1113 E. Franklin A venue, Suite 202 IMinneapolis, MN J COMMUNITY HEALTH CENTERS Phone Fax J

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1 & Minnesota Association of 1113 E. Franklin A venue, Suite 202 IMinneapolis, MN J COMMUNITY HEALTH CENTERS Phone Fax J TO: Minnesota Department of Health- Health Economics Program FROM: Minnesota Association of Community Health Centers DATE: May 5, 2015 RE: Response to RFI On State-based Risk Adjustment Feasibility Assessment The Minnesota Association of Community Health Centers {MNACHC) is responding to your request for information on the feasibility of a statebased risk adjustment system. MNACHC represents the interests of the state's 17 Federally Qualified Health Centers (FQHCs), also known referred to as community health centers. CHC Patient Insurance Status-2013 Med icare Unisured FQHCs provide comprehensive preventive and 8% 37% primary health care services to 174,000 patients in As community-based organizations {SO MA/ percent patient-community board membership}, MN CARE we are in the unique position to view health 4 1% through the lens of the uninsured, low income and medically underserved populations. Over 37 percent of Health Center patients were uninsured {UDS 2013). (Preliminary 2014 data indicates that 31 percent of patients were uninsured.) More than two-thirds of community health centers patients are ethnically and culturally diverse - 28 percent of patients are African/ African American, five percent are American Indian/ Alaskan Native, seven percent are Asian American Pacific Islanders, 25 percent Latino and 32 percent are Caucasian (UDS 2013). As a requirement of the federal qualifications, CHC Patients by Race and community health centers are located in medically Ethnicity 2013 underserved areas {MUAs) of Minnesota, where Asian Latino the communities are the poorest in Minnesota White 25 % and experience the greatest number of health 32% disparities (MN Healthy Counties 2012). n Indian 5% Our Health Centers find that our patients' life circumstances greatly impact their health. "Health in all things" - the social determinants, including

2 ethnicity, language, culture, income, housing, job, food, and education, are inter-related and have a significant impact on states of health. In this light, we are committed to implementing a health system that acknowledges the social determinants' impacts while being cognizant of our responsibility to improve healthcare in our state. The responses and comments below reflect MNACHC's perspective on a risk adjustment system in Minnesota. Responsiveness to health reform development in Minnesota MNACHC supports a risk adjustment system that will best respond to our dynamic healthcare market in Minnesota under health reform. Minnesota's unique health care reform efforts are changing faster than many other states. These reforms focus on a value-based system, rewarding quality over quantity. MNACHC is concerned that the federal risk-adjustment system will not be nimble enough to respond to new initiatives and changes in Minnesota's market. We also have concerns a federally administered risk adjustment system will not have the same familiarity with our market in Minnesota as local resources and experts. Recognition of patient characteristic/ social factors beyond diagnosis in value-based markets MNACHC supports a risk adjustment system that incorporates patient demographic metrics in addition to diagnoses. The formula under the federal risk adjustment system appears to only include demographic data on age and sex. Also, the federal system utilizes hierarchical condition categories (HCC) based on ICD-9 codes. We have concerns the federal formula does not sufficiently capture the social factors impacting patients health such as poverty and race ethnicity. In anticipation of the forthcoming ICD-10, we pose the following key questions of the federal risk adjustment formula: How will /CD-10 implementation impact this risk adjustment formula? Will the formula be adjusted to accountfor the expanded demographic, tertiary codes in /CD-10? Attached to this letter are recommendations submitted to the MNsure Board of Directors regarding its Active Purchaser authority from the MNsure Consumer and Small Employer Advisory Committee (CSEAC) in Appendix A. MNACHC echoes the recommendation to create a Minnesota-specific risk adjustment model that includes metrics for social determinants of health, i.e. socio-economic status, race, ethnicity, language, primary language, etc. MNACHC recommends extending these position for a Minnesota-based risk adjustment model, which ensures carriers offering services and provider networks serving populations with the highest burdens/ rates of health disparities do not experience adverse selection, forcing them to raise premiums or cut services. It also ensures carriers offering products that promote continuity of care for populations who frequently "churn" between private and public programs are not disadvantaged.

3 Alignment across programs in Minnesota MNACHC recommends streamlining the requirements and processes across Minnesota programs to incorporate the unique characteristics of Minnesota's public health care program populations. Recognizing that the risk adjustment proposed under this RFI applies to the commercial individual and small group markets, there is the potential that this process will inform other areas of the state's purchase of health care on behalf of low-income individuals e.g., the Statewide Quality Reporting System (SQRMS) or the Quality Incentive Payment System (QIPS). In this light, MNACHC strongly believes that any state-developed risk adjustment methodology should incorporate the differences and complexities of our Medical Assistance and MinnesotaCare/ Basic Health Plan populations. We believe a methodology considering public programs characteristics in the early stages of development will ensure later incorporation will not further exacerbate barriers to health care and health disparities. Correcting for possible adverse selection and premium stabilization MNAHC recommends Minnesota implement a risk adjustment system which incorporates socio-demographic metrics to address possible adverse selection, premium stabilization and affordability for /ow-income enrollees. We reference the recommendation submitted to the MNsure Board of Directors by John Freeman, Vice Chair CSEAC, in Appendix B. While the recommendation proposes the MNsure Board utilize its "Active Purchaser" authority, we recommend the state pursue a risk adjustment methodology that considers improving the affordability of the commercial individual plans purchased on MNsure. In closing, MNACHC recommends the following considerations of the assessment: Responsiveness to our dynamic health reform market; Recognition of patient demographics beyond medical diagnosis in value-based markets; Alignment across Minnesota health care programs, including considerations of Medical Assistance and MinnesotaCare; and Correcting for potential adverse selection, premium stabilization and affordability. Thank you for this opportunity to submit our feedback on this risk adjustment feasibility assessment. Please do not hesitate to contact me with questions or concerns at jin.lee.johnson@mnachc.org or ext. 16. nt. Respectfully ~ {)JAA~ r~johnsor- Health Policy Specialist Minnesota Association of Community Health Centers I MNACHC "Working Together for Affordable Health Care"

4 To: MNsure Board From: Consumer and Small Business Advisory Committee Re: Recommendations related to the MNsure Board's exercise of Active Purchaser Authority Date: December 4, 2013 APPENDIX A The following recommendations related to the MNsure Board's exercise of active purchaser authority all passed by majority vote of the members of the Consumer and Small Business Advisory Committee. A summary of the dissenting opinion is included after the recommendations. 1. Affordability: In order to provide real access to care, health plans need to have affordable premiums and affordable cost-sharing for routine care like office visits and prescription drugs. Current plan offerings on MNsure have the lowest average premiums in the country but the highest average deductibles, and nearly all MNsure plans limit the number of office visits available for a co-pay before the deductible is satisfied. Because of this, people who buy plans on MNsure may remain "underinsured," which means they have insurance but can't afford to use it because of high deductibles or other cost-sharing. If premium rates increase significantly in 2015, it will be even more difficult for people to afford higher metal-level plans with lower deductibles, which may result in more people delaying or foregoing the healthcare they need to stay healthy. Recommendation: The Mnsure board should negotiate with insurance carriers for plans with affordable premiums and affordable cost-sharing for office visits and prescription drugs, to ensure that every plan on MNsure offers good value, i.e. good coverage for the price. Additionally, MNsure should negotiate for a broader variety of choices than is currently available, from plans with very affordable premiums to plans with significant coverage for office visits and prescription drugs, to ensure a full range of good-value products. 2. Meaningful Choice: Health insurance plans are extremely complex products, with many variables that impact their overall value, including: different individual and family deductibles; different in-network and out-of-network deductibles; embedded and unembedded deductibles; different individual and family out-of-pocket maximums; different co-pay options and coinsurance levels for primary care, specialty care, urgent care, emergency services, mental health care, diagnostic, lab and x-ray services; different coinsurance for in-patient and out-patient care; and different exclusions and services covered. It is extremely difficult for anyone to understand their choices thoroughly and make meaningful comparisons without a benchmark for comparison, regardless of how the information is presented. This undermines market competition on MNsure, because there can't be true competition unless customers understand their choices. In order for people to make apples-to-apples comparisons between health plans and to promote real competition, the products themselves need to be simpler, with fewer variables and coverage differences. Recommendations: DRAFT

5 ~ MNsure should define one high-deductible "Model" plan and one robust co-pay "Model" plan at each metal tier and require all participating carriers to offer "Model" plans. "Model" plans would have standardized cost-sharing structures and covered benefits, to eliminate many of the variables that make it difficult to compare plans. Because the coverage would be standard among "Model" plans of the same metal tier, it would promote competition on price and quality rather than complicated benefit design and tricky loopholes in coverage. "Model" plans offered by different carriers would still differ by premium, quality rating, and network. Carriers should also be encouraged to continue offering non-"model" plans, so that the "Model" plans wouldn't reduce choices on MNsure. b. MNsure should provide education to applicants about choosing a health plan that encourages people to look at factors beyond premiums when comparing the value of plans. This education should be available in the majority of languages spoken by MNsure applicants. 3. Reducing Health Disparities: While Minnesota ranks among the best states in the country for healthcare and overall health outcomes, it also ranks among the highest in racial health disparities, i.e. the difference in healthcare and health outcomes experienced by people of different racial and ethnic groups compared to the white population. The creation of MNsure offers an unprecedented opportunity to address health disparities through innovative strategies and initiatives. Additionally, it is critical to anticipate unintended consequences of large systems changes such as the creation of MNsure, to ensure that they do not increase health disparities by disadvantaging carriers or providers already serving communities affected by health disparities or by reducing the choices available to communities or individuals at risk of health disparities. Recommendations: fil MNsure should promote equitable plan offerings to all communities by creating a Minnesota-specific risk adjustment model that includes metrics related to social determinants of health such as socio-economic status, race, ethnicity, primary language, and sexual orientation and gender identity. This would ensure that carriers that offer services or provider networks that are valuable to populations at risk of health disparities do not experience adverse selection that forces them to raise premiums or cut services. It would also ensure that carriers that offer plans that promote continuity of care for populations that "churn" off of public programs are not disadvantaged by doing so.!tl MNsure should require all participating carriers to contract with provider networks that include a racially, ethnically and culturally diverse range of providers to meet the needs of all communities in their service area. This would ensure that all MNsure enrollees have fair and adequate access to providers that meet their needs. DRAFT

6 4. Quality and Value - Mental Health Care: The extremely personal and individuated nature of mental health care makes it especially important for there to be a choice of providers available to all patients. The scarcity of mental health care providers in some areas of Minnesota makes it difficult for patients to access a choice of providers, even when services are covered by their health plan, or for patients to have the opportunity to change their mental health care provider if they are not receiving effective services. Additionally, high cost-sharing in some plans makes it difficult for patients to maintain compliance with their prescription drug regimen, which puts them at high risk of increased symptoms and instability. Recommendations:.fil MNsure should require all carriers to include an adequate number of mental health care providers in their network to ensure a choice of appropriate providers to all enrollees and the opportunity to change providers when services with one provider are not effective. Where this is not possible, plans should be required to offer out-of-network mental health services at in-network cost-sharing levels to patients who otherwise would not have an adequate choice of providers. hl All health plans on MNsure should be required to offer prescribed psychotropic drugs with no cost-sharing to patients with diagnosed mental health disorders. Dissenting Opinion While recognizing the importance of the priority issues identified in the majority opinion, we respectfully dissent from the recommendations to institute active purchaser approaches before informative data from first year enrollment in MNsure is available. We agree that affordability, choice, reducing health disparities, and improving mental health care quality and value are important goals that the MNsure board should pursue. However, we are unconvinced at this point that the active purchaser approach is the best way to do that. The launch of MNsure is a momentous step for Minnesota, and significant progress on the above mentioned goals is visible already. For example, MNsure offers the lowest premium rates in the country and many of the plans offered on the exchange are ranked highly by the National Committee for Quality Assurance. This is not to say that there is not additional work to be done, simply we do not yet have enough information on how consumers will react to the already significant changes presented. We should wait until there is at least a year's worth of enrollment data before rushing to introduce new market regulations that could have unintended consequences such as narrowing plan options or increasing costs. Any new regulation added to MNsure should be the product of methodical deliberations based on clearly identified gaps in the existing marketplace. Since MNsure has not even completed its first year of enrollment, sufficient data does not exist and our committee has not had sufficient time to weigh the pros and cons of specific active purchaser approaches. This discussion should be revisited after at least one year's worth of enrollment data is available. DRAFT

7 In the meantime, MN sure should focus finite resources and attention to developing the website tools to create the best consumer experience possible and to empower consumers with easily accessible information and a wide range of options so that they can find the best plan for their specific needs. DRAFT

8 APPENDIX B MNsure Consumer and Small Employer Advisory Committee Using Active Purchaser Authority to Improve QHP Affordability Background For both the 2014 and 2015 plan years, Minnesota has the lowest average premiums for marketplace Qualified Health Plans (QHPs) in the nation. Because premiums are the most recognizable component of the cost of health insurance, the cost of premiums are often conflated with the cost of the plan. So, for example, Kaiser Health News and NPR published a story this past February that proclaims the Twin Cities metropolitan region as the "least expensive" and three other Minnesota regions making the top 10.1 The problem, however, is that the cost of the premium is not the same as the cost of the plan. Other costs, which are not mentioned in the article, include deductibles, copays, and coinsurance, known collectively as "out-of-pocket" costs. These costs may not be as prominent in the consumer's mind as she shops for health insurance, since they are not inevitable and instead depend on her use of the insurance. However, any family that experiences an illness, an injury, pregnancy, etc., for any family member needs to be concerned about out-of-pocket costs. It should be recognized that Minnesota currently stands alone in the nation in providing affordable public insurance to adu lts who are over the income limit of Medical Assistance (MA). MinnesotaCare's maximum $50 per adult premiums and low out-of-pocket costs put insurance within reach for those who make too much for MA qualification but who cannot realistically balance the cost of private insurance with their other expenses, given their relatively low incomes. This recommendation is not about that group, but rather about those with limited income that nevertheless exceeds eligibility for MinnesotaCare. The Relationship between Premiums and Costs As described above, premiums are only part of the cost equation for consumers. Even with that stipulated, though, the intuitive assumption is that lower premiums are still a good thing, including for people with lower incomes or higher health needs. For two important reasons, however, that is not necessarily true: 1. The amount of premiums are inversely proportionate to the amount of deductibles and other out-of-pocket expenses. Although the occasional exception may exist, a look at the marketplace for any state in the country will quickly reveal that plans with lower-than-average premiums have higher-than-average deductibles, and that the inverse is true. This is certainly the case in Minnesota, and makes sense from the standpoint of insurance companies that offer lower premiums. They need to make sure their costs will be covered to maintain profitability. The impact of a high deductible plan is that benefits will generally not kick in (other than those for in-network preventive care) until the deductible is met. The 2015 legal limit for a deductible is $6,600 for an individual and $13,200 for a fam ily. Not including catastrophic plans, 13 of the 1 Rau, Jordan. "The 10 Least Expensive Health Insurance Markets In The U.S." Kaiser Health News. Henry J. Kaiser Family Foundation, 13 Feb Web. 08 Oct

9 2015 MNsure plans have an individual deductible of over $6,000 and 16 have a family deductible of over $12,000. The problem is that consumers, especially lower income consumers, gravitate toward lowpremium plans in spite of very high deductibles. There are likely several reasons for this, including: a. Lack of information about the costs of medical services. b. Unfamiliarity with out-of-pocket expenses and how they work. c. Having limited monthly budgets that force them to focus solely on the only inevitable expense (premiums). d. Optimism about anticipated health needs. The result is that many families who are not in a position to pay down deductibles that approach $13,000 /year are nevertheless purchasing such plans, due to the allure (or even necessity) of low premiums. Sadly, this often leads to families forgoing use of their insurance entirely, something that the ACA aims to prevent. 2. Low silver plan premiums reduce the number of families who can lower their insurance costs through Advance Premium Tax Credits. Advance Premium Tax Credits (APTCs) are the primary insurance affordability feature of the MNsure marketplace. 2 In theory, individuals and families with household incomes up to 400% of the federal poverty level (FPL) may be eligible for APTCs that reduce their monthly premiums. The problem, though, is that low premiums lead to many fewer families qualifying for APTCs for the reasons that follow. Whether a consumer receives an APTC and the amount of that APTC is determined by the cost of the "benchmark plan" to that consumer. 3 The benchmark plan is the silver plan with the second lowest premium for that consumer, which will vary by person based on their age, where they live, and whether they smoke. Under the law, each consumer also has an "affordability limit", which ranges from 6.32% to 9.5% on a sliding scale. The idea is that, under the ACA, the cost of premiums should not exceed a consumer's affordability limit. If the annual premium of the benchmark plan exceeds the consumer's affordability limit, he or she will receive an APTC that will bring down the premium cost to that affordability limit, and the consumer can apply that APTC amount to any marketplace plan. If, however, the silver plan with the second-lowest premium does not cost more than their affordability limit (regardless of whether the consumer plans to buy a costlier plan), the consumer will not receive a reduction to the premium through an APTC. In much of Minnesota (although geographic differences exist), receipt of APTCs are more the exception than the rule, even for those making less than 400% of the FPL. The reason for this is 2 Although some families also benefit from Cost-Sharing Reductions {CSRs), the income threshold is much lower 250% of the federal poverty level (FPL) versus up to 400% FPL for APTCs. In addition, CSRs are modest in Minnesota due to the availability of MinnesotaCare, resulting in only a 3% actuarial value increase for silver plan purchasers who meet the income limits. 3 The same analysis is applied to families, but it is simpler in this context to use an individual consumer in the explanation.

10 that the benchmark premiums tend to be so low, that they commonly do not exceed the consumer's affordability limit. This means that many fewer Minnesotans get APTCs than do residents of other states. One may argue that the lack of APTC reductions for so many Minnesota families is not really a loss. After all, the reductions are less common in Minnesota simply because our premiums are lower. However, going back to #1 above, the problem with this is that low-premium plans are accompanied by high deductibles, often very high deductibles. APTCs are intended to reduce the cost of insurance, but they are designed only to reduce premiums... they do not touch the cost of deductibles. In addition, Minnesota loses out on much more federal money that pays for APTCs versus other states. How Does This Play Out For Minnesotans? For Minnesotans who avoid illness and injury and use their insurance primarily for preventive care alone, the low-premium landscape in Minnesota is advantageous and saves them money. But what about Minnesotans who experience illness or injury, often unexpectedly? For the reasons detailed above, the results are often not very favorable. The Committee looked at some simple scenarios in order to compare the Twin Cities area to other regions of the country, using one key assumption - that the hypothetical consumer is forced to go through her entire deductible in the plan year. In other words, the consumer had significant health needs. In addition, the consumer's income was low enough to qualify him for APTCs, although the amount of the APTC varied by state, for the reasons noted above. 4 The comparisons used the benchmark plans from several other states, and specifically focused on four metropolitan areas: San Diego, CA (due to its similar size to the Twin Cities); Seattle, WA (for the same reason); Vail, CO (because it is considered the "most expensive" market in the U.S.); and Milwaukee, WI (since it is a neighboring state). In all four cases, the Minnesota consumer who used his entire deductible fared significantly worse than his counterpart from another part of the country. In fact, the notion that the Twin Cities is the "least expensive" market in the nation and that Vail, CO, is the "most expensive" only holds true for consumers who do not exhaust their deductibles or who do not qualify for tax credits. And the differences were profound: Twin Cities: $1,800 premium+ $4,400 deductible - $24 tax credit= $6,176 total cost San Diego: $3,624 premium+ $2,000 deductible-$1,752 tax credit= $3,872 total cost Seattle: $3,264 premium+ $1,500 deductible - $1,512 tax credit= $3,252 total cost 4 For simplicity, the state-by-state comparison only uses premiums and deductibles, as they are the largest expenses. While copays and coinsurance are important factors, they vary too much from consumer to consumer to usefully include in a simple comparison, and their inclusion would not disrupt the conclusions of this analysis. The consumer in this scenario was 37 years old and a resident of Saint Paul. He made $23,500 per year, which put him at 210% of the federal poverty level. He is over-income for MinnesotaCare, but well within the income range for tax credits (200% to 400%). 5 In other words, we assumed for simplicity that the consumer chose the second cheapest silver plan. Choosing a higher or lower metal level would not change the analysis, but using the benchmark plan makes it easier to follow, since that plan is the basis for the amount of APTCs a consumer receives.

11 Vail: $5,772 premium+ $2,000 deductible -$3,852 tax credit= $3,920 total cost Milwaukee: $3,672 premium+ $2,500 deductible -$1,896 tax credit= $4,276 total cost Let's review what causes these inequities. The total costs in these hypotheticals are a sum of the premiums and deductible, minus savings from tax credits. Although the Twin Cities premiums are by far the lowest, the tax credits are almost nonexistent, compared to tax credits in other states that range from over $1,500 to nearly $4,000 for the year. The reason has to do with the balance between premiums and deductibles. Since tax credits only help with premiums, they are much lower in the Twin Cities. Simply put, Twin Cities residents are entitled to less premium assistance because the premiums are low to begin with. Unfortunately, those low premiums come with far higher deductibles, and the APTCs simply do not help with deductibles. So the Minnesotan who incurs significant healthcare costs ends up paying far more than people in other states. Who Is Most Impacted By This? As noted, consumers with high health needs and chronic conditions are far more likely than healthier consumers to exhaust their deductibles. As such, more frequent users of (non-preventive) medical services are the most harmed by the Minnesota QHP landscape. It is primarily healthier consumers who benefit from Minnesota's low premiums. In addition, those on the lower end of QHP eligibility (slightly over the MinnesotaCare income limit of 200% of the federal poverty level) are disproportionately harmed by the QHP landscape. The reason is that they are more likely to purchase low deductible plans that come with high premiums. While they may be aware of the looming deductible and their inability to pay it, they may feel constrained by their budgets to purchase plans with lower premiums. This could lead insured consumers to avoid seeking medical care. Relevance of Active Purchaser Although MNsure is a marketplace of private insurance plans, the MNsure Board has the ability to influence the marketplace through its active purchaser negotiating authority. Minnesota's exchange was created as an active purchaser of health insurance, allowing the Board to set criteria for offering plans on the marketplace. The intention is to provide a better marketplace for more Minnesotans. Although not being used now, the MNsure Board has the opportunity to make use of this authority for the 2016 QHP marketplace. Strategic use of active purchaser authority need not limit marketplace choice or even significantly disrupt the plan models of carriers. For example, a simple redistribution of the premium vs. deductible breakdown could alter the problems detailed above. As can be seen in the comparison states, insurance carriers would actually collect higher premiums, not lower premiums, if these changes were made. Nor would consumers be harmed. Most are eligible for APTCs, which would be increased resulting in no net change to the in premium costs to the consumer. Those who don't qualify for APTCs may pay higher premiums, but with lower deductibles. These benefits can be realized without harming the carriers or insured simply because the federal government would be paying a higher share of total coverage costs,

12 through the APTCs. Recommendation The Committee recommends that the Board take steps to improve the 2016 QHP landscape for consumers who face high deductibles and little or no premium assistance. It can do so by using its active purchaser power to set criteria that result in a menu of plans that are more similar to other states in their balance of premiums and out-of-pocket expenses. This would greatly improve marketplace affordability for many Minnesotans, and would do so by taking advantage of federal APTC funds, rather than passing costs to carriers or consumers.