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To: Members of the Health Care Availability and Accessibility Committee

From: Brian Imus, Illinois PIRG state Director

Re: Illinois Implementation of the Affordable Care Act

Date: May 28, 2013

Thank you for the opportunity to testify. My name is Brian Imus, and I’m the Director of the Illinois Public Interest Research Group. Illinois PIRG is a non-profit consumer advocacy and research organization primarily funded through dues paying citizen members from across the state. As a public interest organization concerned with defending the rights of Illinois consumers our focus is on addressing changes to the private insurance marketplace to increase competition.

Consumers across the state know that the health insurance marketplace is broken. Insurers don’t compete for their business, instead offering take-it or-leave-it deals. Important information about coverage is buried in the fine print, making it hard to know what’s really covered. Instead of working to lower costs and improve quality, too many insurers focus on covering healthy enrollees and dumping the sick. And costs are continuing their unsustainable rise.

I appreciate the opportunity to speak to the role of the state in implementing the Affordable Care Act (ACA) in Illinois. I’d like to highlight the ways in which consumers are already benefiting from key consumer protections set forth in the federal law and highlight the role state lawmakers have in building on the federal law so that it truly delivers on the promise of better health care outcomes and better value.  

Some highlights of the law and ways in which Illinois families are already benefiting include: 

New Coverage Options for Young Adults. The ACA allows young people to stay on their parents’ coverage until they turn 26; previously, many insurers would drop young people when they reached a birthday or graduated, even if their families had paid into the system month after month.  102,000 young adults in Illinois (2.5 million nationally) gained health insurance through their parents’ plan in 2011; without this provision, they would either go uninsured or have to seek more expensive coverage on their own.[1]

Guarantees that Premiums go to Care. New rules in the ACA require health insurers to spend at least 80% of the premiums they collect on providing health care services, rather than on administrative costs and profits. Over 2009-2011, 3,349,000 Illinoisans benefitted from this guarantee of higher-value coverage. [2] Further, if insurers fail to meet the 80% target, they must rebate that money to their customers. An analysis by the National Association of Insurance Commissioners shows that had the ACA been in effect in 2010, consumers across the country would have received over $1.9 billion in rebates.

No Cost-Sharing for Preventive Care. Thanks to health care reform, Private insurers covering over 2,390,000 Illinoisans added coverage of high-value preventive services without deductibles or copays, which can discourage consumers from obtaining this much-needed care. Preventable causes of death, including tobacco smoking, diseases against which vaccines exist, cancers which are treatable if caught early, are responsible for 900,000 deaths annually — nearly 40% of total yearly mortality in the U.S. Preventive measures such as counseling adults to quit smoking, screening for colorectal cancer, and providing influenza vaccination reduce mortality either at low cost or at a cost savings. Without the ACA, many consumers could forgo such treatments due to their cost.[3]

Ending Lifetime Limits on Benefits. In the past, insurers put lifetime limits on the coverage they provided, meaning that consumers who got very sick could find themselves on the hook for unlimited financial liability, despite having faithfully paid their premiums every month. The Affordable Care Act puts an end to this practice, meaning that the 4,670,000 Illinoisans whose pre-ACA health insurance had lifetime limits no longer have to worry that if they have extraordinarily high medical expenses, their insurance company will refuse to pay for their care.[4] 

Eliminating Retroactive Cancellation of Coverage. The ACA prohibits a health insurance company from retroactively cancelling a sick person’s coverage due to an unintentional mistake in their paperwork. Without the ACA, the 604,800 Illinoisans with individual coverage would be vulnerable to having their insurance cancelled if they made a minor error in their insurance forms.[5]

Assistance for Small Businesses. Small businesses currently face an inhospitable health care marketplace, where they pay 18% more than large businesses for the same coverage because they lack negotiating power and economies of scale.[6] After 2014, the ACA will allow small businesses to pool their bargaining power in new health care marketplaces called exchanges, lowering their rates. In the short term, to help small businesses afford coverage, the ACA creates health care tax credits for businesses with fewer than 25 workers. A study performed by Families USA and Small Business Majority found that over 159,900 small businesses in Illinois were eligible to receive a tax credit to provide health insurance for their employees in 2010 which accounts for over 78% of all small businesses in Illinois. Repealing the ACA would do away with this tax credit and the exchanges, making it more difficult if not impossible for those small businesses to provide health insurance to their employees.[7] 

There is much more that must be done to build upon these successes of the ACA. In particular state lawmakers have considerable leeway in developing a state-based health insurance exchange and strengthening review of health insurance premium rates.  

To establish an exchange in Illinois by the deadline of January 2014, a state-federal partnership will operate the exchange. However, state lawmakers should consider establishing a state-based exchange with policy that improves upon the partnership model. There are critical aspects of the exchange operation for state lawmakers to consider in doing so, including who is eligible to buy coverage through it, how aggressively it will set standards and negotiate with insurers, and who will run it. Some of these choices will allow the state to improve on the law, but others could undermine the exchange’s ability to deliver better choices and lower costs. 

Two important ways state lawmakers can ensure better value and improved health coverage for Illinois families is to ensure the exchange have the authority to negotiate on behalf of its enrollees and prevent conflicts of interest from those running the exchange operations.

Improving independent review of health insurance rates set by insurance companies is another important policy for state lawmakers to consider. Consumers have little bargaining power and less ability to understand whether the sophisticated actuarial models insurers use are reasonable. A strong rate review process can help the insurance market work better by giving consumers confidence that the products they buy provide a fair value. 

The track records of states that have adopted strong rate review processes show that they meet a real need and can deliver results for consumers:

·         Iowa regulators found that a third of filed rate proposals were unreasonable and lowered them, saving consumers an average of 40 percent off their premiums in these cases.

·         In New Hampshire, rate review brought an insurer’s proposed doubling of rates down to a 12.5 percent increase.

·         Oregon consumers saved $25 million in the first year after the state strengthened its rate review process in 2009, requiring greater transparency and consumer participation.

·         Although California lacks prior approval authority, consumers saved over $20 million after a new law increased transparency and required review of premium increases. 

Illinois does review rates, but lacks authority to deny unreasonable rates. That can be remedied by lawmakers here.

Thank you for your time.  

 

[1] “2.5 Million Young Adults Gain Health Insurance Due to the Affordable Care Act,” Office of the Assistant Secretary for Planning and Evaluation, December 2011, at http://aspe.hhs.gov/health/reports/2011/YoungAdultsACA/ib.shtml.

[2] “Health Reform: Results in Your State,” March 5, 2012, at http://www.whitehouse.gov/sites/default/files/methodology_for_sbs_spreadsheet_3-4-12_clean.pdf.

[3] “Fifty-Four Million Additional Americans Are Receiving Preventive Services Coverage Without Cost-Sharing Under the Affordable Care Act,” U.S. Department of Health and Human Services, February 2012, at http://aspe.hhs.gov/health/reports/2012/PreventiveServices/ib.shtml;  Cohen, J., Neumann, P., Weinstein, M., “Does Preventive Care Save Money?” NEnglJMed 2008: 358:661-663; Feb. 14, 2008.

[4] “ASPE Issue Brief,” U.S. Department of Health and Human Services, March 5, 2012, at http://aspe.hhs.gov/health/reports/2012/LifetimeLimits/ib.pdf.

[5] “One Year Later: What Would Have Happened if Congress Repealed the Affordable Care Act?”, at http://www.whitehouse.gov/sites/default/files/repeal_anniversary_fact_sheet.pdf.

[6] “The Economic Impact of Healthcare Reform on Small Business,” Small Business Majority, June 11,

2009, at http://www.smallbusinessmajority.org/_pdf/SBMeconomic_impact_061009.pdf.

[7] “A Helping Hand for Small Businesses,” Families USA, July 2010, at http://www.smallbusinessmajority.org/_pdf/tax_credit/Helping_Small_Businesses.pdf.

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