the 2017 market michigan went up 16.7% prior to subsidies. the subsidies, 87% get subsidies of michigan. those rates are underpriced now for the utilization we're seeing because of the fear that has be been sown in the population. lots to talk about for 2018 but a picture of michigan. >> hattie? >> i want to give a little context on florida as well, now moving from states that supported the implementation to an opposition state, and i'll give you first the main takeaway from my research in florida is despite the support of the state with the affordable care act and any real active efforts by the regulator in florida it's been a real success story over most of the state. so i want to tell you a little bit about the main points, the things i think have led to that. have drawn out this success. but i want to give you some of the history, what's going on in the state, a little about the market. i'll talk about my main points, and then you can tell i'm a lecturer, right? i tell you what i'm going to tell you here first. and then i want to go through some of the concerns i got from the stakeholders i interviewed with. some that might be common to all of our research here. some snichkz that might have been a concern of the stakeholders a talked to in florida. florida's the third largest state. it has a population over 20 million. and 8% of the population is receiving insurance through the marketplace. that's a pretty big percentage. we opposed the implementation of the affordable care act. also opposed the expansion of medicaid. by default the rating areas that were selected for the federally facilitate facilitated exchange are the counties. 67 counties. that's the most rating areas in any state. i think south carolina's next with about 46 rating areas. i have 67 different markets to try to evaluate and just in case you're wondering have they ever thought about trying to combine any of these, the regulators said no, he's really not interested. passive approach to this. that was the default. they stuck with the default. they haven't gone back to revisit whether adjacent rating areas might make a better market. so the state also had -- prior to the implementation of the affordable care act one of the highest uninsures rates in the country. and although the rate is still higher than the national average it's dropped from 20% to 15%. at least by 2015. the market, we have seven carriers that are participating statewide but only one carrier that participates on all the exchanges. and that's blue cross and blue shield of florida through various different names. florida blue, florida select, different plans that they're offering. most of these carriers are also offering coverage in the individual market. off the exchange. blue cross and blue shield i want to say a few things about them. they have been the dominant carrier in florida for seven years operating in the group market as well as the individual market. and they also rank highest in consumer satisfaction in studies. people are really happy with the coverage that they're getting from blue cross and blue shield. they have reportedly in my conversations with different representatives from them they've been very happy with their experience on the exchange to form networks. they already had networks in place. they had relationships with providers throughout the state for their individual members. it was very easy to expand that and say we'll start offering the exchange plans. so for them participating on the exchange was not a really big question as it was for other insurers that didn't have as much of a presence in the individual market. there are four other carriers in florida that did not have a very big -- were not real active in the group market or individual market but were very active in medicaid managed care. and those plans have also become key players in the exchanges. i know this is a point that's come up several times now, is these plans that have medicaid experience, and i would add to that plans that had a lot of individual coverage experience in the state are the ones that have been best suited for the exchange and maybe experiencing the best success there. there have been some major withdrawals in the exchanges. between the first year and the second year there was several carriers that joined and the next year some carriers backed out again. cigna, united health care and aetna have all withdrawn from the exchanges across the state. and blue cross and blue shield i mentioned is the only plan that's actually -- or the only carrier that's operating everywhere statewide. let me get to my major points. and i kind of touched on at least one of these. blue cross and blue shield had a strategic advantage in negotiating with providers. i think that points to some success there in florida that may not see in other places. another major point maybe this comes across from specific conversations i had with navigators is the importance of the navigator network. there was a lot of money put in through grants to the university of south florida where there's a particular person there, jody ray who's a shining star there with implementing the exchanges getting rolled. she has formed alliances across the state in rural areas, in urban areas. in some of these the florida family health care foundation, the epilepsy foundation, she's made alliances with all of them to reach out to people. and i think that that's probably one of the key reasons why we've had so many people sign up for the exchanges in florida. my other findings had to do with medicaid providers. major concerns of the stakeholders. let me come back around to some of these. the navigators are not that concerned about what's happened with competition. they said there are plans available for people everywhere. even in the rural counties like gadsden county. 13 plans, all being offered by one carrier but the navigator said people are satisfied with being able to choose one of those. the prices are high, but navigators do not express a lot of concern about that. the regulator also was not that concerned about the number of carriers that are in the market, is not doing anything actively to try to encourage them. he's had conversations. most of the carriers say i can't make money and they say okay, i understand. that's been maybe a problem and maybe a problem going forward. however, the regulator and some of the stakeholders argued that they did not think that -- even though they see potential for a death spiral with prices rising and more carriers dropping out that it will level out. most of them and the regulator especially said he thought this next year we would start to see with the premiums leveling out and the utilization as well leveling out -- i think i'm running out of time. i'll move on because i think i touched on most of the main concerns i had to address. >> thank you. >> so when i made that crack about who's the academic i didn't mean about substance or style. i meant that all the academics have notes in their lap. to read my notes i'm going to put on my glasses here. north carolina is similar to florida in many ways. about half the size but many of the features are the same. including oppositional state. no medicaid expansion. high uninsured rate previously. but very high take-up. florida and north carolina are often ranked side by side in terms of the largest percentage of eligible population who have enrolled but also very high prices. and so to paraphrase dickens i think north carolina is sort of the best of markets, the worst of markets, some combination of both. despite having very high prices and presently so because the health care cost index is not the highest in the country but the aca premium rates are among the highest. much of that is a buffer because almost 90% of the enrollees are subsidy eligible and almost 2/3 of those are below 250% of poverty so receive substantial subsidies. the effective price remains quite affordable. some of those themes you just heard from patty i want to focus on market structure and entrance and exits because particularly the kind of networks that form to kind of add to the dialogue a bit more. similar to florida blue cross is the only statewide carrier. prior to the reform they had 90% of -- 85% of the individual market and the other carriers had less than 35%. there was effectively no significant competition. previously people would say blue cross owned the market and dominates and what have you. post-aca blue cross's share dropped from 85 to 65. still the largest. but aetna and united rose to the middle and high teens in terms of market share. similar market share's become quite significant. aetna was there from the beginning, mainly in the 1/469 state that composes half the population, the major population centers charlotte, raleigh, where i'm from, greensboro, winston-salem. and then aetna, which had naturally stayed on the sidelines entered the second year. interestingly, they each entered with quite distinctive market network structures. so aetna's strategy was to partner with named health care systems, co-branding that mike referred to. initially with duke in the raleigh area and then with one of the premier systems in the charlotte area, carolina's medical center that also covers part of south carolina. and you know, it was sold as the -- confidently was the corporate entity that subsequently was acquired by aetna but was sold as the duke confidently slash -- i forget the trade name. and then when united entered they came out with gatekeeping hmo. they said it went back to old style 1990s plan structure. in part as a way of creating the network because contractually they were able to do that. focusing on the physician contacts by selecting a certain group of primary care physicians they thought would be good gatekeepers and then putting in referral requirements for specialists and didn't have to go out and renegotiate networks with hospitals that way. so that was an interesting move. so you had these sort of standard ppos that blue cross offered side by side with really sort of an accountable care organization structure because the confidently slash aetna idea was to really embrace the new thinking of management and value-based payments. i heard stories of really using the aca as an opportunity to create this aca-based product with a critical mass where you could put it out there and sort of if you priced it right be pretty confident in getting, you know, 20,000, 30,000 lives which is enough to kind of get the thing up and running and then start to sell it to small groups and eventually large groups. so really, you know, sort of a health policy dream come true. i almost called up alan and say hey, managed's competition's working just the way -- competing health systems being driven by sort of the fine contribution consumer-level shopping. and it all sort of fell apart. aetna pulled out nationwide for corporate reasons we've read about. united pulled out nationwide first. and then aetna pulled out nationwide. of course there's controversy about aetna's reasoning. many people feeling that it had to do with the merger review by the department of justice. but in any event, i heard about why aetna didn't remain in some markets including north carolina. but as mike said, they still are on the sidelines, suggesting this potential of re-entry. and some of these networks that had been formed still exist in the group market, and so you kind of have this positive spillover -- kind of use negative words to convey positive ideas like spillover sounds bad but it's actually good. when something happens in one market and it spills over to the other you see that happening with some of these networks. the other thing that happened was that blue cross responded to these new network structures by creating its own limited networks. it created two forms of limited networks. one was straightforward price discounting. and the other was more in this aco type of model partnering with designated health centers. that said, all this vibrant competition was happening primarily in the urban areas. as mike said, you don't see this happening in the rural areas where there's only one system or one group of specialists to deal with. even in the urban areas it wasn't consistently true. it was more so true in the raleigh area and secondarily charlotte, less so in some of the other areas. so those things all resonate with what mike said. as farz as distinctive points one of the things about competition in north carolina is principally aside from the blues the carriers were national carriers. we don't have local regional carriers. these health systems haven't yet formed insurance companies. but that might change -- so when zoigss were made nationally they impacted our state market across the board. prior to that you saw these national markets expanding their reach. they weren't contracting. united started with about half the states -- half the counties and expanded to three quarters. coventry started with about a quarter and was expanding to about a third. the national entities pulled them both out. there weren't any regional entities to fill that void. many people i spoke to said that's inevitable, this condition of blue cross being the sole carrier won't last as long as the market stabilizes, as long as there's a potential to remain profitable. the big open $64 million question, were the two years of steep price increases sufficient to stabilize the market? we'll find out soon enough i think. well, maybe not soon enough but we'll find out soon. if that's the case, most people felt there would be new entry into the market. aetna's still poised to re-enter -- importantly, medicaid hasn't expanded but traditional ned cade in our state has not been managed care but we've recently embraced medicaid managed care. we have a waiver proposal in with cms right now to implement statewide medicaid managed care. there's a lot of activity right nowing new carrier entries or national carry leisure looking at our state. the thought is there's a good chance they'll also enter into the exchange market given the things we've seen elsewhere with that ability. it's an interesting thing where at the moment there's little or no competition among carriers but everybody seems to my there's this potential competition, that it's poised -- in fact cigna did enter the raleigh market, just a single rating area. no one said this market isn't viable, that there are regulatory barriers that keep people from doing business. the rate increases proposed were generally approved. it does appear to be mainly just a process of the actuaries catching up with utilization. the points that mike maid about not knowing what the population was at first and then the next year having to put in your rates before you really had good data. and think the third year burr risk corridor payments were frozen by marco rubio and the fourth year your reinsurance has phased out. every year there's something to catch up with. so you know, the points you already know. there's reason to believe it's found equilibrium but there's also reason to be concerned that it hasn't. i heard both stories but i think the idea is that prior to the trump election carriers were at least continuing to watch this market carefully and remained sort of flexible in terms of re-entry or new entry. and meanwhile, what had developed with the network, the provider networks was really i think most encouraging. >> okay. thank you very much. mike. >> i suppose the best sort of single line about texas that really plays off of mark's comment is and then it all fell apart. texas is an oppositional state. it didn't expand its medicaid program. it uses a federally facilitated exchange. it enacted legislation requiring additional training for navigators before they could go into the field. and indeed, there are only a handful of formal navigators tlutd the state. but i wanted to make one point before going into the collapse. and that is that the nature of those individual markets truly are sometimes very unique. one of the features with texas is we have a number of border counties. and there the challenge is i'm an insurer and i'm selling a bronze or maybe silver product with a large deductible and access to u.s. providers and the majority hispanic population in mccallum, for example, many can cross the border where there is a vibrant health care market, where they get a favorable rate, and where prices are lower. and it's really difficult with that sort of opportunity for alternative sources of care to make an exchange product of the sort we've talked about today really work. and i just want to throw that as an example of the sometimes very different markets that insurers are trying to function in. then the talk about the nature of the collapse in texas. alice keeps saying to me, you're too negative. you're too negative. i was very enthusiastic about what was happening in texas over the first two years. in the first year as i indicated more globally there was some reluctance on the part of insurers to enter into the market. blue cross blue shield is the dominant carrier, present in all 254 counties. but after that first year we saw substantial entry into markets. we saw expansion by those who were already there. we saw carriers lower their prices relative to the blue cross blue shield prices and to appear to be competing pretty significantly. at least in some markets. certainly, for example, in houston and austin where we saw eight to nine carriers competing by the second and third year. but then the data became available. and when the data became available as mark indicated, big indications that there were losses. and it was those losses together with the perceived inadequacy of risk adjustment mechanisms that led to withdrawals. so houston, depending on how you count, third or fourth largest city in the country, had eight insurers. they now have three. blue cross blue shield and two medicaid managed care plans. the other thing that went on is the shift from a variety of ppo offerings. blue cross, blue shield offering ppos in all of its markets along with hmos. very quickly, it decided to withdraw from the ppo offerings, as did all of the other carriers. you cannot buy a ppo product on the exchanges in texas. hmos are the only ones there. there is certainly a view of significant adverse selection and that it was the sicker folks who enrolled and as a consequence that undermined the principles that the carrier had set up with with a high degree of uncertainty. and i would say given the michigan experience where there's -- you know, there's not a sense of a death spiral, there is a sense of a death spiral in texas. had the election not occurred and additional complications layered on top, there was from my sort of back of the envelope calculations sort of a 50-50 sense among the people we talked to that blue cross blue shield with still be in the market next year. and blue cross raised its premiums rather substantially. 40% to 50-plus percent. in the first year they appear not to have known what the utilize ooigs experience was. they announced they had lost $440,000. they moved from ppos to hmos. which is a classic response an insurer would make to deal with those kind of problems. and they lost $770,000 in the individual market. so clearly there's concern. they have responded with rather large premium increases. and as we've said, it's an open question whether or not those are going to be adequate to deal with with the utilization experience they've seen. the medicare managed care plans truly are a surprise, and i think a surprise even amongst themselves. as one of them said, we have succeeded beyond our wildest dreams in terms of the sorts of enrollment that they were able to garner. and they said we basically didn't know how to price particularly. we followed blue cross. may have been a mistake. but their premiums have remained low. they actually rose up in the middle years and have come back down. molina as others have indicated have lowered their prices every year, at least in some of the markets in texas. so there are bright spots and there are those carriers potentially waiting in the wings to re-enter. but texas is a market that i had great hopes for early on because i saw lots of entry and i saw price competition and all the sorts of things that an economist would say this is all moving the way you would hope it to move. and i guess better data quashed that. so what can i say, alice? that's the best i could do. >> okay. well, very good. even though it's not the case that it works -- the system seems to be working in all these situations, it does seem that are from what you have been saying the aca model seems to work best in urban areas with non-concentrated provider communiti communities. now, i wonder -- and not that it works in all urban areas with non-concentrated provider communities. but i wonder, what can be done to make this model work better in the other communities? it's the rural communities or maybe the smaller city communities that might have more concentrated providers, relatively small number of hospitals or increasingly since the industry seems to be consolidating anyway a lot of our cities, even pretty sizable cities are going to have a fair amount of concentration. i wonder, is it something could be done within the aca itself, or should we be doing something about really building up our provider infrastructure with a separate set of policies? so what? what do you think? anybody. >> i actually think it was very clear. i think frankly all of the issues that we've experienced any think all of our states were fixable issues. now, that is not what is happening right now. and in fact, as i said, there's a lot of chaos in the market. but this was very clear on what we could have done if we had the political will to do it, and that was the public option. you cannot overcome, and i can't remember which of you said -- it was you. you said when you have unlimited number of providers in the community the health plans don't have market leverage to negotiate lower rates, right? >> yeah. >> you need to give them market leverage. so look what's happened with medicare advantage. medicare advantage has worked very well in many of those communiti communities. and it's because they have the leverage of the medicare rates. clearly that would have been a way to fix it. i think we're not going anywhere near that at this point. >> mark, did you have -- >> same thing. we planned all this much earlier in the year and did most of the interviews in the late summer to early fall. prior to the election. and at that time we thought there would be discussions of the public option. so we actually asked people. in north carolina, the eastern part of the state, which is thinly populated and where there's the least provider competition more often than i expected in a fairly conservative state is well, i suppose there's nothing left other than the public option. who knows exactly what that would mean? do you just buy into the state health plan or for the state employees? a bunch left up in the air. but there was more openness to thinking about some version of a public option than i expected to hear. we didn't pursue that in great depth, but suffice it to say it doesn't even mention in the final report because it seems so off the relevant policy field. that's one answer, is that if this model of managed competition which is what i really think we're talking about isn't viable thanh then that's the logical alternative. >> yeah. i don't know. swing to the other side maybe in my perception of political preferences. public option is giving up on this system and blowing it up. right? if we allow one of the, quote unquote, competitors in the marketplace to have a completely different essentially set of rules and to leverage the combined purchasing power of the state and all the mechanisms of the state, it's not a competitor at all. and it's not setting up a fair system of competition. and it doesn't address your question. you look around the world, they've got a single payer system, you couldn't find more market leverage, yet they've seen substantial trends, upward trends in their health care premiums and utilization and so on and so forth. the issue is still competition, right? not of provider -- not of plans but of providers. so this is a really important issue. whether or not we move to a single payer system or do the very interesting ideas from the folks on the right side -- we have to figure out what do you do in non-competitive marketplaces. you could actually be serious about antitrust in urban areas but antitrust doesn't work that well when there's one hospital. i don't know if you can like put a tape down the middle of it and be like you guys are over here. but it's really important. telehealth may be one way to get? traction on those issues and there are others. but these are like the real issues. not the imaginary ideological policy issues but like the real issues that are going to matter if we want to be successful with any system that we choose. >> let me pick up on that because i agree with you. if the issue is the lack of competition amongst providers, one of the things we've seen is over the last couple of of decades is really the willingness to allow providers to consolidate. let's revisit the antitrust issues, consolidators and see to what extent we may unscramble the egg. in some markets we may be able to do that. in rural areas probably not. but there are middle size urban areas that have consolidated into single networks that presumably could be at least revisited. because the issue is competition. it's not the other stuff. >> let me say one other word since i spent 25 years of my career at a health plan doing all this negotiating et cetera. the other way to think about this problem is back to actually a point you raised about the spes fisty of the rating areas, right? so when i was at blue cross and blue shield and we looked at the market as a statewide market rather than an individual regional market the rural areas were not as big a problem because we were essentially letting them be cross-subsidized by the other regions. they have a relatively small impact on a health care plan's profit marge nin total. we could afford to pay higher rates to the providers and still keep premiums lower if we looked at it from a statewide basis. the way the aca is set up now each market stands on its own. so another way to look at this problem is to think about rating areas' structure and statewide plans where there can be some cross-subsidization. >> and you don't want to get bogged down in this one. i was in the discussions when we came up with our 16 rating areas and we talked about do we have 100 counties, do we have whatever, four, do we have whatever. and a lot of the balance was explicitly about this cross-subsidization. and the counterpoint is too much cross-subsidization you don't really reward the plans that do negotiate the discounts with the more centralized health systems. so there are tradeoffs. but that would be the other approach, yeah. >> i mentioned that in the beginning of my discussion of florida, that 67 rating areas may just be too many. in fact, one that i chose is the poorest county in florida, gadsdon, but it borders tallahassee. and leon county, which is where the legislature is. it's where capital health plan has great networks of providers and in fact people in gadsdon that need services can drive 25 miles to all the best hospitals and providers in the state. but the network that's there offers them one hospital over in that side of the county and the consideration here of merging those counties in some way and the fact that that's not on the -- it's not being considered the -- it's not being considered just yet surprises me. captions copyright national cable satellite corp. 2008 captioning performed by vitac

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