Reducing Health Care Costs For Working Families

Testimony of Sabrina Corlette, J.D. before the U.S. House of Representatives Education & Workforce Health Subcommittee, April 26, 2023

Good morning Chairman Good, Ranking Member DeSaulnier. My name is Sabrina Corlette and I am a Research Professor at Georgetown University’s McCourt School of Public Policy.

It is an honor for me to be part of this discussion of policies to help reduce health care costs for working people and their families.

In recent years Congress has made several attempts to improve health care access, affordability, and quality. None has had a greater impact than the Patient Protection and Affordable Care Act (ACA).

Today, Americans with ESI take for granted many of the protections they enjoy under the ACA, including protections for people with pre-existing conditions, coverage for young adults, cost-free preventive services, and caps on our annual out-of-pocket costs.

More recently, the Consolidated Appropriations Act of 2021 (CAA) now protects 177 million consumers from unexpected medical bills and helps empower employers to be more effective purchasers of health benefits.

And last year, the Inflation Reduction Act (IRA) has helped advance the coverage and affordability gains under the ACA and is lowering prescription drug costs for Medicare enrollees.

However, challenges remain. Since 1999, employee contributions to premiums have increased by about 300%, and the average deductible for a single worker has risen from $303 in 2006 to $1,562 in 2022.

The primary reason for the affordability challenges in ESI is rising health care prices. On average, commercial insurers are paying twice the amount that Medicare pays for the same service.

There are a number of reasons for this. First, consolidation in the health care sector is granting providers with outsized market power to demand higher reimbursement rates.

Second, a lack of price transparency has left many employers in the dark about what is driving cost growth.

Third, many of the third-party vendors that employers use to shape and administer their health plans have financial incentives to keep health care costs high.

Employers cannot solve the affordability crisis in health care alone – they need support from policymakers.

Unfortunately, three of the four concepts under consideration today do not address the cost drivers in our system. They simply shift the burden of cost growth to employers with older, less healthy workforces.

First, Association Health Plans: The primary way AHPs can offer low premium rates is through the exemption from ACA rating regulations. This enables them to cherry pick healthy employer groups out of the ACA-regulated market. AHPs just create new winners and losers, with the losers being those who are older and sicker.

Second, the “Self-insurance Protection Act”: The proposal would further encourage the proliferation of level-funded plans in the small-group market, posing two primary risks. First, many small employers may be exposed to unexpected financial liability when they self-fund their plan.

Second, if small employers with younger, healthier employees shift to level-funded products in significant numbers, it will leave employers with older, sicker workers behind. This causes adverse selection, where premium rates rise for employers whose groups cannot pass the stop-loss issuers’ underwriting.

Just as with AHPs, this legislation does nothing to address the underlying reason why there is an affordability crisis for ESI: the prices that commercial insurers pay for provider services and prescription drugs.

Third, the “Telehealth Benefit Expansion for Workers Act”:

Let’s be clear: there is nothing in federal law that prevents employer group health plans from covering telehealth services. Indeed, 96% of large firms already do so.

Employers are struggling to afford the rising cost of health insurance – this is indisputable. But encouraging the proliferation of stripped-down telehealth benefits that discourage care coordination, do not cover basic things like hospitalization, prescription drugs, and labs, and do not have to comply with consumer protections or mental health parity, is not the solution.

Lastly, I want to thank the Subcommittee for attempting to roll back a hospital billing practice that is driving up costs for employers and enrollees alike. The hospital facility proposal before this subcommittee is a step in the right direction.

Thank you for your time, and I welcome your questions.

A webcast of the hearing and Ms. Corlette’s full written testimony are available here.