5 Key Moments from Ways and Means Committee Hearing with Health Insurance CEOs

CEOs of the nation's largest health insurers and pharmacy benefit managers (PBMs) appeared before the Ways and Means Committee to explain why premiums, deductibles, and out-of-pocket costs continue to rise for American families. This is the first in a series of hearings on health care affordability amidst health spending at record levels and consolidation in the insurance, pharmacy, and care delivery markets limiting choice and competition. Committee Republicans challenged industry leaders to account for a system in which prices, coverage decisions, drug access, and provider networks are increasingly controlled by a handful of corporate entities. The hearing marks the first turning point in congressional oversight of the health care sector, after President Trump unveiled The Great Healthcare Plan, which called for lowering premiums, reducing drug costs, holding insurance companies accountable, and increasing transparency across the health care sector.

Consolidation Leads to Market Dominance; Hurts Access and Affordability

The health care landscape has become increasingly consolidated in recent years, with roughly 40 percent of the health insurance market controlled by three insurers, and 80 percent of drug benefits managed by just three PBMs. Ways and Means Committee Chairman Jason Smith (MO-08) questioned health insurance CEOs about the extent of the vertical integration their companies have undergone, revealing that many of the same insurers who control health coverage also manage the drugs patients rely on, and the doctors and health professionals they can see:

Chairman Smith:

"By a show of hands: which of your companies own or control a health insurance division?

"Please keep your hand up if you also employ health care providers or own clinics, specialty pharmacies, or any other kind of medical practices or pharmacy.

"Please keep your hand up if you also own or control a pharmacy benefit manager.

"And please keep your hand up if you lead a publicly traded company at which you have a legal responsibility to maximize shareholder value.

"So, we've established - on the record - that the largest health companies are not just insurers. They are also medical providers and pharmacies - diagnosing and deciding treatment for patients. They are also PBMs - another form of middlemen managing drug benefits. They are increasingly controlling every aspect of our health care system."

Vertical Integration Creates a Closed Loop Designed to Capture Patient Dollars

When pressed about rising health care costs, insurance executives offered everything except direct answers. Rep. David Kustoff (TN-09) asked a witness to explain how money moves downstream within health care conglomerates that own every aspect of health care from insurance to medical practices to pharmacies. One witness responded with vague appeals to coordination and consumer experience, leaving unanswered how large corporate insurers ultimately capture patient dollars moving between vertically integrated companies:

Rep. Kustoff: "Mr. Joyner, if I could, let me ask you a different question. Let's assume that we have an Aetna insured, and she walks into a Minute Clinic to get treatment, and her prescription is filled by CVS Caremark (PBM). Can you walk me through the cash flow on that?

David Joyner, Chairman & CEO, CVS Health: "It would work very similar to how health care works today, and I would say, from a coordination standpoint and from a consumer experience, we have basically taken the process, the scheduling and the logistics out of the consumer's hands. We've actually improved the way in which they'll be able, they're able to access low-cost health care, which is the Minute Clinic. It is a low cost retail acute clinic setting to deal with cough, cold and flu, and then now they have the convenience of getting a prescription next door, so from a customer experience completely better than what exists today, by having to go to potentially two or three different settings in order to get the same treatment for the flu and or for some virus you may have."

Rep. Kustoff: "Walk me through the cash flow from the time that the payment hits Aetna all the way down the chain in that scenario."

David Joyner, Chairman & CEO, CVS Health: "So, Minute Clinic would charge their service, although that is contracted with the client. So as we look downstream, we offer no cost plans to our customers. So in some respects, it could be zero for the consumer to go to a Minute Clinic, and because now we are actually also prescribing, we are we were migrating to very low-cost products. So this would include the highest generic dispensing rate, which actually is in many respects, you know, less than $5 you know, $8 for a for the medication. So it's a really value oriented transaction. And I think the consumers have really positive experience with their amended clinic, and they have very positive experience with the pharmacist, feeling like they have a care team that is focused on their health and focused on getting them healthy for you know, for the conditions they have."

Rep. Kustoff: "I'll let the consumers see if they understand what you just said. Thank you very much. I'll yield back."

Failing to Pass Savings On To Patients

In addition to covering much of the insurance market, many of the same top health insurance corporations also own PBMs that control patients' drug benefits. During his questioning, Dr. Greg Murphy (NC-03) asked PBM parent companies to commit to further lowering costs by allowing the cost of medications sold through TrumpRx to count towards patient deductibles.

Rep. Murphy: "You put profits above patients and you put profits above those who care for patients. You're sitting here blaming hospitals, pharmaceutical companies, even physicians - there is blame to go around - but you have squarely abused your privilege of authority to deliver health care to patients in this country…You know, right now we're trying to lower drug costs. Will each of you - I'd like a yes or no answer - will each of you commit to allowing TrumpRx medications to go towards patient deductibles?"

Consolidation Is Driving Costs Up, Not Lowering Them

Proponents of consolidation argue that vertical integration leads to greater efficiencies and lower costs. However, as Rep. Lloyd Smucker (PA-11) noted, greater consolidation in health care has driven higher spending, helping to pad corporate profits, without a commensurate decrease in premiums or patient costs:

Rep. Smucker: "Americans deserve lower costs, better health and real accountability, not just strong quarterly earnings. Over the past decades, as I mentioned, families have seen premiums, deductibles and out-of-pocket costs rise year after year, even as insurers have taken record revenues. I've produced a chart which shows health insurers stock prices over the last 10 years, and correlates that with rising health care premiums or insurance premiums… It has resulted in higher profits and higher stock prices. For health insurance companies, your margins are protected, but for patients, their experience is higher premiums, higher cost sharing and more difficulty accessing great care.

"Miss Boudreaux, Elevance has grown massively with revenues over $170 billion. Operates Blue plans in many states and owns pharmacy, behavioral health and other subsidiaries. Families and workers in my district are not experiencing affordability gains. Premiums and deductibles continue to rise, even as companies like yours grow larger. Do you acknowledge that consolidation in the health care industry, including your company's expansion into affiliated services, has not resulted in lower premiums or lower out of pocket costs for working families?

Gail Boudreaux, President & CEO, Elevance Health:"Congressman, thank you. I appreciate the question about affordability, and I would say our strategy is grounded in whole health, and as we think about our strategy, we have to -"

Rep. Smucker: "You think costs have gone down as a result of those strategies for families?"

Gail Boudreaux, President & CEO, Elevance Health: "Costs have gone up, predominantly premiums, because we are paying more for inputs, and as you identified the health status -"

Rep. Smucker: "Do you think consolidation has reduced the amount of costs that have gone up?"

Gail Boudreaux, President & CEO, Elevance Health: "Consolidation actually should take friction out, drive affordability and drive simplicity."

Rep. Smucker: "But it hasn't worked. You would expect if a marketplace is working properly, that perhaps under consolidation, we would see lower or at least slower growing premiums in highly concentrated markets. But that's just simply not happening today."

Insurers Admit the System They Helped Create is Broken

Democrats say the health care system is broken and insurers admitted they helped build it. During questioning, Rep. Nathaniel Moran (TX-01) confronted health insurance executives with Minority Leader Hakeem Jeffries' own words before walking them through their companies' past efforts to lobby for and publicly support Obamacare, underscoring that insurers and Democrats alike helped design the system they now criticize:

Rep. Moran: "Here's what Minority Leader Jeffries said, "we have a broken health care system." Those were his words. By a show of hands, how many of you would agree with Leader Jeffries that we have a broken health care system?

"…that system was built by the Democrats on the ACA years ago. And your companies, by the way, heavily influenced how that ACA plan was put together. How many of your companies publicly supported or lobbied for the passage of the ACA? Of the five here, any of you raise your hand, we've got one. Did the other four of you guys, either publicly or privately, lobby for the passage of the ACA years ago, or your predecessors in interest? Okay, we've got one over here as well. So you guys were involved in that process. You agree it's a broken system."