Improving and Strengthening
Employer-Sponsored Insurance

 

BIPARTISAN POLICY CENTER

October 2022
 

STAFF Sabah Bhatnagar Brady Newell

Senior Policy Analyst Senior Project Manager

G. William Hoagland Marilyn Serafini

Senior Vice President Executive Director, Health Program
Oliver Kim Kendall Strong

Director, Health Policy Senior Policy Analyst

 

CONSULTANT Sabrina Corlette

Research Professor, Founder, and Co-Director of the Center on Health Insurance Reforms
Georgetown University McCourt School of Public Policy

 

HEALTH PROGRAM

Under the leadership of former Senate Majority Leaders Tom Daschle and Bill Frist, M.D., BPC's Health Program develops
bipartisan policy recommendations that will improve health care quality, lower costs, and enhance coverage and delivery. The
project focuses on coverage and access to care, delivery system reform, cost containment, chronic and long-term care, rural
health, behavioral health, and digital health.

ACKNOWLEDGMENTS

BPC would like to thank the Robert Wood Johnson Foundation for its generous support. BPC would also like to thank the policy
experts from the federal government, numerous state governments, national organizations, payers, employers, advocates, and
academics who provided insight into the complex challenges facing the U.S. health care insurance system. BPC also thanks Sheila
Burke, Jim Capretta, and Chris Jennings for advising BPC's Health Program.

DISCLAIMER

The findings and recommendations expressed herein do not necessarily represent the views or opinions of BPC's founders,
its funders, or its board of directors.
 

Table of Contents

 

GLOSSARY OF ACRONYMS

 

 

 

 

 

2 EXECUTIVE SUMMARY

7 INTRODUCTION

13 RECOMMENDATIONS

13 Section |: Increase Transparency in the Health
Care System

20 Section II: Empower Employers with Payment and
Pricing Tools

29 Section Ill: Address Market Power Dynamics

41 Section IV: Provide Other Options for Health
Insurance Affordability

47 CONCLUSION

48 ENDNOTES
Glossary of Acronyms

a
ACA Patient Protection and Affordable Care Act

APCD All-payer claims database

CMMI Center for Medicare & Medicaid Innovation

CMS Centers for Medicare and Medicaid Services

DOJ U.S. Department of Justice

EBSA Employee Benefits Security Administration
ERISA Employee Retirement Income Security Act of 1974
ESI Employer-sponsored insurance

FDA U.S. Food and Drug Administration

FTC Federal Trade Commission

HDHP High-deductible health plan

HHI Herfindahl-Hirschman Index

HHS U.S. Department of Health and Human Services
HMO Health Maintenance Organization

HPN High performance network

HSA Health Savings Account

ICHRA Individual Coverage Health Reimbursement Arrangement
MA Medicare Advantage

NSA No Surprises Act

PBM Pharmacy Benefit Manager

PPO Preferred Provider Organization

SEHP State Employee Health Plan

TPA Third-party administrator
Executive Summary

Some 58.1% of non-elderly Americans (158 million people) receive health care
benefits through their employers as of 2019, making employer-sponsored
insurance (ESI) the nation's largest source of health coverage. ESI is the
foundation for the nation's public-private health system, but rising health care
costs continue to put pressure on employers seeking to offer the same level

of benefits and to boost wages. Similarly, employees are seeing their health
insurance premiums rise in the face of stagnant real wages. Even the largest
private employers lack the resources or market power to prompt and sustain the
systemwide changes needed to improve the value they receive for their health
care spending. They must contend with U.S. health care costs that have been
rising for decades, outstripping inflation, wage growth, and overall economic
growth and, in turn, squeezing incomes. Despite ESI being the dominant source
of coverage, in-depth policy discussion on how to improve the employer system
is lacking. With the policy conversation focusing on Medicare, Medicaid, and
the individual market, decision-makers are left wanting for ESI-dedicated
proposals and analysis. Consequently, both employers and employees need
solutions to improve ESI so it can remain in place for the foreseeable future.

Today, employers offer a spectrum of ESI plans: Some are generous, while others
do not meet employee needs. Lower-income workers are less likely to get their
health coverage through ESI, which raises equity concerns. Lower-income
employees who receive health coverage via ESI are also more likely than their
higher-income counterparts to skimp on medical care and prescriptions, have
problems paying their medical bills, and visit an emergency room.

Nonetheless, ESI is a popular benefit with employees. Employers offer

health care benefits to recruit and retain employees, and they see the value

of maintaining those benefits, especially in the face of talent shortages and
resignations. In June 2022 alone, 4.2 million people quit their jobs as part

of the "Great Resignation" and, as of that month, nearly 11 million positions
remained unfilled. Employees were two times likelier to switch careers and less
likely to recommend their employer if they did not get the health coverage they
needed. As a result, employers must balance the need to offer generous benefit
packages to attract and retain skilled employees with the high and rising costs
of providing health care benefits.

Total health spending has grown from 6.9% of the economy in 1970 to nearly
20% in 2020. In inflation-adjusted terms, per capita health spending rose from
$1,875 to $12,531 over that same period. As a result, from 2009 to 2019, the
growth in deductibles (162%) and premiums (54%) has far outpaced inflation
(26%) and wage growth (20%). Nearly 30% of employees now face deductibles of
at least $2,000, which is prompting some employees to postpone or forgo the
health care they need.
What is driving health care cost increases? Multiple studies have shown that
unit prices, or the prices for individual services and products, are the largest
contributor to health care cost growth. Health care prices rose 16% from 2012 to
2016-"four times as fast as inflation. Hospital spending represented the lion's
share of U.S. health spending (31% in 2020), and hospital prices are a critical
driver of spending growth-trising 42% between 2007 and 2014. Numerous
studies have found that hospital consolidation-which enables hospitals

with more market power to charge more-to be a key driver of higher prices.
Pharmaceutical prices are also a significant contributor to the growth in health
care spending. On a per capita basis, Americans spent more than $1,100 on
prescription drugs in 2019. In 2018, retail prices for widely used brand name
pharmaceuticals increased by 5.8%-more than double the rate of inflation
over the same period.

As aresult, the Biden administration and Congress must take steps to help
constrain health care cost increases and give employers the payment and
pricing tools they need to strengthen ESI. With such tools, employers and other
stakeholders can create a high value ESI system that improves health outcomes
and constrains costs.

Policymakers have made no major changes to the health care system, including
ESI, since the Affordable Care Act of 2010. Costs, however, continue to rise,
increasing the financial burdens on employers and employees alike, Although
policymakers on both the left and right promote policies that would ultimately
end the nation's reliance on ESI as a primary source of insurance coverage, such
shifts would likely result in considerable disruption and currently do not have
widespread political support. For policymakers across the political spectrum,
strategies intended to strengthen ESI may thus be considered a reasonable way
to address cost challenges.

Policymakers and other stakeholders should take steps in four areas. First,
they should increase transparency in the health care system. Information
about prices for products and services is readily available in most markets,

but health care is a notable exception. A Congressional Budget Office (CBO)
report on policy approaches to reduce what commercial insurers pay for
hospital and physician services found that employers lack expertise needed

to navigate a complex medical system and often outsource network design,
price negotiation, and claims processing to consultants and other third parties.
A lack of information about prices can also drive this outsourcing, thereby
making employers somewhat price insensitive.' More transparency could make
employers better-informed purchasers. It also could lower prices, shape policy
decisions, and make the delivery of health care more efficient. However, efforts
to increase transparency for consumers have not done much to lower health
care costs, nor have they generally incentivized consumers to compare prices
and shop for better health care. Additionally, price transparency efforts do not
require reporting on quality of care-an important factor when comparing
health care providers and services. As such, greater transparency that includes
both price and quality information will have its largest impact if policymakers,
regulators, and health plans use it to enact policies to combat cost growth.

Second, policymakers and other stakeholders should empower employers to
help lower costs by giving them payment and pricing tools that would help
create a higher value ESI system that prioritizes employee health outcomes.

To constrain prices and improve quality, policymakers should, through
legislation and regulation, enable employers to design better provider networks.

Third, policymakers and other stakeholders should address problems in the
private health care market. Negotiations between providers and payers shape
market prices. Prices are also shaped by geography, the demand for services,
the market power of providers and payers, and other factors. Employers often
do not possess enough market power to negotiate lower prices due to the
consolidation of health care providers. Provider consolidation continues to
accelerate, with nearly 67% of hospital markets now considered highly or very
highly concentrated. Consolidation often drives health care price increases,
according to a large body of evidence. BPC has proposed policies to equalize
market power dynamics to foster a more competitive employer-sponsored
health insurance system.

Finally, policymakers should consider other legislative and regulatory steps to
make health insurance more affordable. While more than 70% of workers, on
average, accept employer-sponsored health care when it is offered, the figure is
only 63% among firms that employ larger shares of lower-wage workers, such
as part-time and temporary workers. Employees at firms with more low-wage
workers pay higher premiums as a share of their incomes than employees at
firms with fewer low-wage workers. These figures suggest that ESI remains less
affordable, and as a result perhaps less desirable, for lower-wage employees. The
administration could consider providing guidance on and make improvements
to alternatives to traditional group health plans that allow employers to offer
more affordable coverage to their employees.

BPC'S RECOMMENDATIONS

 

Section I: Increase Transparency in the Health
Care System

¢ Congress should establish a federal all-payer claims database (APCD) to
promote a comprehensive understanding of the health care payment and
delivery system and the underlying drivers of cost growth.

¢ Congress should require the U.S. Department of Health and Human
Services' (HHS) secretary to establish a centralized data repository to host
payer and provider pricing data and penalize entities that refuse to comply
with existing transparency laws.
Congress should consider creating a federal, publicly available database or
clearinghouse to track health care ownership and require private equity
firms to report health care provider purchases where concentration is high.

Section II: Empower Employers with Payment and
Pricing Tools

The U.S. Department of Labor should leverage existing authorities to boost
accountability for third-party administrators (TPAs) and other vendors, and
issue guidance on what qualifies as a fiduciary function.

The U.S. Departments of Labor, Treasury, and Health and Human Services
should issue guidance to clarify the so-called gag clause ban and that plan
data are a plan asset.

Congress should require HHS to nationally designate Centers of Excellence.

Congress should urge the administration to fulfill implementation of the No
Surprises Act by urging the Advisory Committee on Ground Ambulance and
Patient Billing to finalize committee membership and host its first meeting.

Congress could consider options for encouraging ESI use of high
performance network (HPN) health plans to motivate employers to offer and
employees to choose high performance health coverage options.

Section Ill: Address Market Power Dynamics

Congress should prohibit anti-competitive contract language (such as
anti-tiering, anti-steering, and all-or-nothing clauses) in insurer contracts
with providers.

The Department of Labor and the Center for Medicare & Medicaid
Innovation Center (CMMI) should develop a standard model provider-payer
contract to pilot at the state level, Medicare Advantage plans, and ACA
qualified health plans.

Congress should strengthen federal enforcement agencies' ability to
identify and review potentially problematic transactions in the health care
industry to avoid high concentration in markets and potentially reduce
health care prices.

To lower hospital prices in noncompetitive markets, Congress should permit
hospitals in markets with a Herfindahl-Hirschman Index (HHI) score above
4,000 to enter into negotiations with the Federal Trade Commission (FTC) to
bring the HHI score under 4,000, unless market consolidation was the result
of a regulatory exception to the U.S. Department of Justice (DOJ) guidelines
related to hospital mergers. Hospitals that do not enter negotiations with

the FTC would be prohibited from charging private insurers more than the
maximum rate paid by a private insurer to a hospital for a service based on
the average Medicare Advantage (MA) rate for that service in the market.
Alternatively, they would be prohibited from charging more than the average
private insurance rate in a competitive market, whichever is lower.
The Departments of Labor and HHS should issue guidance to encourage ESI
plans to use reference-based pricing models.

CMMI should design a multi-payer coalition demonstration with
employers and public-sector payers to develop high performance networks
and provide grant funding to state employee plans or agencies to
coordinate coalitions.

Congress should prohibit settlements between biologic and biosimilar
manufacturers that postpone the market entry of lower cost biosimilars.

The U.S. Food and Drug Administration (FDA) should issue guidance
to promote regulatory clarity in the biosimilar marketplace, including
establishing clearer standards for interchangeability of biologic products.

Section IV: Provide Other Options for Health
Insurance Affordability

To increase health care affordability and expand health care coverage
options, Congress should adjust the ESI affordability firewall to align
with the ACA marketplaces' percentage cap for contributions to health
insurance premiums.

To allow employers to utilize alternatives to traditional group health
insurance, the Departments of Labor, HHS, and Treasury could provide
guidance on and make improvements to alternatives to traditional group
health insurance programs like Individual Coverage Health Reimbursement
Atrangement (ICHRA) and State Employee Health Plan (SEHP) buy-ins.
Introduction

Employers play a vital role in funding and supporting the U.S. health care
system. As of 2019, 58.1% of non-elderly Americans-158 million in total-
received health care benefits through their employers, making it the United
States' largest source of health coverage today."* These employers include small,
medium, and large companies, although larger ones are more likely to offer
health benefits: About half of small firms offer ESI, while nearly all companies
with 1,000 workers or more do so.* Intended to serve as a recruitment and
retention tool, ESI has been a popular employee benefit.° Nonetheless, ESI is
quickly becoming financially untenable for both employers and employees, due
to rising health care costs. These increases make it difficult for employers to
maintain benefits, constraining real wages and increasing financial barriers to
critical health care services for employees and their families.

To make matters worse, the reverberating impact of the COVID-19 pandemic
is placing added financial pressures on the health care delivery system.' Staff
shortages, as well as an over-burdened and in some cases shrinking workforce,
are contributing to systemwide stress and labor cost increases that are being
passed onto payers and, ultimately, to employer-sponsored plans.'

Family premiums for ESI have increased 54% and deductibles 162% since 2009.
This rise is outpacing both inflation and wage growth, which have increased
26% and 20%, respectively, over the same time frame.' A recent analysis from
Aon estimated that ESI premiums could grow 6.5% in 2023.° Nearly 30% of
employees now face deductibles of $2,000 or more-almost four times the
percentage of employees who faced such deductibles in 2009.

Despite significant bipartisan concern and the long-standing nature of these
issues, stakeholders and policymakers have not made meaningful progress on
slowing the growth. Even as of the early 1990s, personal health care spending
was growing at twice the rate of disposable income, and excess medical pricing
was a problem."

Congress has made few legislative changes to health care-and ESI,
specifically-as sweeping as the now 12-year-old ACA. Although the private
sector has deployed innovative models, policy solutions are necessary to correct
for market dynamics that are outside the control of employers and other payers.
Individual employers-even larger ones with geographically dispersed staff-
have very little leverage to influence provider or insurer behavior." As such,
federal strategies to address health system cost drivers and offer employers
payment and pricing tools are critical to improving and strengthening the

 

i 54% of all Americans have employment-based insurance, according to the

U.S, Census Bureau.
nation's ESI system. With these tools at their disposal, employers and other
stakeholders have the potential to create a higher value ESI system that
improves outcomes and constrains health care cost growth.

ABrief History of ESI

ESI's beginnings can be traced to the late 1920s, but the growth of private
health insurance tied to employment did not take off until the 1940s and
1950s. This growth happened as a result of World War II, when businesses were
unable to offer competitive wages and turned to benefits to attract workers.3"
Congress further spurred the evolution of ESI in 1954 when it made employer
contributions to health insurance permanently tax free. Employer-sponsored
insurance coverage was nearly universal by the mid-1960s."

Today, employers offer health coverage primarily in three ways-self-funded,
level-funded, and fully insured plans. Under self-funded health plans, which
are governed by the federal Employee Retirement Income Security Act of 1974
(ERISA), employers assume the risk for the cost of health care coverage; 64% of
workers utilize these plans.'° These employers often hire insurers as third-party
administrators (TPAs) to manage and administer benefits. The rest of employers
offer coverage either through level-funded or fully insured plans, where
employers purchase coverage from a state-regulated insurance company that
assumes partial or all risk, respectively, on behalf of employees.

The type of benefits that employers offer has evolved in recent years, often
driven by efforts to reduce costs. Early on, most employer coverage took the
form of indemnity insurance, where the employee was responsible for a
percentage of service costs. But as the cost of health care continually increased,
employers turned to managed care, adopting health plans such as health
maintenance organizations and preferred provider organizations, which limited
provider networks.

Managed care plans, where insurers contract with health care providers to
provide care for their members, emerged in the 1970s and 1980s. Although

a growing number of employers started to offer health maintenance
organizations (HMOs) in the 1970s, 1980s, and 1990s, they remained less
popular than preferred provider organizations (PPOs) because they offered
little opportunity for employees to use providers out of the prescribed network.
PPOs, to the contrary, offer a fairly unfettered choice of providers, and enrollees'
cost-sharing for in-network provider services was lower than for out-of-network
services. Indeed, employers pulled back from more restrictive health plans after
a backlash from workers, who wanted more flexibility in choice of providers.

In the 2000s, more and more employers began turning to high deductible
health plans (HDHPs) under the belief that participants would be more
cost-conscious due to higher deductibles." Specifically, these plans have
lower monthly premium payments but place a higher burden of payment
on consumers who use services before insurance kicks in."* Worryingly,

while HDHPs lower the cost of care for employers, evidence has shown

that consumers are more likely to simply delay or forgo needed care-
especially preventive care-and that this is not a consequence of price-
conscientiousness.!*° In 2021, self-pay after insurance accounts were the
leading source of bad debt for hospitals, likely due to high HDHPs-ultimately
driven by high provider prices." One analysis found that 12% of privately
insured adults with high deductibles carried medical debt, compared with 15%
of uninsured individuals and 9% of Medicare beneficiaries."

HDHPs arte often accompanied by Health Savings Accounts (HSAs), which
allow employees to pay for pre-deductible health care services and other
cost-sharing charges, tax free. Some, but not all, employers might contribute

to employees' HSAs as part of their health benefits package, and HSA usage
has increased alongside the growth in HDHPs."* Furthermore, the percentage
of workers enrolled in HDHPs has steadily risen-17% from 2011 to 2021-
and the plans are prevalent today, with 28% of covered workers enrolled in
them." This growth rate has flatlined in recent years: 25% of smaller firms
(less than 200 workers) offered HDHPs in 2020, compared with 20% in 2021.
Similarly, 66% of large firms (more than 1,000 workers) offered HDHPs in 2021,
compared with 67% in 2020." As of 2022, the IRS defines HDHPs as those
with a deductible of at least $1,400 for an individual and $2,800 for a family."'
However, average deductibles in HDHPs are often over those thresholds - above
$2,300 for individuals and above $4,500 for families."8

ESI Today

Employer-paid premiums are exempt from federal income and payroll taxes.
This tax exclusion, which is unlikely to be rescinded, is projected to cost the
federal government $316 billion in 2022 alone (approximately $2,000 per
person enrolled in ESI).2? Moreover, experts and economists argue that this tax
exclusion, like other employee benefits, is regressive because higher-income
workers accrue a disproportionate share of the benefits.*°

Cost drivers today are largely unchanged from what they were a few

decades ago, and hospital spending is the primary contributor: In 2020,
hospital services represented 31% of total U.S. health spending. Spending

on physicians/clinics and prescription drugs accounted for 20% and 8%,
tespectively.*' Although the growth in hospital spending has slowed in recent
decades, it continues to increase and has averaged a 4.6% increase annually
between 2010 and 2020.25 Hospital costs account for nearly half of plan
sponsor health care spending, while pharmacy benefits represent 23% of plan
sponsor spending (Figure 1).
Figure 1: Group Health Plan Expenditures
Hospital costs contributed 46% of plan sponsor health care spending in 2022.

YLyS @ Other

@ Inpatient ---
Hospital Charges
= 46%

@ Outpatient --!

23% 19%

© Professional
Services

 

@ Pharmacy

Source: 2022 Milliman Medical Index, May 2022

Source: National Alliance of Healthcare Purchaser Coalitions, Beyond Hospital
I Getting to a Fair Pri

Beyond that, between 2012 and 2016, health care prices overall grew 16%-
four times the rate of overall inflation.** Multiple studies have shown

that unit prices, or the prices for individual services and products, are the
largest contributor to health care cost growth.* Again, hospital prices are a
critical driver of this growth, rising 42% between 2007 and 2014. Hospital
consolidation remains a contributor to high prices, according to numerous
studies, including a Medicare Payment Advisory Commission's March 2020
report to Congress.3®°"

Pharmaceutical prices are the second-largest contributor to health care
spending growth. On a per capita basis, Americans spent more than $1,100 on
prescription drugs in 2019.** In 2018, retail prices for widely used brand-name
pharmaceuticals increased by 5.8%-more than double the inflation rate over
the same period.®® Pharmacy Benefit Managers (PBMs) contract with health
plans to administer pharmacy benefits and often develop prescription drug
formularies by acting as intermediaries between plans and pharmaceutical
manufacturers. PBMs receive rebates and discounts from pharmaceutical
companies in exchange for formulary placement. Multiple studies have found
that rebate payments lowered governmental costs and contributed to lower
copays for plan enrollees.*° However, there is evidence to the contrary-some
studies suggest that PBMs could be raising prices for consumers because
their revenue is based on a percentage of the drug's list price-potentially
incentivizing them to prioritize higher cost drugs.

The Inflation R ion Act of 2022 (P.L. 177-169), signed into law in August
2022, contains several provisions on drug prices in the Medicare program.

The law allows the federal government to negotiate drug prices for some
medications covered under Medicare, requires drug companies to pay rebates to

10
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Medicare if drug prices rise faster than inflation, and caps insulin cost sharing
for Medicare beneficiaries, among other changes. Although these changes apply
to the Medicare program, they could affect employer costs as well.

Today, employers across the nation offer a spectrum of ESI plans, some of
which are generous and others of which are costly yet still do not adequately
meet the needs of employees. Studies indicate that ESI remains popular among
employees." Employers continue to offer health care benefits as a recruitment
and retention tool and recognize the value in maintaining those benefits in the
wake of talent shortages and resignations.* According to the Bureau of Labor
Statistics, in June 2022, 4.2 million people quit their jobs and nearly 11 million
positions remain unfilled.*** According to one survey, employees were twice

as likely to switch careers and were less likely to recommend their employer

to friends if they had not received adequate health care coverage.** However,
despite its popularity, ESI can be inequitable. Lower-income workers are less
likely to benefit from ESI and generally face greater affordability concerns-
potentially leading to delays in needed care. Nearly 22% of health plan enrollees
with incomes below $50,000 reported that they had difficulty paying medical
bills (compared with 12% across all income levels).*"**

Employers must balance attracting new employees by offering generous
benefit packages while dealing with the high and rising costs associated with
providing health care. The challenge, then, is to find ways to improve ESI so
employers can offer more affordable, comprehensive coverage without shifting
more costs to their employees through higher deductibles.

Recent U.S. Supreme Court decisions might also have broad ramifications for
ESI benefits moving forward. After the Supreme Court overturned Roe v. Wade
with its Dobbs v. Jackson Women's Health Organization decision, some employers
began guaranteeing travel-related benefits to their employees, including
reimbursement for travel expenses associated with abortion services." Others
might move to limit or enhance pregnancy-related service coverage in response
to the ruling.

In another decision (Marietta Memorial Hospital Employee Health Benefit Plan

v. DaVita Inc.), the Supreme Court ruled that a group health plan in Ohio did
not violate federal law by limiting access to dialysis providers.°° Although the
ruling could enable payers to limit access to dialysis treatment, this type of
plan design is rare in the employer market.

Finally, the Supreme Court's ruling to restrict the Environmental Protection
Agency's ability to regulate carbon emissions (West Virginia v. Environmental
Protection Agency) could jeopardize federal regulations for other sectors,
including health. Health care organizations that fall under the purview of HHS
are questioning whether other regulations could be subject to judicial review.
Many of these organizations rely on federal payment predictability to make
financial plans-contributing to nervousness about the ruling's fallout for
health care.
Under this continually evolving framework, BPC aims to understand the
drivers of increasing costs and make recommendations for policy changes
to help employers and employees best address them using payment and
pricing tools.

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¥

Recommendations

SECTION I: INCREASE TRANSPARENCY
IN THE HEALTH CARE SYSTEM

Pricing and quality information for products and services is readily available in
most markets, but health care is a notable exception. Greater transparency in
the health care system has the potential to make employers better-informed
purchasers, to lower prices, to inform policy, and to produce more efficient
outcomes. Evidence, however, shows that transparency efforts on the consumer
front have not had a significant impact on costs and generally do not incentivize
consumers to compare prices and shop. Likewise, provider quality information
is lacking and should be strengthened. As such, transparency efforts will have
the largest impact if policymakers, regulators, and employers use them to enact
informed policies to combat cost growth and improve quality of care.

 

An APCD is a database of medical, pharmacy, and other health care claims from
both public and private payers. APCDs-which states originally developed and
continue to operate through independent agencies, commissions/committees or
nonprofit organizations, or within state departments of health or state Medicaid
agencies-document health care cost, usage, access, delivery, and performance over
time.®* A broad range of stakeholders-including many consumers, employers,
researchers, and policymakers-promote APCDs as a useful tool in controlling
health care costs because they increase transparency in health care spending.

Furthermore, APCDs are an increasingly valuable means for policymakers,
researchers, and decision-makers to measure the value of health care and

the variation in health care prices. Based on BPC's conversations with expert
stakeholders, states are utilizing APCDs to help set cost targets, as well as to
understand issues in and changes to access to and quality of care. Legislators
can also use APCDs to inform policymaking,**

However, APCDs vary widely by state in terms of the standard data elements,
availability to researchers, price, and comprehensiveness, Currently, 24 states
operate APCDs-some mandatory and some voluntary-and each with its own
data collection and submission protocols.*°* A handful of additional states
have APCDs in development.

Although federal policymakers can continue to promote the standardizing
of health care data collection for APCDs among states, there is also value in
leveraging the work being done by states and developing a federal all-payer
health care claims database in which participation is mandatory. Moreover,
states do not have the authority to require ERISA self-funded plans-
accounting for 64% of covered workers nationwide-to submit claims data,
due to the Supreme Court's 2015 decision on Gobeille v. Liberty Mutual. The
Department of Labor, on the other hand, already has the authority to require
the submission of such data for a federal APCD.*"

In fact, the creation of a federal APCD would provide actionable information
on national health care utilization and price data at a volume currently
unachievable on a state-by-state basis. It would allow for an integrated look at
data nationally and geographically. Congress should thus consider establishing
a federal APCD, and the Department of Labor should articulate that ERISA
self-funded plans would not be exempt from submitting data. Furthermore,
the public should have access to APCD data, with the secretaries of Health and
Human Services and Labor given discretion to set reasonable fees to support
the database's maintenance costs.

The federal government likely already has the authority to create a federal
APCD, but researchers have suggested that congressional direction of and
funding for such work would produce greater success.*® The Brookings
Institution has estimated that the annual operating costs for a nationwide
APCD would be $20 million, after initial start-up funding.®

The proposal for a federal APCD has a history of bipartisan support.

In 2020, Senate HELP Committee Chairman Lamar Alexander (R-TN) and
ranking member Patty Murray (D-WA) introduced the Lower Health Care
Costs Act (S. 1895), which would have essentially created a national APCD. It
mandated that state data, including from self-insured plans, be contained in
a nonprofit entity.

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Short of establishing a federal APCD, Congress could require, or the
administration could encourage via the Department of Labor, states to
implement standardized state-level APCDs. In fact, via the bipartisan
Consolidated Appropriations Act of 202] (CAA) (P.L. 116-260), Congress has
authorized-though not yet appropriated-funding of up to $125 million over
three years, beginning in fiscal year 2022, for states to develop new or improved
APCDs. As a condition of funding, the Labor Department could require states
to adopt uniform data collection and reporting standards. As part of this
recommendation, the department should implement the recommendations set
forth by the State All Payer Claims Databases Advisory Committee (SAPCDAC).
In 2021, Congress created SAPCDAC as part of the CAA to provide the secretary
of Labor with the guidance necessary for states to collect claims data from
plans-and, in particular, ERISA self-insured plans-in a standardized format.
The goal was to enhance health care quality and affordability." This guidance,
in the form of a report, provides valuable and useful information for the
implementation of standardized state APCDs.

* Congress should require the HHS secretary to establish a centralized
data repository to host payer and provider pricing data and penalize
entities that refuse to comply with transparency laws.

Strong evidence shows that high, rising, and variable prices are the greatest
contributors to health care cost growth in the United States. Although
APCDs can provide valuable information on the volume of health care services
being utilized by consumers and on cost drivers in the fully insured market,
additional cost and quality data, including data from the self-insured market,
could provide a more complete picture of health care costs and their impact.
Employers and policymakers are not well served by the black box that currently
exists around the prices that commercial insurers negotiate with providers.
Existing transparency efforts do not allow for more direct comparisons.
Employers need adequate information about health care prices and quality to
keep their plans affordable and fulfill their fiduciary responsibility.

Over the past decade, the Obama, Trump, and Biden administrations have
attempted to improve hospital and health plan price transparency. In 2020,
pursuant to authority under the ACA, the Trump administration expanded
on Obama-era rules by requiring hospitals and health plans to publicly post
data on their negotiated prices. The rules also required consumer-facing tools
to help enrollees understand their out-of-pocket financial liability for health
care services.

Just weeks after the Trump administration issued its rules in 2020, Congress
passed several transparency provisions through the CAA (P.L. 116-260). The
CAA also required a consumer-facing price comparison tool and banned

gag clauses in contracts that group health plans enter with either providers,
networks, TPAs or other service providers. This ban eliminated an avenue that
insurers and third-party administrators have used to deny employers access
to claims and other data. The Biden administration has published guidance to
providers, hospitals, and health plans to implement the new requirements.

The hospital price transparency rule, which went into effect on January 1,
2021, requires health systems to publish standard charges for 300 shoppable
services on a public website, along with standard charges for all services in

a digital file. However, as of February 2022, only 14% of hospitals and health
systems had complied with the rule. Furthermore, data from hospitals that
did share pricing information was inconsistent and incomplete. Although
more specific recent data on compliance levels is unavailable, noncompliance
remains high because making the data public is not in hospitals' financial
interests and adds to administrative costs. In addition, penalties for
noncompliance are limited.®°* The Centers for Medicare and Medicaid Services
(CMS) has sent warning notices and the Biden administration increased
penalties for noncompliance, but as of June 2022, the HHS secretary has only
levied penalties on two Georgia-based hospitals.*' The administration should
continue to hold entities accountable by penalizing them for noncompliance.

The "Transparency in Coverage" final rule requires health plans to post on

a publicly accessible website their negotiated in-network prices and allowed
amounts? for out-of-network services for all covered health care items and
services, by plan and by provider. They must also make a price comparison

tool available to consumers online beginning in January 2023. Additional
requirements will take effect in 2023 and 2024 and require health plans to
provide an explanation of benefits before an enrollee receives services; improve
provider directories; report on prescription drug and spending information;
and include in-network and out-of-network deductibles on ID cards.* The

rule requiring health plans and insurance issuers to publicly post in-network
negotiated rates, billed charges, and allowed amounts for out-of-network
providers went into effect on July 1, 2022. Although compliance rates are
already higher than with the hospital transparency rule, at the time of this
writing, much of the data are not accessible or usable. One insurer can produce
huge data files, requiring users to wade through millions of non-searchable data
points.°° Although many insurers are in compliance with the rule, CMS should
revisit the guidance it gave to carriers on how to submit and display data so
that the information is more usable.

The transparency rules implemented by the Trump and Biden administrations
are a critical step forward in bringing actionable health care data into the light.
However, inconsistent, inaccessible, and poorly formatted websites and data
repositories do not allow for direct comparisons across providers and plans.
Private companies and researchers are working to compile and analyze some
of this data. Maintaining price transparency data in a centralized, publicly
available data repository with a data dictionary ("collection of names,

 

ii The maximum amount a plan will pay for a covered health care service.

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definitions, and attributes about data elements that are being used or captured
in a database") would allow for apples-to-apples comparisons."

Such a centralized database should also incorporate data showing how
providers perform on key quality metrics and health outcomes, enabling
employers, regulators, and policymakers to assess not only prices across
health care markets but also the value employers are receiving for their health
care dollars."? This effort would hinge on federal agencies' ability to create

a standard template for data submission and to issue detailed guidance on
data presentation.

Moreover, hospitals should post prices both as a flat dollar amount and as a
percent of Medicare rates. Research conducted by RAND has revealed that
employers and private insurers paid, on average, 224% of what Medicare
would have paid for hospital services." Allowing an assessment of price
variation relative to a Medicare benchmark can help identify when prices are
more a function of a provider's market power than its underlying costs for
delivering services.

A data accumulation and standardization effort of this magnitude would be a
huge undertaking for CMS, but without it, transparency efforts will not produce
actionable data needed to enact transformative policy change.

Given existing compliance challenges, HHS may have to provide additional
technical assistance and stronger oversight and enforcement to payers and
providers for them to meet requirements. Vague language that leaves too

much to interpretation burdens hospitals and health plans with uncertainty
regarding compliance. Hospital leaders have indicated that confusing and
complex regulations are their top barrier to complying with price transparency
tules." For any new requirements to be effective, a specific plan for improving
tates of compliance is needed. Guidance and rulemaking, along with additional
technical assistance and strong enforcement, would enable payers and
providers to submit and publish actionable information.

Because policymakers, employers, and consumers will use transparency data
very differently, HHS will need to facilitate data use based on the audience. For
example, policymakers could use data on price variations to investigate bad
actors and to craft informed policy. Employers can use transparency data to
design networks and benefits for their employees. Transparency efforts aimed
at consumers will need to display clear, digestible information so consumers
can select a provider and compare prices and quality at the time they need

to make a decision about a health care item or service. However, as noted
previously, there is little evidence that price transparency efforts for consumers
have a big impact on the cost of care."
To understand the impact of private equity on health care prices:

* Congress should consider creating a federal, publicly available
database or clearinghouse to track health care ownership and require
private equity firms to report health care provider purchases where
concentration is high.

In recent years-and particularly following enactment of the Affordable Care
Act-private equity involvement in health care acquisitions and consolidation
has grown."©"' As of 2021, private equity and venture capitalist investment in
the health care sector was double what it was seven years ago."

However, transparency is minimal regarding private equity involvement in
health care acquisitions and its impact on quality and outcomes." While the
role of private equity in the health care sector continues to evolve and grow,
transparency efforts focused on private equity could help to bring attention
to the downstream effects on patients and reveal what positive effects private
equity investment is having on health care delivery.

To better understand the nature and effects of private equity investment in
health care prices and delivery-both positive and negative-Congress should
consider the creation of a federal publicly available database or clearinghouse
to track health care ownership where provider consolidation is high, or network
participation is low. This data should be designed for use by federal antitrust
enforcement agencies and researchers; it could also include data on cost to
patients and quality outcomes.

Because the health care sector is often viewed as being relatively recession-
proof, investors see the sector as both a way to shield themselves financially,
and to diversify and balance out their portfolios.®° On the payer and provider
side, consolidation may be undertaken in an effort to insulate themselves in
the face of new, disruptive players in the health care market, such as Amazon."
Furthermore, private equity investment can offer both payers and providers
protection from risk and reduce administrative and regulatory burdens, as well
as provide novel resources to improve their workflow, service delivery, and care
coordination. Innovations in care delivery, technology, and other operational
proficiencies can also result from such investments.* Indeed, private equity
investment may be one way in which primary care physicians can be
encouraged to pursue integrated, value-based care arrangements-thereby
avoiding downstream excesses in hospital utilization and cost.

On the other hand, some researchers have found private equity investment

in health care to be problematic, arguing that it creates pressure on entities

to prioritize the interest of stakeholders over those of patients in decision
making.** Others have suggested that private equity's involvement in provider
consolidation has ultimately driven up prices.** Some evidence showed that
private equity-backed entities have lower-quality care. For example, nursing
homes acquired by private equity firms had higher emergency department

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visit rates and hospitalizations.® Other researchers have found that specific
health care providers-such as hospice care-might be especially vulnerable
to exploitation by private equity.®* In terms of hospice care, the Government
Accountability Office (GAO) urged greater oversight.®"

In her April 20, 2021, testimony before the U.S. House Judiciary Subcommittee
on Antitrust, Commercial and Administrative Law, professor Leemore S.

Dafny of the Harvard Business School and Harvard Kennedy School, suggested
creating a federal database that would allow researchers and antitrust
enforcement agencies to review transactions more rapidly.®* It would also allow
researchers to determine where private equity investment in health care can be
beneficially expanded.
   

SECTION Il: EMPOWER EMPLOYERS WITH
PAYMENT AND PRICING TOOLS

Policymakers should ensure that employers have the tools they need to create a
high value, employer-sponsored insurance system that prioritizes employee health
outcomes while protecting families financially. Congressional and regulatory

actions should allow employers to design better benefit structures and provider
networks, with both prices and quality in mind. Additionally, policymakers should
ensure that all stakeholders, not just employers, responsible for managing and
deploying ESI plans are accountable for constraining health care cost growth.

To provide clarity on fiduciary responsibility and promote stakeholder
accountability for cost containment:

¢« The Department of Labor should leverage existing authorities to boost
accountability for third-party administrators and other vendors, and
issue guidance on what qualifies as a fiduciary function.

Employers and service providers regulated by ERISA are accountable for
maintaining and deploying health care benefits in the best interest of plan
members. Under ERISA, the Department of Labor articulates that "the primary
responsibility of fiduciaries is to run [health plans] solely in the interest of
participants and beneficiaries and for the exclusive purpose of providing
benefits and paying plan expenses." A key component of this fiduciary
responsibility is to pay "no more than reasonable compensation" to service
providers (29 U.S.C. § 1108(b){2)(A)). The Labor Department's Employee Benefits
Security Administration (EBSA) also states that fiduciary status is based on the
functions an entity performs for the plan rather than its title, and any entities
that exercise discretion over health plan administration are fiduciaries.' Since

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ERISA's passage, employers have shouldered the responsibility of carrying

out fiduciary functions. However, there are several open questions regarding
how fiduciary responsibilities apply in the context of health benefit plans.

One specific area where more clarity is needed is the extent to which ERISA's
fiduciary provisions require different entities involved in administering a
health benefit plan to pay and be paid "no more than reasonable compensation"
and what is "reasonable." Absent regulation, health insurers, TPAs, and other
vendors with whom plan sponsors contract often do not have enough incentive
to bring down provider prices and slow the rate of health care cost growth.

Moreover, evidence shows that insurance carriers (whether they are providing
insurance policies to fully insured plans or whether they manage risk on behalf
of employers as third-party administrators pursuant to Administrative Services
Agreements) are more profitable as health care expenditures grow." Clarifying
fiduciary functions, and how they apply to employers and other vendors,

could ensure that all stakeholders involved in managing and administering
employer-sponsored health plans are held accountable for constraining health
care cost growth and acting in the best interest of plan members.

Two main problems exist: The Department of Labor has not (1) clarified

what constitutes fiduciary functions versus settlor functions-activities
related to the formation rather than the management of plans; or (2)

defined what qualifies as fulfilling fiduciary duties. TPAs often use section

29 CFR 2509.75-8 D2 of ERISA to argue that they are simply performing
ministerial functions and therefore do not qualify as fiduciaries. However, the
Labor Department's letters, notices, and legal cases suggest otherwise:

* Ina1998 letter to the Service Employees International Union the
Department of Labor stated that hiring a health care provider qualifies as
a fiduciary function." These statements are somewhat murky. Although
employers may qualify as fiduciaries while selecting networks offered by
insurance carriers, TPAs could also qualify as fiduciaries when adding or
subtracting providers after the plan signs the network access agreement.

¢ The Labor Department, when determining issues that arise under
ERISA-covered health plans, is guided by the ERISA statute, It states,
"A person is a fiduciary with respect to a plan to the extent (i) he exercises
any discretionary authority or discretionary control respecting management
of such plan or exercises any authority or control respecting management
or disposition of its assets, (ii) he renders investment advice for a fee or
other compensation, direct or indirect, with respect to any moneys or other
property of such plan, or has any authority or responsibility to do so, or (iii)
he has any discretionary authority or discretionary responsibility in the
administration of such plan."

e In Per M re Administrati ices, LL in 2017, the

department brought a case against a health plan TPA, MagnaCare, for
charging undisclosed "network management fees" to ERISA plans, saying it
was a Violation of ERISA's fiduciary duties. A settlement required MagnaCare
to pay $16 million to the department, including a civil penalty and
compensation to health plan clients.*? A representative for the EBSA stated,
"This case serves as a reminder that a fiduciary must fully disclose fees to
plan clients under federal law, as MagnaCare has agreed to do."

¢ A Department of Labor lawsuit against United Healthcare under the
Mental Health Parity and Addiction Equity Act of 2008 alleged that
United breached its fiduciary duties while acting as a TPA. The department
recognized that TPAs have significant discretionary authority and control
over health plans in the mental health arena and should recognize that as
well with respect to other functions.

Despite the department's issuance of notices and letters and its
commencement of court cases against TPAs for breaches of their fiduciary
obligations, employers, TPAs, and other vendors are still left waiting for

courts to determine fiduciary responsibility on a case-by-case basis-always
after an entity has already caused harm to plan members. This is because,
despite taking the positions noted above, the department has issued very
little guidance on the fiduciary responsibilities associated with managing and
implementing health plans.

The Labor Department should engage in rulemaking to address high and
rising health care costs. It must first, however, assess how to leverage existing
authorities to hold intermediaries and TPAs accountable. ERISA states that

"{a] fiduciary is a person or entity with discretionary authority to control and
manage the operation and administration of a benefit plan." The department
could therefore clarify, for example, that even if a plan sponsor nominally has
final decision-making authority on claims, a TPA that exercises discretionary
authority over plan management and/or exercises any authority or control
respecting the management or disposition of plan assets is also a fiduciary and
therefore required to fulfill a fiduciary obligation.

To ensure that employers have access to health plan data:

* The Departments of Labor, Treasury, and Health and Human Services
should issue guidance to clarify the so-called gag clause ban and that
plan data are a plan asset.

The CAA (P.L. 116-260) banned gag clauses in contracts that group health plans
enter with providers, networks, TPAs or other service providers. However,

TPAs and vendors are continuing to limit the ways employers can use plan
data despite the CAA. Before enaction of this provision, gag clauses restricted
insurers from making price and quality information available to other parties,
including employers.

Despite congressional intent to ensure employers had unfettered access to
claims data, TPAs and insurers are circumventing the law. BPC interviews with

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experts found that TPAs are working around the ban by limiting the number of
claims that employers can review and financially audit; by refusing to provide
data fields required to perform an electronic audit; and by refusing to share
claims data in regions where they are the only TPA. For example, one TPA
limited financial audits to 225 claims from the previous year. TPAs have also
tried to assert that national patient identifiers are proprietary data-preventing
employers from running analytics.

Employers need access to their own claims data to ensure they are fulfilling
fiduciary obligations-for example by monitoring whether TPAs are charging
reasonable fees and paying claims properly in accordance with the plan
document(s); recovering overpayments; and designing data-informed benefits
for plan members. As such, the Department of Labor should issue further
guidance articulating that plan data is a plan asset and that the data belongs
to the plan, not the TPA. The department should clarify this means that plans
should be able to electronically access claims data at all times and share with
any business associates of their choosing, subject to relevant privacy provisions.
It should also clarify that this means TPAs, networks, and other service
providers have no right to use any of the data collected for any use outside of
managing claims under the plan unless they have express permission from the
plan and any affected participant.

TPAs and insurers might worry that giving employers unfettered access to
claims will require them to share propriety information or put patient data at
risk. However, employer groups assert that access to claims data is critical for
reducing health care costs and meeting their fiduciary duty to administer the
plan in the best interest of members. Furthermore, employers maintain that
fears about putting patient data at risk are overblown. Industry experts widely
agree that the main goal of TPAs in keeping this information confidential is
to keep the negotiated discounts they have with providers confidential, and
that is specifically no longer allowed under ERISA Section 724." Additionally,
the Health Insurance Portability and Accountability Act of 1996 (HIPAA)

and other laws provide sufficient protection. Employer groups like the ERISA
Industry Committee have pushed for the departments of Treasury, Labor,

and HHS to issue "guidance and clarification on eliminating gag clauses in
contracts between providers and health plans, as required by the CAA."
Without additional clarification from the departments, TPAs could continue to
thwart transparency efforts intended to ensure employers can improve health
outcomes for employees while lowering health care costs.

 

iii CAA states that "A group health plan or health insurance issuer offering group
health insurance coverage may not enter into an agreement with a health care
provider, network or association of providers, third-party administrator, or other
service provider offering access to a network of providers that would directly or
indirectly restrict a group health plan or health insurance issuer offering such
coverage from-- (A) providing provider-specific cost or quality of care information
or data, through a consumer engagement tool or any other means, to referring
providers, the plan sponsor, enrollees, or individuals eligible to become enrollees of
the plan or coverage."
To make it easier for employers to use tools that improve outcomes and
contain costs:

* Congress should require HHS to nationally designate Centers
of Excellence.

Centers of Excellence are payer- or employer-designated providers that meet
high quality, outcome, and cost-effectiveness standards for specific procedures
or services (usually non-emergent care). Employers use this model to derive
greater value from their health care dollar and generate savings by encouraging
members to get care at high quality facilities that can produce positive patient
outcomes. For example, Walmart deployed the Centers of Excellence model for
spine surgery, which resulted in shorter hospital stays and reduced readmission
rates-ultimately saving the company money due to avoided surgeries and
better outcomes."

Payers often waive out-of-pocket costs and cover travel costs if their employees
or members seek services at the Center of Excellence. In exchange for the
designation, providers may agree to accept lower negotiated rates or bundled
payments for services to increase the volume of patients at their facilities.
These programs tend to be voluntary, and consumers have the option to choose
other providers.

This model is frequently touted as an innovative and effective employer
strategy to reduce costs, but not all programs are alike. The lack of a concise
definition or trusted accreditation body has contributed to mixed evidence with
respect to the desired outcomes.*? While some assessments show that Centers
of Excellence produced positive outcomes and cost savings, others yielded
inconclusive results. For example, in a recent survey of state employee health
plans, 23 plans reported establishing a Centers of Excellence program, but only
two were able to associate the program with any quantifiable cost savings.!°°

Furthermore, many employers may face barriers, such as high administrative
costs or inadequate resources needed to develop criteria, to implementing a
Centers of Excellence program. This can limit programs to only the largest and
most well-resourced employers and their TPAs.'" A federal designation could
enable more employers to use the program without having to devote resources
to determining criteria and researching costs. Although a federal designation
could help reduce significant administrative costs, it would not eliminate all of
them. The employer would still have to negotiate an in-network rate for services
delivered at the Center of Excellence.

Asimilar effort is underway at the state level. A state law in New York

(and legislation advancing in California) will require insurance companies that
administer Medicaid and marketplace plans to enter into payment negotiations
with National Cancer Institute designated Comprehensive Cancer Centers.
This effort aims to improve outcomes by bringing high quality cancer centers
in-network for Medicaid recipients and exchange plan members.!

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25

In federally designating Centers of Excellence, HHS will need to be explicit
about criteria and ensure evaluations adjust for the populations that a
particular hospital or health system serves to account for risk. Moreover, CMS
should report on how it plans to designate these centers (for example by disease
state) and what the qualification criteria is. These criteria will vary by clinical
focus. The federal government should develop standards in conjunction with
the National Quality Forum and incorporate proper risk adjustment. There is
precedent for a federal Centers of Excellence program, but negative provider
reactions to the criteria development and evaluation process halted previous
progress. In 1990, Medicare chose four to six institutions as the standard of
excellence for heart bypass centers. In a three-year demonstration project,

CMS agreed to pay discounted rates if a beneficiary sought bypass surgery at
these institutions. Participating doctors agreed to accept Medicare fees as full
payment.'°? However, some hospital systems objected to the evaluation and
selection process, and CMS did not continue the program after the three-year
period. The federal government could build off this work in designating Centers
of Excellence, while involving a variety of stakeholders to develop criteria.

This model has not always been popular with local providers, but Center of
Excellence partnerships with these providers may help address challenges.
Some local providers argue that the model can make it harder for smaller,
independent physician practices to maintain business.' In response to some
of these concerns, Cleveland Clinic's Center of Excellence program partners
with local physicians to deliver follow-up care after patients return to their
hometowns. CMS could encourage these types of partnerships when nationally
designating Centers of Excellence.

To further protect patients from surprise medical bills:

* Congress should urge the administration to fulfill implementation
of the No Surprises Act by urging the Advisory Committee on Ground
Ambulance and Patient Billing to finalize committee membership and
hold its first meeting.

Congress passed the No Surprises Act (NSA) as part of the Consolidated
Appropriations Act of 2021 (CAA) (P.L, 116-260). The law took effect on
January 1, 2022. It protects insured patients from surprise medical bills when
receiving most emergency services, as well as when receiving non-emergency
services from out-of-network providers and services from out-of-network air
ambulance providers.

The NSA, however, does not apply to ground ambulance services. Rather,

the NSA requires the secretaries of Labor, Health and Human Services, and
Treasury "to establish and convene an advisory committee for the purpose of
reviewing options to improve the disclosure of charges and fees for ground
ambulance services, better inform consumers of insurance options for such
services, and protect consumers from balance billing." It requires that the
committee submit a report with recommendations related to insurance
coverage for charges and fees for ground ambulance services no later than 180
days following the date of its first meeting.!°

The secretary of HHS signed the advisory committee's charter on November 16,
2021. A week later, CMS published a Federal Register Notice that announced
the establishment of the committee and allowed interested individuals

to submit their applications or nominations to be committee members by
December 13, 2021. Since that time, the committee has taken no additional
action, has not announced any committee members, and has not scheduled a
first meeting.

As Americans continue to receive surprise medical bills from ground
ambulance services, it is imperative that Congress urge the advisory committee
to undertake its work-first and foremost, by finalizing membership and
setting a date for a first meeting-in order to produce recommendations as
soon as possible, and no later than 180 days following the date of its first
meeting. Furthermore, the advisory committee should be encouraged to look
for best practices at the state level by examining the ways in which states that
currently provide some protections against ground ambulance out-of-network
bills operate. As a part of this work, the advisory committee might also be urged
to develop recommendations related to incentivizing more contracts between
insurers and ground ambulance providers.

Before the NSA, about 25% of emergency room visits resulted in unexpected,
or "surprise," medical bills, as did between 9% and 16% of non-emergency,
in-network hospitalizations..°' Data available before enactment of the NSA
revealed that the average surprise bill for a visit to an emergency room was
above $600, although more recent data from the HHS's Office of the Assistant
Secretary for Planning and Evaluation found costs ranged more frequently
between $750 and $2,6000, depending on the service.'°8°° In the first two
months of 2022, after the NSA went into effect, a survey conducted by AHIP
and the Blue Cross Blue Shield Association found that the law prevented
more than 2 million potential surprise bills."° Promisingly, the Congressional
Budget Office has estimated that the NSA "will reduce commercial insurance
premiums by between 0.5% and 1%, saving taxpayers $17 billion over 10 years
and saving consumers about twice that much between reduced premiums and
cost-sharing."

Ground ambulance services are usually operated by state and local
governments, however, which can create greater complexity in billing."
According to the Peterson-Kaiser Family Foundation Health System tracker,
in 2020, government organizations, such as local fire departments, provided
nearly 2 in 3 ground ambulance rides."3 Furthermore, regulations at the

state and local level can make it harder for these government organizations
to operate as in-network providers when they are dealing with insurance
companies. Unfortunately, researchers have found that significant shares of

26
27

ground ambulance services can result in surprise medical bills-nearly half

of ground ambulance rides result in an out-of-network charge with an average
patient cost of $450 per ride." Formally naming members to and convening the
advisory committee on GAPB stand to both fulfill implementation of NSA and
further protect patients from surprise medical bills.

To motivate employers to offer and employees to choose high
performance health coverage options:

* Congress could consider options for encouraging ESI use of high
performance network (HPN) health plans.

Previous attempts to rein in health care costs by discouraging high-cost
health plans have faced resistance. For example, the ACA's so-called "Cadillac
tax" would have imposed a tax on high-premium plans with generous benefit
packages. This cost-containment policy was unpopular among employers
and employees, who worried that it would erode health benefits or burden
employees. Eventually, in 2019, Congress repealed the Cadillac tax, much to
the relief of employers, but without considering a replacement mechanism

to contain costs."* The political feasibility of reviving any sort of tax on high
premium plans appears to remain low.

To remedy this, Congress should consider funding an education campaign,

led by HHS, to highlight the value of high performance provider networks.

HHS should define the criteria for what qualifies as an HPN, and it should be
sure to include measurements on delivery efficiency, quality improvement,

and cost effectiveness. The American Academy of Actuaries has developed a
comprehensive issue paper on high performance networks, which highlights
the importance of ensuring that insurers, providers, employers, and health plan
members are all engaged to meet the same objectives." Such a campaign would
ideally encourage employers to be more exacting in their health plan selection
and network development, inspire employees to enroll in high performance
health plans, and ultimately pass on savings to employees in the form of wage
increases. Building greater interest in high performance networks might also
encourage insurers to compete to develop and offer lower premium, high
performance options.

If an appetite exists for more forceful action to promote high performance
health care networks, Congress might also consider creating a tax credit

or grant program that rewards the uptake of HPN health plans. A tax

credit policy option might operate by redirecting a portion of the current
employer tax subsidy to employers in exchange for decreasing their premium
contributions."* Employers would receive a credit for each employee enrolled
in coverage, and they would be required to standardize covered benefits. Such
a tax credit policy would theoretically boost employees' take-home pay in the
form of wage increases, as firms would be required to apply these credits to the
premiums workers owe for ESI enrollment.
Alternatively, a congressionally directed and funded grant program could
incentivize employers to provide and promote high performance network
health plans. Such a grant program might operate by providing additional
funding to states, via HHS; the money could then be disbursed among
interested employers for the purpose of developing and promoting the uptake
of high performance network health plans. As a condition of grant funding,
HHS should be given the leverage to determine requirements for participation,
similar to, for example, requirements on employers participating in the ACA's
reinsurance program, which were also subject to federal audits. Furthermore,
HHS should develop a mechanism to measure improvements in health care
quality and outcomes associated with HPNs.

Finally, in encouraging the use of HPNs, HHS could consider taking a closer
look at the performance and value of health plans such as those provided

by health maintenance organizations (HMOs). As opposed to preferred
provider organization (PPO) plans, HMOs are a type of prepaid plan that offer
beneficiaries access to a smaller network of providers, typically require referrals
to see specialists, and do not cover any out-of-network providers. The attraction
of HMOs is that they focus on primary and preventative care in order to keep
beneficiaries in good health, thereby, ideally, preventing higher costs down the
line. They accomplish this by charging on a per-patient basis, rather than by
fee-for-service, within a narrower network of providers. For employees, HMOs
tend to be more affordable, as they tend to have lower or no annual deductible:
43% of workers with single coverage via an HMO, and 42% of workers with
family coverage, do not have a general annual deductible."

HMOs gained prominence in the 1970s following passage of the Health
Maintenance Organization Act of 1973. By the 1990s, however, HMOs began
to fall out of favor as criticisms over the quality of care they provided grew. By
2001, nearly every state had passed legislation regulating HMOs, and some
stakeholders would argue that these efforts provided the basis for pushes for a
patients' "bill of right" within the ACA. Since 2015, however, the percentage of
employees enrolled in HMO plans has increased slightly.'2° As such, and as a
part of this option, Congress might also consider urging the GAO to complete
a comprehensive review of the performance and cost effectiveness of HMOs
following enactment of the ACA. As part of this review, GAO might also be
encouraged to report on the performance and cost effectiveness of other types
of managed care plans, such as Exclusive Provider Organizations.

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SECTION Ill: ADDRESS MARKET
POWER DYNAMICS

    

Health care prices in the private market are shaped by negotiations between
providers and payers. A variety of factors determine these prices, including
geographic markets, demand for services, and payer and provider market
power. Employers often do not wield enough market power to negotiate low
prices due to provider consolidation. Indeed, provider consolidation continues
to accelerate-nearly 67% of hospital markets are considered highly or very
highly concentrated."' A large body of evidence shows that this consolidation
can lead to increased health care prices.'?? BPC has proposed policy strategies

intended to equalize market power dynamics to foster a more competitive
employer-sponsored health insurance system.

In an already consolidated hospital market, providers can include anti-
competitive language in their contracts with health plan sponsors, and this
can lead to higher prices. Employers and insurers are often forced to accept
these terms due to their limited market power. For example, a dominant "must-
have" provider in a health system might include an all-or-nothing clause in its
contract that requires a health plan to contract with all of the system's other
providers. This practice prevents health plans from negotiating lower rates with
another hospital or provider in the same health system.
Health systems can also use anti-steering and anti-tiering provisions in
contracts, which prevents health plans from excluding them from the network
or including incentives for their employees or members to choose a less costly
alternative. These provisions hamper an insurer's ability to direct its members
to higher value providers.'

Bipartisan support exists for banning anticompetitive terms in insurance
contracts. Sens. Mike Braun (R-IN) and Tammy Baldwin (D-WI) have sponsored
the Healthy Competition for Better Care Act (S. 3139), which would prohibit
anti-tiering and anti-steering language in contracts. The ERISA Industry
Committee, American Benefits Council, National Association of Insurance

and Financial Advisors, and Council for Affordable Health Coverage are all
supportive of the bill.!*+

BPC has included this recommendation in a previous report, Bipartisan

Rx for America's Health Care: Congress should prohibit hospitals from using
noncompetitive contracting requirements, such as all-or-nothing requirements,
which require plans to contract with an entire network in order to contract with
a single hospital or provider group. Nothing in this provision would relieve
plans of the responsibility of meeting network adequacy requirements.

To reduce administrative waste:

¢ The Department of Labor and the Center for Medicare & Medicaid
Innovation (CMMI) should develop a standard model provider-payer
contract to pilot at the state level, in Medicare Advantage plans, and in
ACA qualified health plans.

Often characterized as complexity-driven waste, billing and insurance-

related administrative costs are higher in the United States than in any other
country.'# One of the reasons for the complexity is that providers have to
administer dissimilar contracts for multiple insurers and meet plan-specific
requirements. Few policymakers and advocates have proposed strategies to
control billing and insurance-related administrative waste resulting from
contractual complexity, although simplified solutions have been implemented
in other industries. Standardized payer-provider contracts could be deployed in
a multi-payer system. Researchers using a model to estimate fixed and variable
costs found that standardizing contracts generated larger administrative
spending savings and less variance than single-payer strategies.'°

The Department of Labor, in conjunction with CMMI, could design a standard
payer-provider contract template to use to cut down on administrative burdens.
This template could standardize claims processes, payment protocols, risk
sharing (if any), credentialing requirements, pre-authorization criteria, dispute
resolution, payment codes, and quality and other reporting requirements.
Additionally, the model contract could standardize how to designate in-network
and out-of-network providers and network inclusion changes, so payers are still
able to deploy high value benefit designs.

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This policy is unlikely to lead to administrative savings without a critical
mass of providers and payers in a particular market adopting standardized
contracts. CMMI could work with the departments and state insurance
commissioners to pilot standardized payer-provider contracts at the state level.
The Balanced Budget Act of 1997 (BBA) and subsequent legislation could also
offer the authority to introduce contract standards in Medicare Advantage
plans. Another option is to use authority under the ACA to certify qualified
health plans (QHP) on the health insurance marketplaces to include additional
standardized elements in their contracts with providers. As defined by the
ACA, a QHP is an "an insurance plan that is certified by the Health Insurance
Marketplace, provides essential health benefits, follows established limits on
cost sharing, and meets other requirements outlined within the application
process",'"' The federally facilitated and state-based marketplaces could
establish additional requirements for QHPs that require them to use standard
payer-provider contracts. Although these requirements would apply only to
plans sold via the marketplaces or through Medicare Advantage and state
plans, they could be used to measure the impact of a standard model contract
and ultimately expand their use.

To promote provider competition:

* Congress should strengthen federal enforcement agencies' ability to
identify and review potentially problematic transactions in the health
care industry to avoid high concentration in markets and potentially
reduce health care prices.

The U.S. health care market is more consolidated than ever before.'2* Multiple
studies have concluded that the consolidation-including both horizontal and
vertical mergers-consistently leads to higher prices without improving the
quality of care.'29°°3! In regard to hospitals, a2020 MedPAC report found that
most of the literature- although not all of it-suggests consolidation results in
higher prices.'*?

Many smaller but no less impactful transactions leading to consolidation

do not meet the filing requirements under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, also known as the Hart-Scott-Rodino Act. This
failure allows consolidation and increases in market concentration to persist.
Before merging, companies surpassing certain thresholds are required under
the act to submit notifications to the Department of Justice's Antitrust Division
and the Federal Trade Commission (FTC). The act also creates a waiting period
before mergers can be finalized. The Hart-Scott-Rodino Act was designed to
protect competition and prevent monopolies, and the FTC updates thresholds
annually based on variations in gross national product.

To temper high prices that can be associated with high market concentration,
Congress should consider strengthening FTC and DOJ antitrust enforcement by
providing additional appropriations for the review and prevention of potentially
problematic transactions. Stronger review would help to prevent market
consolidation and maintain industry competition.

The FTC leads investigations into acquisitions, mergers, and other
consolidation transactions in the health care sector and, in the past, it has
blocked some mergers by physicians and hospitals. The DOJ's Antitrust
Division oversees mergers in the health insurance industry.

The FTC under the Biden administration has been both more aggressive

and successful over the past year in combating provider consolidation.™ In
fact, the FTC recently sued to block a merger between two New Jersey health
care systems, arguing that, by removing direct competition, prices would
increase and the quality of care for patients would decrease." In July 2021, the
administration issued an executive order encouraging the federal government's
antitrust agencies to focus their enforcement on particular markets, including
health care markets.

In addition to the administration's greater focus on combating anticompetitive
transactions, recent increases in appropriations to the FTC over the past

two years have also helped combat provider consolidation. The FTC has seen
around a 6% increase annually, since 2020-far outpacing what was, on
average, a decrease in funding since 2012."* In FY2022, the agency was funded
at $377 million."

The same may be true of the DOJ. The DOJ's Antitrust Division suffered from
nearly level funding-around $160 million per yeat-between 2009 and
2020.8 The division saw an unprecedented increase in funding-more than
10%, to $184.5 million-from 2020 to 2021. As part of the FY2023 budget
request, the Biden administration called for substantial increases in funding
for both the DOJ and the FTC."°

Antitrust investigations require time and sustained resources, and they could
be strengthened by providing additional funding for merger and acquisition
review and enforcement.

To lower hospital prices in noncompetitive markets:

* Congress should permit hospitals in markets with a Herfindahl-
Hirschman Index (HHI) score above 4,000 to enter negotiations with
the Federal Trade Commission (FTC) to bring the HHI score under
4,000, unless market consolidation was the result of a regulatory
exception to the Department of Justice (DOJ) guidelines related to
hospital mergers. Hospitals that do not enter negotiations with FTC
would be prohibited from charging private insurers more than an
amount outlined below (or whichever is lower):

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Option 1: The maximum rate paid by a private insurer to a hospital for a service
would be the average Medicare Advantage (MA) rate for that service in the
market, with private rates phased down to MA rates over five years:

¢ Year 1&2--HHS secretary and FTC define market concentration
and notify providers

¢ Year 3-178% of Medicare Advantage Rates
* Year 4-150% of Medicare Advantage Rates
¢ Year 5-130% of Medicare Advantage Rates
¢ Year 6-110% of Medicare Advantage Rates
¢ Year 7--100% of Medicare Advantage Rates

Option 2: The maximum rate paid by a private insurer to a hospital would be
arate that reflects the average private insurance rate in a competitive market
(defined as an HHI score of 2,500 or below) relative to the average Medicare
Advantage rate in that market. For example, in a market with an HHI index
below 2,500 with an average MA payment for a service of $100 and an average
commercial rate of $200, the maximum commercial rate would be 200% of
Medicare Advantage rates.

¢ Direct the FTC to publish a list of markets with an HHI score of 4,000 or
greater. In determining HHI scores, the FTC must work with the secretary
of HHS to define market concentration. This would allow for analysis that
more accurately reflects today's markets and is not limited to inpatient
admissions. Factors could include overall admissions and discharges, but
would also allow specialties that may include outpatient-only services.

* Hospitals in consolidated markets should be prohibited from balance billing
(changing patients the difference between the provider's charge and the
insurer's allowed amount) patients. This prohibition on balance billing
would have to apply to any hospital subject to the rate cap to prevent it from
refusing to participate with commercial plan networks and then billing
patients directly.

BPC included this recommendation in a previous report, Bipartisan Rx for
America's Health Care. Market consolidation is increasingly common, in part
because of federal payment policy that encourages more integrated care and
incentivizes provider risk. Not all mergers are anti-competitive; although they
can lead to significant market concentration, some mergers may be done to
preserve access to care, particularly in vulnerable communities-rural areas for
example. In some cases, consolidation has helped facilitate delivery system
reform and preserved access to care. Hospitals argue that consolidation helps
lower their costs through increased efficiency.

But in other cases, consolidation has resulted in increased market share and
higher prices, according to multiple studies over more than a decade. In the 25
metropolitan areas with the highest rates of consolidation, prices increased

in most areas by 11% to 54% in the years following a merger, a 2018 analysis
conducted by the Petris Center on Health Care Markets and Consumer Welfare
for The New York Times found."?"** The study also discussed trends in hospital
acquisition of physician practices, concluding that this practice exacerbates
market consolidation and leads to higher prices."*

In January 2018, hospitals or large health care systems employed nearly

half of all physicians in the United States, compared with just 25% of
physicians in 2012." About half of all markets have a high market
concentration (HHI of 2,500 or higher), about one-third of markets are
moderately concentrated (1,500-2,500 HHI), and the remaining one-sixth

ate low concentration or unconcentrated (100-1,500 HHI)."* In some of the
more concentrated markets, the purchase of specialty practices has resulted

in a disincentive for providers to negotiate rates because they know that plans
must contract with them in order to meet health insurance network adequacy
requirements. This lack of competition negatively affects health insurance
premiums, particularly in non-group insurance markets. Several proposals seek
to address the problem, including providing additional funding for the FTC to
increase antitrust enforcement or providing incentives to states to eliminate or
preempt state laws that hamper competition or address provider rates.

Options 1 and 2 would not apply to hospitals located in counties with a
population below the U.S. median. At the same time, BPC recognizes that high
market concentration has a significant impact in counties with populations
below the national median, including rural areas. Some state attorneys general
have taken steps at the state level to address high costs resulting from market
consolidation, and we are supportive of those efforts.

When considering corporate mergers in other industries, the FTC uses the HHI
to measure market concentration. According to the DOJ and the FTC, HHI is
calculated by "squaring the market share of each firm competing in the market
and then summing the resulting numbers" such that 10,000 is the maximum
score (where the market is controlled by a single firm) and the score approaches
zero when the market is comprised of many firms of varying size."" However,
some stakeholders have asserted that HHI may not be an accurate measure

of hospital concentration due to a lack of agreement on geographic area for
calculating the index. Additionally, policy experts and researchers sometimes
find that the link between market structure and prices is weak, making HHI

a blunt instrument. For example, policy experts have stated, "Because of a
range of institutional features, including insurance, which shields patients
from the price of care, information problems, and product differentiation

based on location or reputation, many hospitals in low-concentration markets
may have market power and thus charge high prices.""* More specifically, an
academic medical center that offers specialized care may wield a great deal of
market power even in an unconcentrated market. In response to these concerns
and ones recognizing that mergers or acquisitions may be done to preserve

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access to care, BPC has stated that the FTC must work with the secretary of
HHS to define market concentration and review HHI as a screening tool for
hospital mergers.

As better measures of market concentration become available, the secretary
could use them instead of HHI or develop additional tests to determine
whether a health system or hospital would be subject to price ceilings. One
such test could establish a threshold based on case mix" numbers, so that
health systems and hospitals that treat patients with complex needs would
not be penalized. New methods to develop more-accurate predictors, including
analyses of these tools on access to care, would ensure that policies do not
reduce access to care for vulnerable populations.

To encourage employers to use cost containment tools, limit price
variation, and constrain provider prices:

* The Departments of Labor and HHS should issue guidance to encourage
ESI plans to use reference-based pricing models and incorporate them
into plan designs.

Prices associated with health care services and products can vary greatly,
even within a geographic market. For example, one study found that knee
teplacement surgery in Dallas ranged from $16,772 to $61, 585 in 2017."
Armed with new transparency data, employers may be empowered to use cost
containment strategies such as reference-based pricing to address high and
variable prices. Using reference-based pricing, employers (often supported by
a TPA) establish a "reference price" or cap for a health care service or product.
Employees can select a provider at or below the reference price for their usual
cost-sharing amount. However, if they choose a provider that charges more
than the reference price, they would have to pay the difference. The goal is to
bring down prices by forcing providers to charge prices closer to the reference
price or lose business. Employers can implement reference-based pricing
programs in a variety of ways. One such way is by using a reference price
benchmarked to Medicare.

The California Public Employees' Retirement System (CalPERS) used reference-
based pricing to steer members to high value providers and lower prices.
CalPERS paid a reference price of $30,000 for initial hospital stays for total

hip or knee replacements. Designated facilities accepted this payment rate,
and PPO enrollees paid out-of-pocket if they used facilities that charged over
that amount. The reference-based pricing design reduced average hip and

knee replacement payments per case by 26.7% in the first year by forcing
high-price providers to compete with lower-priced competitors.'*° As such, the
CalPERS model can serve as a positive case study for employers hoping to use
teference-based pricing.

 

iv CMS developed the case mix index as a measure to indicate whether a hospital treats
a greater number of complex, resource-intensive patients.
Reference-based pricing strategies are not a panacea and may not work for
every employer, depending on provider markets, patient education, and existing
coverage networks. The variability highlights the need for additional guidance.
Home Depot, one of the United States' largest employers, implemented a
reference-based pricing model to limit price variation and provide higher-value
care for its employees. Its carrier, or TPA, created a "reference price" for
colonoscopies and endoscopies (both significant cost drivers for the company)
using price and quality information. If employees selected a provider charging
more than the reference price, they paid the difference out of pocket. This
program was rolled out in 30 markets and included big cities like Boston, New
York, and Philadelphia-requiring the TPA to set a different reference price for
each market. Home Depot also created a portal where plan members could find
facilities that provide colonoscopies or endoscopies at or below the reference
price; deployed a communications strategy; included program and contact
information directly on medical cards; and posted a list of available providers
on its website. One challenge was that the organization offered first-dollar
preferred provider organization (PPO) coverage, so members were not used to
shopping for coverage. Even with the employee education tools in place, plan
members continued using referrals from their general practitioners to select
specialists for colonoscopies and endoscopies. The team determined that
engaging physicians is critical to guaranteeing program success."

The departments could encourage employers to deploy networks that involve
tiered cost-sharing to encourage plan members to select lower cost options
and ultimately lower provider prices. Tiered cost-sharing programs have had
success at the state level. The Minnesota State Employee Group Insurance
Program operates a tiered cost-sharing system where enrollees incur different
copays depending on which primary care provider they choose. The state
assigns primary care clinics to tiers based on risk-adjusted total cost of care for
the previous year, divided by the mean cost for all members. All primary care
clinics fall within 1 of 4 tiers, with tier 1 being the lowest-cost clinics. Lower
tier clinics (1 and 2) result in the lowest copays for plan enrollees. Members
were most likely to select clinics in lower tiers, and the program increased
the percentage of clinics falling in tier 1 and 2-from 49% in 2006 to 78% in
2017, This indicates that clinics elected to reduce their prices in response to
enrollee behavior."

Additional guidance from the departments would encourage employers to
design and use reference-based pricing models. In 2014, the Departments

of Labor, HHS, and Treasury addressed questions about appropriate use of
reference pricing in their ongoing guidance about ACA implementation. The
guidance stated that reference pricing can be used as a cost containment tool
and that large group health plans can use reference-based pricing without
violating the ACA. However, they said that "the Departments are concerned that
such a pricing structure may be a subterfuge for the imposition of otherwise
prohibited limitations on coverage, without ensuring access to quality care and

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an adequate network of providers."* Georgetown's Center on Health Insurance
Reform interviewed state employee health plan (SEHP) officials and found
that developing a list of "shoppable" services and determining high value
providers can be barriers to implementing reference-based pricing programs.'*
Additionally, employers and payers must develop tools that allow employees to
compare services, and these tools can require significant investments.*> Such
challenges make it harder for smaller employers to use reference-based pricing.
The Department of Labor could provide additional guidance on how employers
and TPAs can develop a reference price for a particular market, which services
are well suited for reference-based pricing, how to engage physicians, and
strategies and tools available for employee education.

With 1.5 million members, CalPERS is unique in its market power.* Most
employers do not have the volume of membership to negotiate a similar
initiative with providers. Other strategies to boost employer market power
may make it easier for employers to use reference-based pricing and
similar strategies.

To give payers leverage in consolidated provider markets:

« CMMI should design a multi-payer coalition demonstration with
employers and public-sector payers to develop high performance
networks and provide grant funding to state employee plans or
agencies to coordinate coalitions.

The problem for employers is often scale-even the largest employers do not
have the number of covered lives needed as leverage to address health care
price challenges. To increase employer purchasing power, employers can

band together with other payers to initiate strategies to bring down health
care prices, especially in consolidated provider markets. These coalitions-
sometimes called multi-payer coalitions or aggregated purchasing alliances-
spread costs among payers, allowing them to pursue innovative approaches to
improve outcomes and costs. However, private-sector employees would achieve
the greatest benefit if they partnered with public-sector payers due to market
power and scale.

Although CMMI has designed multi-payer models in the past, a recent CMMI
Teport stated that "multi-payer models designed for Medicare providers

have not consistently led to high levels of participation from Medicaid and
commercial payers.""' This lack of participation may be because employers are
not part of the model design process. If CMMI involved employers in the design
process, they may be more likely to participate in multi-payer initiatives.

Astate agency-for example, the Medicaid program, chambers of commerce,
or state employee plan-could receive a grant from CMMI to carry out
coordinating functions. States have experience as both regulators and
purchasers and could function as an intermediary between CMS and the
coalition. Additionally, CMS could provide technical assistance to the state
entity tasked with coordination. The National Academy for State Health

Policy convened a focus group of 400 state leaders and found that states need
additional support and guidance from the federal government on coordinating
with private payers and employers to achieve multi-payer alignment.'

On the state level, existing purchasing alliances and multi-payer coalitions
seek to improve health care quality and affordability for residents. The
Colorado Purchasing Alliance, established in December 2020, brings together
self-funded and fully insured employers to address unwarranted price
variation and create a sustainable model of care-building off the Colorado
State Innovation Model grant. As of July 2022, the state's employee health
plan joined the purchasing alliance, giving employers even more leverage to
negotiate health care prices.'

Although multi-payer coalitions can deploy a variety of strategies to address
health care prices in their geographic market, CMMI could require the coalition
to develop criteria for designing high performance networks, or networks that
include higher quality, lower cost providers. While narrow networks emphasize
low costs, high performance networks use both quality and cost information
and rely on data sharing to enhance coordinated care.'*' CMS could further
develop this definition of high performance networks. Using a multi-payer
coalition to design criteria for high performance networks would lower the
barriers to entry for employers, especially smaller ones. Only 18% of employers
surveyed by Willis Towers Watson in 2020 offered high performance or narrow
networks, likely due to the time and resources needed to develop criteria and
select providers.'*? Moreover, employers may have reservations about making
these investments, especially in the face of employee backlash to narrower
networks. Joining forces with other payers to develop these networks would
increase the potential for cost savings: Multiple payers working together are
more likely to secure discounts from providers. In 2017, for example, Home
Depot worked with Imagine Health to develop and offer a high value provider
network to its employees. To be included in the network, providers agreed to
make price concessions-leading to cost savings. The plan offers unlimited
primary care visits and a lower out-of-pocket maximum and copayments.
Nearly 75% of Home Depot employees in markets where high value network
plans were offered selected those plans during open enrollment.'® Although
this strategy worked for Home Depot, many employers do not have the
resources or covered lives to design and implement a high value provider
network and secure cost savings. As such, a multi-payer coalition may enable
even smaller employers to use them as an effective cost-saving strategy.

To the extent a multi-payer coalition pursues narrow or tiered networks or
alternative payment arrangements with providers, the coalition can also pool
resources to support associated administrative costs. For example, tiered
networks can expose employees to high out-of-pocket costs unless they have
actionable information about differential cost-sharing at the time they need

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to use the services. A multi-payer coalition could design communication
strategies and develop tools to allow employees to compare providers and shop
for services.

To promote pharmaceutical competition by encouraging biosimilar
market uptake:

* Congress should prohibit settlements between biologic and
biosimilar manufacturers that postpone the market entry of lower
cost biosimilars.

¢ TheU.S. Food and Drug Administration (FDA) should issue guidance
to promote regulatory clarity in the biosimilar marketplace,
including establishing clearer standards for interchangeability of
biologic products.

Scientific advances in the pharmaceutical sector have led to new treatments for
a multitude of acute and chronic illnesses. While policymakers value the need
to support continued innovation, they also seek ways to reduce pharmaceutical
expenditures and increase the affordability and accessibility of drugs. Nearly
half of pharmaceutical spending in the United States is on specialty drugs,
primarily biologic medicines-pharmaceuticals derived from living systems.
Similar to generics for small molecule pharmaceuticals, biosimilars are
follow-on pharmaceutical products that are highly similar to the originator
biologics and have the potential to decrease health care expenditures on

drugs through competition. Biosimilar list prices tend to be 15% to 35% lower
than the originator's price and have the potential to decrease spending on
pharmaceutical drugs by $38.4 billion between 2021 and 2025.' One analysis
found that self-insured employers would have saved $1.4 billion in 2018 alone
if they had utilized biosimilars for two biologic products (infliximab and
filgrastim).'© Although biologics have been on the market for decades, there was
no pathway for biosimilar approval until the ACA's Biologics Price Competition
and Innovation Act was enacted. Despite the existence of this pathway,

the biosimilar market in the United States has not taken off due to biologic
manufacturers' tactics and the lack of clarity around certain regulations."

Biologic manufacturers sometimes engage in "pay-for-delay" tactics to
postpone biosimilar entry into the market and avoid lower cost competition.
The patent for Humira, the world's most profitable drug, expired in 2016,

but six biosimilars will not enter the market until 2023 due to settlement
agreements between the originator's manufacturer (AbbVie) and biosimilar
manufacturers.' Bipartisan legislation, the Preserve Access to Affordable
Generics and Biosimilars Act (S. 1428), aims to end these "pay-for-delay" deals.

 

Vv According to the FDA, 36 biosimilars have been approved in the U.S.
Biosimilats are subject to stricter regulations than their small molecule
counterparts, and the FDA could issue additional guidance on some of these
regulations. For example, biosimilar manufacturers must separately seek FDA
approval as an interchangeable product and demonstrate "interchangeability"
before a biosimilar product can be treated as a substitute for the originator
biologic. Even after a biosimilar product receives approval, it must be deemed
"interchangeable" before it can be sold on the market. In 2019, the FDA released
guidelines for interchangeability testing standards, allowing pharmacists to
replace a biologic product with a biosimilar without consulting a physician.
However, substitution laws vary by state. Clearer federal standards for these
regulations and education, especially on interchangeability, may encourage
biosimilar market uptake and allow for substitution.

The BPC team addressed other strategies to tackle prescription drug prices

in greater detail in a report, Examining Two Approaches to U.S. Drug Pricing:

International Prices and Therapeutic Equivalency." To date, many of the options
to mitigate the high price of drugs have focused on increasing competition

and transparency in the pharmaceutical sector, as well as on increasing value-
based payments based on outcomes achieved. However, this report examines
two additional tools: external reference pricing and internal reference pricing.
External reference pricing uses international prices as a benchmark to set or
negotiate the price of drugs. Internal reference pricing, which could be used in
various scenarios to ensure that therapeutically equivalent drugs are priced
similarly, encourages the use of the least costly alternative therapy.

40
 

A

   

SECTION IV: PROVIDE OTHER OPTIONS
FOR HEALTH INSURANCE AFFORDABILITY

While more than 70% of workers, on average, accept access to ESI when it

is offered, this percentage is less-63%-among companies that employ a
larger share of lower-wage employees.'°® Furthermore, and as compared to
higher-income earners, lower-wage worker spend a higher percentage of their

income on health care costs.' In general, then, ESI remains less affordable for
lower-wage employees. To increase health care affordability for lower-income
workers and expand health care coverage options, even outside of traditional
group health coverage, the following options might also be considered.

To increase health care affordability and expand health care
coverage options:

* Congress should adjust the ESI affordability firewall to align with
the ACA marketplaces' percentage cap for contributions to health
insurance premiums.

Under the ACA, ESI is considered "affordable" so long as an employee's
premium contributions are less than 9.5% of household income. This threshold
is also known as the affordability firewall. Adjusted for 2022, the ACA
marketplace currently offers subsidies for individuals enrolled in ESI if they
spend more than 9.61% of their household income on their company's health
plan premium. The inflation-adjusted amount for 2023 is 9.12%.

Congtess should alter the threshold of ESI subsidy eligibility-or affordability
firewall-to match the maximum percentage of income an individual or family
must contribute toward premiums for an ACA marketplace benchmark plan.
This would encourage employers to either make coverage more affordable
or allow employees to move to the ACA marketplace.' Most important,
such a change would allow for greater policy consistency and reduce
consumer confusion.

According to the Peterson-KFF Health System Tracker, lower-wage workers
spend a greater percentage of their income to afford health care compared with
higher-wage workers.'7 While an average individual with employer coverage
will pay 4% of their income toward premium contributions and out-of-pocket
payments, this percentage jumps to 10.4% for individuals making 199% or less
of the federal poverty level.' The coverage offered is also often less robust.'

Furthermore, the Center on Budget and Policy Priorities has suggested

that the affordability firewall at its current threshold results in lower-wage
workers being worse off than if they had no coverage offer at all, because

they would then be free to shift to the ACA marketplace for more affordable
coverage.'" This reality has led some stakeholders to suggest eliminating

the affordability firewall in full, although such a step would likely be quite
expensive for the federal government due to the expected influx of employees
to the ACA Marketplace.'" Adjusting the threshold to align with the maximum
premium contribution threshold for ACA marketplace premiums, then,
represents a middle ground between doing nothing and eliminating the
affordability firewall.

The Build Back Better Act (BBBA), which passed in the House of
Representatives in November 2021 but ultimately never cleared Congress in
its original form, would have temporarily reduced the affordability threshold
to 8.5%. Under the BBBA, the affordability firewall would have been reduced to
8.5% from 2022 to 2025, following which the threshold would return to 9.5%.

To allow employers to utilize alternatives to traditional group
health insurance:

* The Departments of Labor, HHS, and Treasury could provide guidance
on and make improvements to alternatives to traditional group health
insurance such as ICHRA and State Employee Health Plan buy-ins.

A variety of alternatives to traditional group health offerings are at an
employer's disposal. These alternatives, including Individual Coverage Health
Reimbursement Arrangements (ICHRAs) and allowing private employers to buy
into state employee health plans, could ease affordability problems. However,
there are certain risks, opportunities, and barriers that employers and states
must understand before utilizing these strategies. Likewise, ICHRAs, in their
current structure, open the door to exacerbated health care discrimination and
could undermine risk pools-pointing to the need for improvements.

ICHRAs allow employers to make defined contributions for employees to
purchase health insurance on their own through the ACA marketplace.
Although health reimbursement arrangements have existed for some time, a

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2019 regulation allows employers to use an ICHRA to subsidize premiums on
the individual market. While a small percentage of employers are currently
utilizing ICHRA, a survey conducted by Kaiser Family Foundation found

that 9% of smaller firms (50-99 workers) are "very likely" to offer ICHRAs to
employees in the next couple of years." Employers may feel that offering a
traditional health plan is a critical recruitment and retention tool and have
opted to forgo utilizing ICHRA, but it is also the case that many employers are
unaware of this option.

The federal government does not allow employers to offer employees a

choice between ICHRA and a traditional group health insurance plan. The
Department of Labor, HHS, and Department of Treasury (Tri-Agencies)
prohibited such a choice because "employers would also face strong
countervailing incentives to maintain (or improve) the average health risk of
participants in their traditional group health plans."'"" Commenters responding
to the ICHRA final rule voiced concerns that the arrangement would allow
employers to dump older, sicker employees onto the individual market.'
ICHRA currently contains nondiscrimination provisions intended to guard
against discrimination favoring highly compensated individuals and benefits
tests based on participant age.' However, experts disagree about whether
these provisions would sufficiently protect older, sicker employees and limit
adverse selection. In theory, if the departments allowed it, an employer

could offer a choice between the group health insurance plan and individual
marketplace coverage but design the group health insurance option so that

it is unappealing to sicker workers. The Tri-Agencies could make meaningful
adjustments to the program and alleviate these concerns with simple and
equitable adjustments to the rule.

Despite the availability of CMS premium look-up tools, ICHRA uptake has
been slow. HHS could conduct outreach and education to industries whose
workers would most benefit from a shift to the marketplace (for example, small
firms that cannot provide affordable, comprehensive coverage to employees).
The CMS IGHRA Employer Lowest Cost Silver Plan Premium Look-up Table

is intended to help employers decide whether ICHRA is the right option for
their employees by giving them access to marketplace premium information
by geographic location."° However, employers may need to consider several
variables before choosing ICHRA. Additional assistance from HHS, the Labor
Department, and Treasury could help employers make more informed decisions
about ICHRA and to structure benefits in a way that does not create inequities.
The Robert Wood Johnson Foundation is conducting an outreach campaign
aimed at employers to correspond with open enrollment for plan year 2023.

In Colorado, the Peak Health Alliance is working with small businesses to
increase uptake of ICHRA.

Although ICHRA may be a good option for some employers, individual
coverage in some markets is more expensive than the small-group market.
Employees are currently ineligible for premium tax credits if an ICHRA is
deemed affordable. This affordability is based on the lowest cost silver plan,

the employee's primary residence, and the employee's household income.'®

In many markets, ACA marketplace plans cost more than traditional group
coverage through an employer. Additionally, stakeholders have raised concerns
that marketplace plans offer less robust coverage than traditional employer
group health insurance plans.'*? Despite affordability concerns, employees who
receive an offer of an ICHRA that is "unaffordable" are able to get premium tax
credits on the marketplace. However, giving employees a fixed dollar amount to
shop for plans on the marketplace may expose them to higher costs.

Policy experts disagree about ICHRA's impact on marketplace premiums. One
theory posits that increasing employer use of ICHRA would encourage more
plans to enter the ACA marketplace-thereby making it a more competitive
arena where insurers compete to offer affordable, robust coverage. Advocates of
this theory support requiring newly incorporated businesses to offer coverage
through ICHRA to receive a tax break."** On the other hand, a Brookings
analysis found that allowing employers to offer ICHRA alongside a traditional
group health insurance plan could increase marketplace premiums by 16% to
93%, depending on how aggressive employers are about shifting employees to
marketplace coverage.'** To avoid unintended consequences, the departments
could strengthen existing ICHRA safeguards and conduct education and
outreach to employers that may benefit from allowing employees to purchase
coverage on the individual market. Additionally, the announcement by the
Center for Consumer Information and Insurance Oversight of a plan to track
ICHRA use beginning in 2023 will allow analyses of the potential selectivity of
ICHRA enrollees.

To further avoid unintended consequences and the likelihood that the system
will lead to further health inequities, adverse effects on lower-wage workers,
and a destabilization of the risk pool, the Tri-Agencies could consider the
following improvements:

¢ Ending the age discrimination requirement. Under current ICHRA policy, older
workers have to pay more than a younger worker for the same individual
market coverage because of the ACA's 3:1 age rating rules." Employers could
be required-or at least permitted-to contribute enough to older workers'
ICHRAs to hold them harmless.

¢ Reducing the potential for employers to shift risk. Current ICHRA rules allow
employers to offer ICHRAs only to certain classes of employees, such as
hourly versus salaried workers. Eliminating this option would reduce
the potential that some employers would offer ICHRAs only to classes of
employees with a sicker profile.

 

vi The ACA's 3:1 age-rating rule prevents insurers from charging older adults (over 64)
more than three times the premium paid by a 21-year-old with the same coverage.

44
45

* Protecting workers from "junk" plans. Current rules require workers to use the
ICHRA for ACA-compliant coverage, but that is often difficult for the average
consumer to discern, particularly with the proliferation and deceptive
marketing of short-term and other less comprehensive insurance products.
Employers should be required to substantiate that their workers are, in fact,
purchasing ACA-compliant individual policies.

¢ Collect information about ICHRA's market impact. Even with the changes
described above to deter risk sorting, ICHRAs may harm the individual
market risk pool (and increase federal costs) because they disproportionately
appeal to employers with sicker workforces, who can use them to shift
tisk onto the community-rated individual market. Because carriers do
not generally know which enrollees use ICHRA, there is currently no
information about the risk characteristics of employees with ICHRAs.
Federal agencies could require ICHRA plan sponsors to provide reporting
that allows research about ICHRAs' market impact.

Another option for private employers could involve collaborative purchasing
agreements, such as partnerships with State Employee Health Plans (SEHPs).
These plans are often the largest employer purchaser in their state and are
uniquely positioned to deploy strategies to target high prices. SEHPs have
used a variety of innovative models to address the rising cost of care in their
states, for example reference-based pricing strategies in California or hospital
payments caps using Medicare as a benchmark." As a result of pressures
from state employees, these plans also tend to be more affordable and more
comprehensive than their commercial counterparts.

States have been reluctant to allow private employers to buy into the state plan
because they would risk losing their status under ERISA as a "governmental"
plan. States want to maintain this designation because it allows them

to exempt themselves from certain Public Health Service Act (PHSA)
requirements that apply to commercial plans. In an advisory opinion to the
governor of Connecticut, the U.S. Department of Labor stated, "Section 3(32)

of ERISA defines the term 'governmental plan,' in pertinent part, as 'a plan
established or maintained for its employees by the Government of the United
States, by the government of any State or political subdivision thereof, or by
any agency or instrumentality of any of the foregoing." Although the Labor
Department does allow nonprofit organizations that contract with federal,
state, and local governments to participate in a State Employee Health Plan
without affecting its status as a governmental plan under Section 3(32), other
private entities cannot participate due to the "governmental plan" definition.
The Department of Labor could consider allowing states to request a waiver to
establish a SEHP buy-in option and establish a threshold for how many private
employers are allowed to opt into the plan. A threshold for the maximum
number of employers or covered lives allowed to participate in a State Employee
Health Plan, or limiting participation to small employers, could make the
option more appealing to states. In BPC interviews, some stakeholders stated
that the Department of Labor does not have any authority to allow waivers

to the statutory definition of a governmental plan or allow more than a de
minimus number of non-governmental employees to be covered by a SEHP and
any action to change these would require Congressional action.

States fear that allowing private employers to buy into their SEHP could raise
plan premiums and adversely affect risk pools. A RAND analysis found that
expanding eligibility for the SEHPs in Connecticut would improve affordability
while having little to no impact on the state's budget. Costs associated with
SEHPs were substantially lower than employer-sponsored coverage. A Manatt
model exploring a buy-in option to Nevada's Public Employee Benefits Program
(PEBP) found that projected premiums would be 9% lower than similar plans on
Nevada Health Link (the state's ACA marketplace). However, the buy-in would
raise PEBP premiums by 2% to 3%.!*'Allowing states to develop a waiver option
would enable them to design a buy-in option that suits their needs in a way
that does not negatively affect SEHP premiums.

46
47

Conclusion

Although a majority of Americans rely on employer-sponsored insurance
for their health benefits, ESI is on an unsustainable trajectory due to high
and rising health care costs. Policymakers must act to address underlying
cost drivers and empower employers with payment and pricing tools.

Administrators, policymakers, and regulators can restrain costs and improve
the ESI system by increasing transparency in the health care system and
ensuring existing transparency laws produce actionable data. Such changes
would give employers the tools needed to design high value networks and
address market power dynamics. This would also ensure that employers
have other options for extending health insurance affordability.

Improving and strengthening our current system is the most politically
viable approach to improving health outcomes and controlling health care
cost growth.
Endnotes

10

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U.S. Government Accountability Office, "Medicare Hospice Care: Opportunities Exist to
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L. Dafny, "How Health Care Consolidation Is Contributing to Higher Prices and
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54
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91 U.S. Department of Labor, Employee Benefits Security Administration, "Information
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92 K.Handorf and J. Selesnick, "Engaging and Health Plan TPAs: Understanding
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93 U.S. Department of Labor, "Manager Of Health Care Network To Reimburse Plans

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94 K. Malone, D. Shillcutt, et al., "U.S. Department of Labor Settles Unprecedented
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95 Society for Human Resource Management, "What is a fiduciary, and what are
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person, Income%20Security%20Act%20(ERISA).

96 The ERISA Industry Committee, "Removing Illegal Gag Clauses is Vital to Reducing
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97

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98S. Delbanco, R. Murray, et al., "Payment Methods and Benefit Designs: How They
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99 M. Garrity, "Walmart Sees Benefit of Flying Employees to Top Hospitals
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100 S. Corlette, M. Kona, and M. Houston, Unleashing the Giant: Opportunities for State
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101 S. Delbanco, R. Murray, et al., "Payment Methods and Benefit Designs: How They
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102 K. Hartnett, "States to give low-income patients access to top-tier cancer providers,"
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103 R. Rosenblatt, "MEDICARE / CUTTING COSTS: 4 to 6 Hospitals to Be Chosen
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104 N. Tepper, "National center of excellence programs foster growing discontent
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105 Centers for Medicare and Medicaid Services, "No Surprises: Understand
your rights against surprise medical bills," January 3, 2022. Available at:
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inst-surprise-medical-bills.

106 Centers for Medicare and Medicaid Services, "Advisory Committee on Ground
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regulations-guidan isory-commi i -committee-ground-ambulan

 

107 K. Pollitz, "No Surprises Act Implementation: What to Expect in 2022," Kaiser Family
Foundation, December 2021. Available at: https://www.kff.org/health-reform/issue-
brief/no-surprises-act-implementation-what-to-expect-in-2022/.

 

108 E.Sun, M. Mello, et al., "Assessment of Out-of-Network Billing for
Privately Insured Patients Receiving Care in In-In Network Hospitals,"
JAMA Internal Medicine, 179(11): 1543-1550, 2019. Available at:
https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2740802.

109 U.S. Department of Health and Human Services, Office of the Assistant
Secretary for Planning and Evaluation, Evidence on Surprise Billing:
Protecting Consumers with the No Surprises Act, November 2021. Available at:
https: hh repor idence-surprise-billing.

110 AHIP, "New Study: No Surprises Act Prevented Over Two Million Potential Surprise
Bills for Insured Americans," May 24, 2022. Available at: https://www.abip.org/new:
Tess-rel new- -Tlo-surprises-act-prevented-over- illi i

   

111 L. Adler, M. Fiedler, et al., "Understanding the No Surprises Act," USC-Brookings
Schaeffer Initiative for Health Policy, February 4, 2021. Available at:

https://www.brookings.edu/blog/usc-brookings-schaeffer-on-health-
licy/2021/02/04/understanding-the-no-surprises-act/

112 M. O'Brien, J. Hoadley, and M. Kona, "Protecting Consumers from Surprise
Ambulance Bills," Commonwealth Fund, November 15, 2021. Available at:
https://www.commonwealthfund.org/blog/2021/protecting-consumers-surprise-
ambulance-bills.

113 K.Amin, K. Pollitz, et al.," Access & Affordability: Ground ambulance rides and
potential for surprise billing," Peterson-KFF Health System Tracker, June 2021.
Available at: https: health mtracker,org/brief/gr

56
57

114

115

116

117

118

119

120

121

122

123

124

125

126

127

M. O'Brien, J. Hoadley, and M. Kona, "Protecting Consumers from Surprise
Ambulance Bills," Commonwealth Fund, November 15, 2021. Available at:
https://www.commonwealthfund.org/blog/2021/protecting-consumers-surprise-
ambulance-bills.

K. Chhabra, K. McGuire, et al., "Most Patients Undergoing Ground and Air Ambulance
Transportation Receive Sizeable Out-Of-Network Bills," Health Affairs, 39(5), 2020.
Available at: https:/Awww.healthaffairs.org/doi/abs/10,1377/hithaff.2019,01484,

R. Golden, "Trump signs bill repealing ACA Cadillac tax, granting 'relief' for employers,"
HR Dive, December 23, 2019. Available at: https://www.hrdive.com/news/trump-signs-
bill-repealing-aca-cadillac-tax-granting-relief-for-employer/569551/.

American Academy of Actuaries, "Issue Paper: High-Performance Networks," February
2018. Available at: https://Awww.actuary.or ntent/high-performance-networks-0,

J. Capretta, "The Future of Employer-Sponsored Health Insurance," American
Enterprise Institute, November 2020. Available at: https://www.aei.org/wp-content/
uploads/2020/12/The-Future-of-Employer-Sponsored-Health-Insurance.pdf.

Kaiser Family Foundation, 2021 Employer Health Benefits Survey, November

2021. Available at: https://www.kff.org/health-costs/report/2021-employer-
health-benefits-survey/.

Ibid.

Health Care Cost Institute, "Hospital Concentration Index: An Analysis of U.S. Hospital
Market Concentration," June 2022. Available at: https://healthcostinstitute.org/heci-
originals/hmi-interactive#HMI-Concentration-Index.

K. Schwartz, E. Lopez, et al., "What We Know About Provider Consolidation," Kaiser
Family Foundation, September 2020. Available at: https://www.kff.org/health-costs/
issue-brief/what-we-know-about-provider-consolidation/.

K. Gudiksen, A. Montague, et al., "Preventing Anticompetitive Contracting Practices in
Healthcare Markets," The Source on Healthcare Price & Competition and Petris Center,
September 2020. Available at: https://2zelelbn0Os12i9lio41niael- ngine,n

Practices-in-Healthcare-Markets-FINAL.pdf.

Office of U.S. Senator Tammy Baldwin, "Baldwin & Braun introduce bipartisan
legislation to crack down on anti-competitive practices in health care," November 3,
2021, Available at: https: aldwin.sena' v/news/press-telea aldwin-and-

   

D. Scheinker, B. Richman, et al., "Reducing administrative costs in US health care:
Assessing single payer and its alternatives," Health Services Research, 56(4): 615-625,

2021. Available at: https://pubmed.ncbi.n]m.nih.gov/33788283/

Ibid.

Centers for Medicare and Medicaid Services, "Qualified Health Plan Certification,"

2022. Available at: https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-
Insurance-Marketpla hp.
128 J. King, S. Chang, et al., "Preventing Anticompetitive Healthcare Consolidation: Lessons
from Five States," The Source on Healthcare Price & Competition and Petris Center,
June 2020. Available at: https://papers.ssrn,.com/sol3/papers.cfm?abstract_id=

129 K. Schwartz, E. Lopez, et al., "What We Know About Provider Consolidation," Kaiser
Family Foundation, September 2020. Available at: https://www.kff.org/health-costs/
i -brief/what-we-know-about-provider-consolidation/

130 L. Gustafsson and D. Blumenthal, "The Pandemic Will Fuel Consolidation
in U.S. Health Care," Harvard Business Review, March 9, 2021. - Available at:

 

131 A. Gale, "Bigger But Not Better: Hospital Mergers Increase Costs and Do Not Improve
Quality," Missouri Medicine, 112(1): 4-5, 2015. Available at: https://www.ncbi.nlm.nih.
gov/pmc/articles/PMC6170097/

132 MedPAC, March 2020 Report to the Congress: Medicare Payment Policy, March 2020.
Available at: https://www.medpac.gov/document/http-www-medpac-gov-docs-default-
rce-reports-mar20_entirereport -pdf/.

133 H. Meyer, "Biden's FTC Has Blocked 4 Hospital Mergers and Is Poised to Thwart
More Consolidation Attempts," Kaiser Health News, July 18, 2022. Available at:

 

134 Federal Trade Commission, "FTC Sues to Block Merger Between New Jersey Healthcare
Rivals RWJBarnabas Health and Saint Peter's Healthcare System," June 2, 2022.
Available at: https://www. fe, gov/news- events/news/press- releases/2022/06/Ilec- sues-

 

135 The White House, "FACT SHEET: Executive Order on Promoting Competition in the
American Economy,' July 9, 2021. Available at: https://www,whiteh v/briefing-

 

136 Federal Trade Commission, "FTC Appropriation and Full-Time Equivalent (FTE)
History," 2022. Available at: https://www.ftc.gov/about-ftc/bureaus-offices/office-
executive-director/financial-management-office/ftc-appropriation.

137 Ibid.

138 D. McCabe, "Mergers are spiking, but antitrust cop funding isn't," Axios, May 7, 2018.
Available at: https://www.axios.com/2018/05/04/antitrust-doj-ftc-funding.

139 U.S. Department of Justice, "Appropriations Figures for the Antitrust Division:
Fiscal Years 1903-2021*," February 2020. Available at: https://www.justice.gov/atr/
appropriation-figures-antitrust-division.

140 US. Office of Management and Budget and The White House, Budget of the U.S.

Government: Fiscal Year 2023, 2022. Available at: https://www.whitehouse.gov/wp-
content/uploads/2022/03/budget_ fy2023.pdf.

141 H.J. Jiang, K. Fingar, et al., "Quality of Care Before and After Mergers and Acquisitions
of Rural Hospitals," JAMA Network Open, 4(9), 2021. Avaliable at: https://jamanetwork,
com/journals/jamanetworkopen/fullarticle/2784342.

58
59

142

143

144

145

146

147

148

149

150

11

152

153

154

155

R. Abelson, "When Hospitals Merge to Save Money, Patients Often Pay More," The New
York Times, November 14, 2018. Available at: https://www.nytimes.com/2018/11/14/
health/hospital-mergers-health-care-spending, html.

N. Petris, Consolidation in California's Health Care Market 2010-2016: Impact on Prices and
ACA Premiums, Match 2018. Available at: https://petris.org/consolidation-in-californias-
health-care-market-2010-2016-impact-on-prices-and-aca-premiums/.

Ibid.

Physicians Advocacy Institute, "Updated Physician Practice Acquisition Study:
National and Regional Changes in Physician Employment 2012- 2018," February
2019, Available at: http: hysician: insti rg/Portal:

L. Kaiser, "Chapter 24: Market Consolidation and Alignment," in The Transformation
of Academic Health Centers: The Institutional Challenge to Improve Health and Well-
Being in Healthcare's Changing Landscape, ed. S. Wartman (Academic Press, 2015),

239-249. Available at: Available at: https://www.sciencedirect.com/science/article/
ii/B978012 7624 244

U.S. Department of Justice, "HERFINDAHL-HIRSCHMAN INDEX," Available at:
https://www.justice.gov/atr/herfindah!-hirschman-index.

M. Pany, M. Chernew, and L. Dafny, "Regulating Hospital Prices Based on Market
Concentration is Likely to Leave High-Price Hospitals Unaffected," Health Affairs, 40(9):
1386-1394, 2021. Available at: https://www.hbs.edu/ris/Publication%20Files/Pany%20
Dafny%20Chern 20-%20Regulating%20Pri Z: -7b48-4535-befe-

d94a2fd39c9b.pdf.

C. Whaley, "Sources of Health Care Price Variation Create Barriers To
Measuring Health Care Costs," Health Affairs, December 13, 2021. Available at:

https://www.healthaffairs.org/do/10.1377/forefront.20211212.305573.

H. Zhang, D. Cowling, and M. Facer, "Comparing The Effects Of Reference Pricing And
Centers-Of-Excellence Approaches To Value-Based Benefit Design," Health Affairs,
36(12), 2017. Available at: https://www.healthaffairs.org/doi/10.1377/hlthaff.2017.0563.

Catalyst for Payment Reform, "Reference Pricing The Home Depot, Inc.," April
2018. Available at: https://www.catalyze.org/product/reference-pricing-home-

depot-employer/,

T. McDonald and K. White, "Clinic Price Reductions in a Tiered Total Cost
Benefit Design," The American Journal of Managed Care, 7(9), 2021. Available
at: . : . we eae . :
cost-benefit-design.

Centers for Medicare and Medicaid Services, "FAQs About Affordable Care Act
Implementation (Part XIX)," May 2014. Available at: https://www.cms.gov/CCIIO/
Resources/Fact-Sheets-and-FAQs/aca_implementation faqs19.

S. Corlette, M. Kona, and M. Houston, Unleashing the Giant: Opportunities for State
Employee Health Plans to Drive Improvements in Affordability, June 2021. Available at:

https://sehpcostcontainment.chir.georgetown.edu/documents/SEHP-report-final.pdf.

Ibid.
156 CalPERS, "About CalPERS," 2021. Available at: https://www.calpers.ca.gov/docs/forms-
publications/facts-about.pdf.

157 Centers for Medicare and Medicaid Services, "Innovation Center Strategy Refresh,"
October 2021. Available at: https://innovation.cms.gov/strategic-direction-whitepaper.

158 National Academy for State Health Policy, "Multi-Payer Alignment on Value-Based
Care," June 2022. Available at: https://nam 'wp-conten loads/2022/06/Multi-
Payer-Alignment-on- i i i

 

159 Colorado Business Group on Health, "The Colorado Purchasing Alliance," 2021.
Available at: https: health org/the-colorado-purchasing-allian

160 J. Ingold, "Why Colorado's state employee health insurance plan just made a pretty
significant change," Colorado Sun, August 22, 2022. Available at: https://coloradosun.

com/2022/08/22/colorado-health-insurance-purchasing-alliance/,

161 J. Atkins, "Defining High-Performance Networks," Blue Cross Blue Shield, June 2019,
Available at: https://www.bcbs.com/smarter-better-healthcare/article/defining-high-
performance-networks,

162 Willis Towers Watson, "2020 Health Care Delivery Survey.," October 2020. Available at:
https://www.wtwco.com/en-US/Insights/2020/10/2020-health-care-delivery-survey.

163 Catalyst for Payment Reform, "Reference Pricing The Home Depot, Inc.," April 2018.
Available at: https://www.catalyze.org/product/reference-pricing-home-depot-

employer/

164 A. Mulcahy, C. Buttorff, et al., "Projected US Savings From Biosimilars, 2021-2025,"
The American Journal of Managed Care, 28(7), 2022. Available at: https://www.ajmc.com/

165 The ERISA Industry Committee, "Biosimilars: Employers and Employees See Savings,
More Competition Needed," March 2020. Available at: https://www.eric.org/wp-
content/uploads/2020/03/ERIC-Biosimilars-Initiative.pdf.

166 L. Karas, R. Sachs, and G. Anderson, "Legal Obstacles to Biosimilar Market Entry,"
Harvard Public Health Review, 28, 2021. Available at: https://hphr.org/28-article-laura/.

167 G.W. Hoagland, A. Parekh, et al., Examining Two Approaches to U.S. Drug Pricing,
Bipartisan Policy Center, October 2019, Available at: https://bipartisanpolicy.org/
report/examining-two-approaches-to-u-s-drug-pricing/.

168 Kaiser Family Foundation, 2021 Employer Health Benefits Survey, November
2021. Available at: https://www.kff.or alth-costs/report/2021-empl
health-benefits-

169 G. Claxton, M. Rae, et al., "How affordability of employer coverage varies by
family income," Peterson-KFF Health System Tracker, March 2022. Available at:

 

income-among-people-with-employer-coverage/#Average%20share%200f%20family%20
income%20going%20toward%20employer-based%20health%20insurance%20

remium%20contributions%20and% -of-pocket%2 202
61

170

171

172

173

174

175

176

177

178

179

180

181

182

T. Straw, "Trapped by the Firewall: Policy Changes Are Needed to Improve Health

Coverage for Low-Income Workers," Center on Budget and Policy Priorities, December

3, 2019. Available at: https://www. 1g/research/health/tra -by-the-firewall-
licy-changes-are-ni -to-improve-health- rage-for.

G. Claxton, M. Rae, et al., "How affordability of employer coverage varies by
family income," Peterson-KFF Health System Tracker, March 2022. Available at:
https://www.health emtracker,org/brief/how-affordability-of-health-care-

varies-by-income-among-people-with-employer-coverage/#Average%20share%20
f%20family%20income%20g0ing%20toward%20employer-ba 20health%20

insurance%20premium%20contributions%20and%2 -of-pocket%2 %202020,
Ibid.

T. Straw, "Trapped by the Firewall: Policy Changes Are Needed to Improve Health
Coverage for Low-Income Workers," Center on Budget and Policy Priorities, December
3, 2019. Available at: https://www.cbpp.org/research/health/trapped-by-the-firewall-
policy-changes-are-needed-to-improve-health-coverage-for.

Ibid.
Ibid.

Avalere Health, "Impact of Individual Coverage Health Reimbursement Arrangements
on Employees with Group Health Coverage," February 2022, Available at:

U,S, Internal Revenue Service, Employee Benefits Security Administration,
and Department of Health and Human Services, "Health Reimbursement
Arrangements and Other Account-Based Group Health Plans," Federal Register,
84 FR 28888, June 20, 2019. Available at: https://www.federalregister.gov/
ments/201 20/2019-12571, Ith-reimbursement-arrangements-and-other-

Avalere Health, "Impact of Individual Coverage Health Reimbursement Arrangements
on Employees with Group Health Coverage," February 2022. Available at:
https://avalere.com/wp-content/uploads/2022/02/ICHRA-Whitepaper.pdf.

Conner, Strong & Buckelew, "Affordability and Nondiscrimination Rules for
Individual Coverage HRAs," October 22, 2019. Available at: https://www.connerstrong.
om/blog/insi . eye se ee ; eyes

coverage-hras/,

    

Ibid.

S. Keely, "How ICHRA and premium tax credits work," Take Command, June 9,
2021. Available at: https://www.takecommandhealth.com/blog/ichra-a
tax-credits.

 

P. Jacobs and S. Hill, "ACA Marketplaces Became Less Affordable Over Time For Many
Middle-Class Families, Especially The Near-Elderly," Health Affairs, 40(11), 2021.
Available at: https://www.healthaffairs.org/doi/full/10.1377/hithaff.2021.00945.
183 A. Roy, "Trump could revolutionize the private health insurance market,"

 

4-9124-11e9- -74e6b2b46f ry.html.

184 M. Fiedler, "Effects of weakening safeguards in the Administration's Health
Reimbursement Arrangement proposal," USC-Brookings Schaeffer Initiative for
Health Policy, December 28, 2018. Available at: https://www.brookings.edu/research/

effects-of-weakening-safeguards-in-the-administrations-health-reimbursement-
arrangement-pr al/.

185 S.Corlette, M. Kona, and M. Houston, Unleashing the Giant: Opportunities for State
Employee Health Plans to Drive Improvements in Affordability, June 2021. Available at:
https://seh; tcontainment.chir, georgetown. ments/SEHP-report-final. pdf.

186 P. Rao, F. Girosi, et al., Increasing Subsidies and Expanding Health Insurance Options
in Connecticut, RAND Corporation, 2022. Available at: https://www.rand.org/pubs/
research _teports/RRA1276-2.html.

187 C. Brooks-LaSure, K. Ellis, et al., Senate Concurrent Resolution No. 10 Study: Evaluating
Public Health Insurance Plan Options for Nevada Residents, Manatt, January 2021. Available
manatt.com/Manatt/media/Documents/Articles/Manatt-Health
Nevada-Concurrent-Resolution-No-10-Public-Option-Study_January-17-2021 pdf.

62
   
 
 
 
  
   
  
 
 
 
 
   
 
 
    

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