[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
  HEALTH CARE ISSUES INVOLVING THE CENTER FOR CONSUMER INFORMATION AND
                          INSURANCE OVERSIGHT

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               ----------                              

                           FEBRUARY 16, 2011

                               ----------                              

                            Serial No. 112-7


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov


 HEALTH CARE ISSUES INVOLVING THE CENTER FOR CONSUMER INFORMATION AND 
                          INSURANCE OVERSIGHT




  HEALTH CARE ISSUES INVOLVING THE CENTER FOR CONSUMER INFORMATION AND
                          INSURANCE OVERSIGHT

=======================================================================

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 16, 2011

                               __________

                            Serial No. 112-7


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE MYRICK, North Carolina           GENE GREEN, Texas
  Vice Chair                         DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANE HARMAN, California
MICHAEL C. BURGESS, Texas            JAN SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN BILBRAY, California            JAY INSLEE, Washington
CHARLIE BASS, New Hampshire          TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             ANTHONY D. WEINER, New York
BOB LATTA, Ohio                      JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            JOHN BARROW, Georgia
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BILL CASSIDY, Louisiana
BRETT GUTHRIE, Kentucky
PETE OLSON, Texas
DAVID McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
MORGAN GRIFFITH, Virginia

                                  (ii)
              Subcommittee on Oversight and Investigations

                         CLIFF STEARNS, Florida
                                 Chairman
SUE MYRICK, North Carolina           DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee            Ranking Member
LEE TERRY, Nebraska                  JAN SCHAKOWSKY, Illinois
JOHN SULLIVAN, Oklahoma              MIKE ROSS, Arkansas
TIM MURPHY, Pennsylvania             ANTHONY D. WEINER, New York
MICHAEL C. BURGESS, Texas            EDWARD J. MARKEY, Massachusetts
BRIAN BILBRAY, California            GENE GREEN, Texas
PHIL GINGREY, Georgia                CHARLES A. GONZALEZ, Texas
STEVE SCALISE, Louisiana             JOHN D. DINGELL, Michigan
CORY GARDNER, Colorado               HENRY A. WAXMAN, California (ex 
MORGAN GRIFFITH, Virginia                officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
  

                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Cliff Stearns, a Representative in Congress from the State 
  of Florida, opening statement..................................     1
    Prepared statement...........................................     3
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     5
    Prepared statement...........................................     7
Hon. Cory Gardner, a Representative in Congress from the State of 
  Colorado, prepared statement...................................    10
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................    11
    Prepared statement...........................................    12
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    77
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................    78

                               Witnesses

Steve Larsen, Deputy Administrator and Director, Center for 
  Consumer Information and Insurance Oversight, Centers for 
  Medicare and Medicaid Services, Department of Health and Human 
  Services.......................................................    14
    Prepared statement...........................................    17
Jay Angoff, Senior Advisor, Office of the Secretary, Department 
  of Health and Human Services...................................    26
    Prepared statement \1\.......................................

                           Submitted Material

Letter of February 15, 2011 from the American Heart Association, 
  submitted by Mr. Waxman........................................    80
Letter of February 15, 2011 from the the American Cancer Society, 
  submitted by Ms. DeGette.......................................    81
Subcommittee exhibit binder......................................    83
Letter of support from the Hemophilia Federation of America, 
  submitted by Mr. Stearns.......................................   332

----------
\1\ Mr. Angoff did not submit a prepared statement.


 HEALTH CARE ISSUES INVOLVING THE CENTER FOR CONSUMER INFORMATION AND 
                          INSURANCE OVERSIGHT

                              ----------                              


                      WEDNESDAY, FEBRUARY 16, 2011

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 9:30 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Cliff 
Stearns (chairman of the subcommittee) presiding.
    Members present: Representatives Stearns, Sullivan, Murphy, 
Burgess, Blackburn, Myrick, Gingrey, Scalise, Gardner, 
Griffith, Barton, DeGette, Schakowsky, Weiner, Green, Dingell, 
and Waxman (ex officio).
    Staff present: Caroline Basile, Staff Assistant; Mike 
Bloomquist, Deputy General Counsel; Allison Busbee, Legislative 
Clerk; Karen Christian, Counsel, Oversight; Stacy Cline, 
Counsel, Oversight; Howard Cohen, Chief Health Counsel; Julie 
Goon, Health Policy Advisor; Todd Harrison, Chief Counsel, 
Oversight/Investigations; Sean Hayes, Counsel, Oversight/
Investigation; Ruth Saunders, Detailee, ICE; Alan Slobodin, 
Deputy Chief Counsel, Oversight; Sam Spector, Counsel, 
Oversight; John Stone, Associate Counsel; Tim Torres, Deputy IT 
Director; Lyn Walker, Coordinator, Administration/Health 
Resources.

 OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Stearns. We convene this hearing of the subcommittee on 
Oversight and Investigation today to gather information on the 
entity responsible for overseeing the Administration's changes 
to the private insurance market, the Center for Consumer 
Information and Insurance Oversight.
    It has been nearly a year since the health care law was 
enacted, and this is the first hearing this subcommittee has 
had since passage of the law devoted exclusively to its 
effects. This Center is responsible for the massive changes 
being made by the Administration to the private insurance 
market. It is responsible for new insurance market rules, the 
temporary high-risk pools, new medical loss ratio rules, and 
will assist States in implementing the massive new regulatory 
burdens imposed by the Administration.
    Our witnesses today are a former Director of the Center and 
the current one, Mr. Jay Angoff, who ran the office from its 
inception after the passage of the bill until earlier this 
year. We know very little about the creation of this office, 
and I hope this hearing this morning will finally shine some 
light on how this office was, in fact, created, how it is 
simply organized, and why it is recently moved from HHS to CMS 
on literally, literally the day the Republicans took the 
majority in the 112th Congress. Just a coincidence I am sure.
    We also know little about how this office is funded. Is it 
paid for out of the Health Care Law that was signed last year? 
Is HHS taking money from another program? So we know very 
little, and what we do know has not made a favorable impression 
on us, perhaps because we don't understand.
    Last year the New York Times reported, ``In Bethesda, 
Maryland, more than 200 health regulators working on 
complicated insurance rules have taken over three floors of a 
suburban office building, paying almost double the market rate 
for the space in their rush to get started.'' So I hope the 
Administration and its regulators are better at writing 
regulations than perhaps writing leases.
    Our other witness is Mr. Steve Larsen. Mr. Larsen was 
recently promoted to Director of the Center and had previously 
served in the Center's Office of Oversight, the office that was 
responsible for granting waivers from the Obama 
Administration's Health Care. I think it is an understatement 
to say that these waivers have been controversial.
    The Administration's Health Care Plan was sold as all 
benefit and no downside, so when the public began hearing that 
while they would have to comply with all the new regulations 
and costs while other individuals would get waivers from the 
Administration and thus not have to comply and bear the same 
burdens, obviously they weren't happy. After all, they were 
promised that if they like their coverage, they could keep it. 
We heard this mantra over and over again. If you like your 
coverage, you can keep it.
    They were promised lower premiums. They were promised lower 
costs, so simply what did they get? Lost coverage, higher 
premiums, and higher costs in our opinion, and when the 
damaging effects of the Administration's Health Care Plan got 
so bad that people were starting to notice, then it was time 
for waivers. The promises made by supporters of the law just 
simply have not come true.
    The Chief Actuary for the Centers for Medicare and Medicaid 
Services recently testified that the law will likely not hold 
down costs. He went on to say that not everyone will be able to 
keep their coverage, even if they like it. Meanwhile, the 
adverse effects of the law on the private sector have been 
undeniable. Companies are considering dropping coverage, 
insurers are opting to exit from the market, and consumers are 
left with fewer options, in fact. And of those options 
available the premiums continue to rise thanks to the costly 
mandates and regulations in Obamacare.
    It certainly doesn't get any better when you look at how 
the government is handling this Health Care Bill. Last month 
this subcommittee's hearing on the need for regulatory reform 
highlighted how numerous regulations in the Health Care Bill 
have been issued without even public comment. If an idea is 
controversial and lacks popular support, like end-of-life 
counseling, for example, then it simply sneaks into the 
regulations in the hope that nobody will notice. No comment 
period. Just happens to appear.
    So today, my colleagues, we will hear testimony about why 
so many companies and insurers need to be excluded, given 
waivers from this great Health Care Bill that the 
Administration has touted. Ironically, considering that if you 
listened to the Administration for the last 2 years, you would 
wonder why anyone would ever need to be protected from this 
law, yet today we have learned that over two and a half million 
people have been exempted from the Administration's Health Care 
Plan through these waivers. Two and a half million people need 
to literally, literally be protected from the devastating 
effects of the Health Care Bill the Administration has passed. 
Yes, protected.
    Under the very standards determining whether a waiver will 
be granted, a company or insurer needs to show that unless a 
waiver was granted, beneficiaries were either going to face 
significant premium increases or a significant reduction in 
access to benefits. So we will hear today that these waivers 
are necessary because the plans they affect offer little 
coverage. We will likely hear at length today that the reason 
it is OK to give out these waivers is because in 2014, the 
exchanges will finally provide low-cost, quality health care, 
yet nearly every promise made about Obamacare has been broken.
    During the debate on health care our party offered many 
solutions to expand access to health care services without 
raising costs or bankrupting the country. They were not passed. 
They were ignored. So I am hopeful today that we begin to 
examine the effects of the Administration's Health Care Bill. 
Americans from both parties will begin to see the value in our 
ideas, ideas that rely on commonsense and free-market solutions 
and perhaps not on decisions that are made by the federal 
bureaucracy.
    I am very interested in the testimony we will hear today, 
because this Center is responsible for many of the changes in 
the Administration's Health Care Bill that it makes to the 
private insurance market, and I hope our witnesses will shine 
some light on the reasons for these changes. I know this is a 
busy season for them, so I appreciate them coming up here 
especially with the budget process and the budget being 
released this week. So I thank them sincerely for their time.
    Today marks the beginning of what the public voted for in 
2010, real and sustained oversight of the federal takeover of 
the health care industry, and with that I recognize 
distinguished colleague, Ms. DeGette.
    [The prepared statement of Mr. Stearns follows:]

                Prepared Statement of Hon. Cliff Stearns

    We convene this hearing of the Subcommittee on Oversight 
and Investigations today to gather information on the entity 
responsible for overseeing the Administration's changes to the 
private insurance market--The Center for Consumer Information 
and Insurance Oversight. It has been nearly a year since the 
health care law was enacted, and this is the first hearing this 
subcommittee has had since passage of the law devoted 
exclusively to its effects.
    This Center is responsible for the massive changes being 
made by Obamacare to the private insurance market. It is 
responsible for new insurance market rules, the temporary high 
risk pools, new medical loss ratio rules, and will assist 
states in implementing the massive new regulatory burdens 
imposed by Obamacare. Our witnesses today are the former 
Director of the Center and the current one--Mr. Jay Angoff ran 
the office from its inception after the passage of Obamacare 
until earlier this year. We know very little about the creation 
of this office, and I hope this hearing will finally shine some 
light on how this office was created, how it is organized, and 
why it was moved from HHS to CMS on literally the day 
Republicans took the majority in the 112th Congress.
    We also know little about how this office is funded--is it 
paid for out of the health care law signed last year? Is HHS 
taking money from another program? We know very little, and 
what we do know has not made a good impression. Last year the 
New York Times reported: ``In Bethesda, Maryland, more than 200 
health regulators working on complicated insurance rules have 
taken over three floors of a suburban office building, paying 
almost double the market rate for the space in their rush to 
get started.'' I hope Obamacare's regulators are better at 
writing regulations than writing leases.
    Our other witness is Mr. Steve Larsen, Mr. Larsen was 
recently promoted to Director of the Center, and had previously 
served in the Center's Office of Oversight--the office that was 
responsible for granting waivers from Obamacare.
    I think it is an understatement to say that these waivers 
have been controversial. Obamacare was sold as all benefit--no 
downside. So when the public began hearing that while they 
would have to comply with all of the new regulations and costs, 
while other individuals would get waivers from the 
Administration and thus not have to comply and bear the same 
burdens, they weren't happy.
    After all, they were promised that if they like their 
coverage, they could keep it. They were promised lower 
premiums. They were promised lower costs. What did they get? 
Lost coverage. Higher premiums. Higher costs. And when the 
damaging effects of Obamacare got so bad that people were 
starting to notice? Then it was time for waivers.
    The promises made by supporters of the law have not come 
true. The Chief Actuary for the Center for Medicare and 
Medicaid Services recently testified that the law will likely 
not hold down costs. He went on to say that not everyone will 
be able to keep their coverage, even if they like it. 
Meanwhile, the adverse effects of the law on the private sector 
have been undeniable: companies are considering dropping 
coverage, insurers are opting to exit from the market, and 
consumers are left with fewer options--and of those options 
available, the premiums continue to rise, thanks to the costly 
mandates and regulations in Obamacare.
    It certainly doesn't get any better when you look at how 
the government is handling Obamacare. Last month this 
subcommittee's hearing on the need for regulatory reform 
highlighted how numerous regulations in Obamacare have been 
issued without public comment. If an idea is controversial and 
lacks popular support, like end of life counseling, then it is 
simply snuck into a regulation in the hope that nobody will 
notice.
    Today we will hear testimony about why so many companies 
and insurers need to be excluded from the effects of 
Obamacare--ironic, considering that if you listened to the 
Administration for the last 2 years you'd wonder why anyone 
would ever need to be protected from this law--yet today we 
learn that 2.5 million people have been exempted from Obamacare 
through these waivers. 2.5 million people need to literally be 
protected from the devastating effects of Obamacare.
    Yes, protected. Under the very standards determining 
whether a waiver will be granted, a company or insurer needed 
to show that unless a waiver was granted, beneficiaries were 
either going to face a ``significant'' premium increase or a 
``significant'' reduction in access to benefits.
    We will hear today that these waivers are necessary because 
the plans they affect offer little coverage. We will likely 
hear at length today that the reason it is ok to give out these 
waivers is because in 2014, the exchanges will finally provide 
low cost, quality health care. Yet, nearly every promise made 
about Obamacare has been broken.
    During the debate on health care, our party offered many 
solutions to expand access to health care services without 
raising costs or bankrupting the country. We were ignored then. 
I am hopeful that as we begin to examine the terrible effects 
of Obamacare, Americans from all parties will begin to see the 
value in our ideas--ideas that rely on commonsense and free 
market solutions, not on decisions made by the federal 
bureaucracy.
    I am very interested in the testimony we will hear today 
because this Center is responsible for many of the changes 
Obamacare makes to the private insurance market, and I hope our 
witnesses will shine some light on the reason for those 
changes.
    I know that this is a busy season for them, especially with 
the budget being released this week, and I thank them for their 
time.
    Today marks the beginning of what the public voted for in 
2010: real and sustained oversight of the federal takeover of 
the healthcare industry.
    I recognize, with pleasure, the Ranking Member, Ms. 
DeGette.

    Ms. DeGette. Mr. Chairman, out of deference to the two 
hearings this morning, I am going to defer to the ranking 
member to make his opening statement first.
    Mr. Stearns. Mr. Waxman is recognized.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much. I am a strong believer in 
effective oversight. It is essential to assure that the laws 
passed by Congress are implemented in the most effective and 
efficient way possible, and that is why I support oversight of 
the Affordable Care Act.
    The Health Reform Law passed by Congress, signed into law 
by President Obama last year, provides tremendous benefits. 
Insurers are banned from discriminating against children with 
pre-existing conditions. Seniors are already benefiting from 
lower drug prices. Small businesses are getting tax cuts to pay 
for health insurance. The law has benefits for all Americans, 
and we ought to be doing what we can to make sure the 
Administration is implementing the law appropriately.
    But I am concerned, Mr. Chairman, that this committee is 
using oversight as another means of blocking the implementation 
of the law. Over the last few weeks the committee issued a 
broad document request to the Department of Health and Human 
Services that require massive document searches for no apparent 
purpose. Already HHS has provided over 50,000 pages of 
documents in response to these requests. And already we are 
seeing Republican leaders make unsubstantiated allegations that 
wrongly accuse the Department of misconduct and mismanagement. 
Before they have even had the hearing and gotten the facts 
Republicans are telling us that the law has failed, and I 
believe that it is not true.
    The subject of today's hearing is the formation of the HHS 
Center for Consumer Information and Insurance. This group 
within CMS has provided insurers from a provision of the Health 
Care Bill banning annual limits on health care coverage. The 
insurers are saying unless they get some of these waivers, the 
price of the insurance will go up before we get to the period 
of 2014, or the availability of the insurance will not be as 
much as it has been in the past. So we wrote into the law that 
we wanted the Department to give these waivers, at least until 
2014, when the law will be fully in effect.
    Our subcommittee chairman has asserted that the granting of 
these waivers show that health care reform is flawed. ``If the 
law is so good, why are so many waivers to the law being 
granted.'' Senator Orrin Hatch decried the lack of 
transparency. Oversight Chairman Darrell Issa has asserted that 
unions have received special treatment because, ``Bureaucrats 
are picking winners and losers in a politicized environment 
where the winners are favored constituencies of the 
Administration.''
    But let us look at the facts. The waiver process has been 
transparent and efficient. HHS put out an interim final rule, 
three sets of guidance, and worked individually with each 
applicant to resolve any problem with waiver requests. Over 90 
percent of all entities that applied for waivers were approved. 
The average wait time for approval of a completed waiver 
request was only 13 days. The process has been fair.
    Contrary to Chairman Issa, there has been no favoritism to 
unions. The information HHS has provided to the committee shows 
that plans that serve union employees were almost five times as 
likely to have their waivers denied as non-union plans. Nine of 
the last ten largest applicants to be denied waivers were plans 
that provided care for union members.
    The law and waiver process are designed to accommodate 
plans with low annual limits known as limited benefit plans or 
mini-med plans. These plans either have a set limit of dollars 
that they will spend on benefits or a limited amount of 
benefits that may be received or a cap on specific benefits. 
These are plans that by 2014 will no longer be able to do what 
they are doing because in 2014, all plans are going to have to 
cover the minimum health insurance package. They will not be 
able to discriminate on the basis of pre-existing conditions, 
and consumers and small businesses will have improved access to 
affordable care through no health insurance exchanges.
    The waivers are intended to provide a smooth transition 
between now and 2014. They affect a small population, less than 
2 percent of all Americans with employer-based coverage, but 
for this group they provided valuable interim relief.
    The Democratic staff has prepared an analysis of the waiver 
process that documents its success, and I ask this analysis be 
made part of today's hearing record.
    I was the ranking member of the Oversight Committee when 
Dan Burton was Chairman, and during that time President Clinton 
was in office. No allegation was too wild for him not to 
pursue. The committee would demand thousands of documents, take 
up hundreds of hours of taxpayer's time in investigations that 
cost taxpayers millions of dollars, all with no regard for the 
basic facts of the case.
    An allegation would come out before they got the 
information, and then when the information came out disproving 
the allegation, they were already ready for another allegation. 
They moved 1 day to the next with attacks, attacks, attacks.
    Well, Mr. Chairman, I hope we are not going to see that go 
on in this committee and in this Congress. Let us be fair, let 
us get the facts, and let us see what the reality is before we 
make any of these accusations that I have been hearing.
    I yield back the balance of my time.
    [The prepared statement of Mr. Waxman follows:]

               Prepared Statement of Hon. Henry A. Waxman

    Mr. Chairman, I am a strong believer in effective 
oversight. It is essential to ensuring that the laws passed by 
Congress are implemented in the most effective and efficient 
way possible. That is why I support oversight of the Affordable 
Care Act.
    The health reform law passed by Congress and signed into 
law by President Obama last year provides tremendous benefits. 
Insurers are banned from discriminating against children with 
pre-existing conditions. Seniors are already benefitting from 
lower drug prices. Small businesses are already getting tax 
cuts to pay for health insurance. The law has benefits for all 
Americans--and we ought to be doing what we can to make sure 
the Administration is implementing the law appropriately.
    But I am concerned that this Committee is using oversight 
as another means of blocking implementation of the law. Over 
the last few weeks, the Committee issued broad document 
requests to the Department of Health and Human Services (HHS) 
that require massive document searches for no apparent purpose. 
Already HHS has produced over 50,000 pages of documents in 
response to these requests.
    And already we are seeing Republican leaders make 
unsubstantiated allegations that wrongly accuse the Department 
of misconduct and mismanagement.
    The subject of today's hearing is the formation of HHS's 
Center for Consumer Information and Insurance Oversight and the 
waivers that CCIIO has provided insurers from a provision of 
the health care bill banning annual limits on health care 
coverage.
    The Subcommittee Chairman has asserted that the granting of 
these waivers shows that the health care reform effort is 
flawed: ``If the law is so good, why are so many waivers to the 
law being granted?'' Senator Orrin Hatch has decried ``the lack 
of transparency which has surrounded the waiver process.'' 
Oversight Chairman Darryl Issa has asserted that unions have 
received special treatment because ``bureaucrats are picking 
winners and losers in a politicized environment where the 
winners are favored constituencies of the administration.''
    But let's look at the facts.
    The waiver process has been transparent and efficient. HHS 
put out an interim final rule, three sets of guidance, and 
worked individually with each applicant to resolve any problem 
with waiver requests. Over 90% of all entities that applied for 
waivers were approved. The average wait time for approval of a 
completed waiver request was only 13 days.
    The process has also been fair. Contrary to Chairman Issa, 
there has been no favoritism to unions. The information HHS has 
produced to the Committee shows that plans that serve union 
employees were almost five times as likely to have their 
waivers denied as non-union plans. Nine of the ten largest 
applicants to be denied waivers were plans that provided care 
for union members.
    The law and the waiver process are designed to accommodate 
plans with low annual limits known as ``limited benefit plans'' 
or ``mini-med'' plans. These plans either have a set limit on 
dollar amounts of benefits that may be received or cap specific 
benefits.
    In 2014 these plans will be unnecessary: all Americans will 
have improved health care coverage because insurers will no 
longer be able to discriminate on the basis of pre-existing 
conditions, and consumers and small businesses will have 
improved access to affordable care through new health insurance 
exchanges.
    The waivers are intended to provide a smooth transition 
between now and 2014. They affect a small population--less than 
2% of all Americans with employer-based coverage--but for this 
group they provided valuable interim relief.
    Rather than indicating a flaw in the law, the waiver 
process shows HHS is implementing health reform in a way that 
helps consumers keep their plans without imposing undue burdens 
on insurers or risking loss of coverage.
    The Democratic staff has prepared an analysis of the waiver 
process that documents its success. I ask that this analysis be 
made part of today's hearing record.
    I was ranking member of the Oversight Committee when then 
Chairman Dan Burton ran amok investigating our last Democratic 
President. No allegation was too wild to pursue. The Committee 
would demand thousands of documents, and take up hundreds of 
hours of taxpayer time in investigations that cost taxpayers 
millions of dollars--all with no regard for the basic facts of 
the case.
    I hope this is not happening here. When we hold oversight 
hearings, we should do so because we want to make sure that 
federal agencies are doing their jobs. We should not hold 
hearings to stop the vital work of government. And we should 
not hold hearings because the new Republican majority wants to 
disrupt the health care reform law.
    As we conduct oversight on the law, I hope we will put 
partisanship aside and do the kind of thorough and fair 
investigations that have been the hallmark of this Committee.
    And if we do that, the American people will see there is 
good news about the health care reform law and the ways it is 
helping all Americans.

    Mr. Stearns. Yields back the balance of his time and I 
recognize the gentlelady from Tennessee for 2 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman. I welcome our 
witnesses today. We have been waiting a long time to ask these 
questions that we have for you, and reading your prepared 
remarks I think we would all be led to believe that this has 
been an unqualified success in its rollout. You talk a lot 
about benefits, but you don't talk a lot about expected costs, 
and we will want to talk with you about that.
    I want to go to the waivers because there have been some 
900 health plans that have been given waivers, and we will 
discuss those waivers as we move forward. I think we are going 
to want to know what happens in 2013, and 2014, when those 
companies are not able to get waivers. These waivers gave 
relief to some plans but will happen to--we want to know what 
is going to happen when the other mandates of Obamacare are 
phased in, and it seems to me that these are 900 new stories 
that the Administration probably is wanting to avoid because 
private sector plans that are working for people, they don't 
want to come under Obamacare. And so they are coming to you to 
get a waiver.
    In Tennessee we have been down this costly road before, and 
Mr. Chairman, I have some charts on what happened in Tennessee 
that I would like to submit for the record.
    As I have repeatedly stated in this committee, TennCare 
gave unlimited access to care, it incentivized use rather than 
controlled costs, it reached the point of consuming 35.3 
percent of the State budget. That was in 2005. Nearly 
bankrupted the State, so I am going to want to know if you are 
using history as a guide, what is your plan for dealing with 
cost acceleration which comes on you very quickly if you look 
at the TennCare model which is the closest thing in this 
country to what you have.
    Even our former governor, a Democrat, Phil Bredesen, did a 
lot to rein in exploding costs, implementing a program, but, 
there again, we saw what happened in our State.
    I thank you, Mr. Chairman. I yield back.
    Mr. Stearns. And I thank the gentlelady. Recognize Dr. 
Burgess for 1 minute.
    Dr. Burgess. For 1 minute?
    Mr. Stearns. We are going to go 1 minute to Mr. Burgess, 1 
minute to Mr. Gardner, and 1 minute to Mr. Barton.
    Dr. Burgess. All right. Very well. Then let me just welcome 
our witnesses. It is good to see you again, Mr. Angoff. We had 
a nice visit last November. This is an issue that has been of 
great interest to me for quite some time. In fact, you were 
known by a different acronym when I met with you and, now I 
followed with interest that there have been some changes within 
the agency, and whether those are good or bad remains to be 
determined.
    Mr. Waxman spoke eloquently of the problems that he saw in 
a previous Congress, but let me just allude to the problems 
that I saw in the last Congress when we decided to be 
indifferent to oversight and not even ask a simple question. We 
passed this law in my opinion in a way that was poorly done, 
and then your agency, within the agency was set up with very 
little notice to the Congress. No one knew you were here, no 
one knew how much money you were spending, where it was coming 
from, and then we find out that in order for the Patient 
Protection and Affordable Care Act to work you had to give two 
and a half million people waivers. Well, it doesn't sound to me 
like the definition of a good solid foundation.
    So I am grateful that we are doing the oversight now, 
grateful to the subcommittee chairman for calling this hearing. 
I wish we could have done this several months ago. I think it 
would have helped all of us, but thank you, Mr. Chairman. I 
will yield back.
    Mr. Stearns. Thank the gentleman, and Mr. Gardner, you are 
recognized for 1 minute.
    Mr. Gardner. Thank you, Mr. Chairman, and the witnesses for 
attending today for convening our first hearing, oversight 
hearing, on the Patient Protection and Affordable Care Act.
    A lot of promises have been made about health care reform. 
Costs would be lower, people would have better access to health 
care. If people liked their coverage, they could keep it. Those 
promises are not being kept.
    The waivers issued by HHS exempting health plans from the 
prohibition on annual or lifetime benefits or lifetime limits 
on benefits is a good case study. Over 900 health plans would 
have been forced to reduce benefits, raise costs to their 
enrollees, or drop the plans altogether because complying with 
the requirements of the Health Care Bill was just too 
expensive.
    Even worse, these waivers are simply postponing reality. 
What will happen as other requirements of the law are phased in 
and health care plans, health plans are not able to comply with 
those further financial burdens? This is why this committee's 
investigation of the bill is so timely in the Center for 
Consumer Information and Insurance Oversight. We cannot wait 
until the exchanges are up and running to discover that they 
are not working. Congress can't stick its head in the sand and 
deny the law of economics. Companies that need waivers today 
will not suddenly be able to provide even more required 
benefits in 2012, when the Health Care Bill fully kicks in.
    Many of the assumptions that are underpinning the Health 
Care Bill have proven to be false. For instance, it was 
estimated that 375,000 people would enroll in the high-risk 
pools. Instead, only 12,000 people enrolled. Recent articles 
and the news have discussed the increasingly unbearable burden 
that Medicaid places on State budgets. Medicaid is 21 percent 
of total State spending and annual spending growth on the 
program doubled between 2008, and 2009.
    I am excited to get to work on this. I believe we have a 
lot of work to do and look forward to hearing from you before 
we end up bankrupting this country.
    [The prepared statement of Mr. Gardner follows:]

                Prepared Statement of Hon. Cory Gardner

    Thank you, Mr. Chairman, for convening our first oversight 
hearing on the Patient Protection and Affordable Care Act.
    A lot of promises have been made about health care reform. 
Costs would be lower. People would have better access to health 
care. If people liked their coverage, they could keep it. Those 
promises are not being kept.
    The waivers issued by HHS exempting health plans from the 
prohibition on annual or lifetime limits on benefits is a good 
case study. Over 900 health plans would have been forced to 
reduce benefits, raise costs to their enrollees, or drop the 
plans altogether because complying with the requirements of 
Obamacare was just too expensive. Even worse, these waivers are 
simply postponing reality. What will happen as other 
requirements of the law are phased in, and health plans are not 
able to comply with those further financial burdens?
    This is why this Committee's investigation of Obamacare, 
and the manner in which it is being implemented by the Center 
for Consumer Information and Insurance Oversight is long 
overdue. We cannot wait until the exchanges are up and running 
in 2014 to realize that this system is not working. You cannot 
stick your head in the sand and deny the laws of economics 
forever. Companies that need waivers from Obamacare's 
requirements today will not suddenly be able to provide even 
more required benefits in 2012, when Obamacare fully kicks in. 
Many of the assumptions underpinning Obamacare have been proven 
to be false.
    For instance, it was estimated that 375,000 people would 
enroll in the high-risk pools. Instead, only 12,000 enrolled. 
Recent articles in the news have discussed the increasingly 
unbearable burden that Medicaid places on state budgets. 
Medicaid is 21 percent of total state spending, and annual 
spending growth on the program doubled between 2008 and 2009. 
And yet this health care reform law would essentially add 20 
million more people to the Medicaid rolls in 2014. These are 
simply unsustainable burdens, and if they are not fixed, they 
will break the world's greatest health care system and bankrupt 
this country. We need to fix this problem.
    I am ready to get to work on this issue. I thank the 
witnesses for being here, and I yield back the balance of my 
time.

    Mr. Stearns. I thank my colleague and the distinguished 
chairman emeritus, Mr. Barton.
    Mr. Barton. Thank you, Mr. Chairman. I will put my formal 
statement in the record.
    Today's hearing is the first of many, but I think it is 
telling, Mr. Chairman, that we are here today with an oversight 
hearing over an organization that is not explicitly authorized 
in the Act, whose job is to give waivers to a law that 
supposedly is going to lower costs, but the very reason they 
are giving waivers is because the cost of complying with the 
law is so large that over 900 companies or 900 insurance plans 
have been given waivers because they could not comply if they 
had to honor what the law said.
    So this is going to be a good hearing. I appreciate each of 
you two gentlemen being here, and I will try to participate 
some, Mr. Chairman, but as you know, we have the FCC Commission 
downstairs simultaneously. So some of us have to try to be two 
places at one time, which is----
    Mr. Stearns. I appreciate your----
    Mr. Barton. Thank you, Mr. Chairman.
    Mr. Stearns [continuing]. Staying here.
    Mr. Barton. Thank our witnesses.
    Mr. Stearns. Thank you. The gentlelady, Ms. DeGette, is 
recognized.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you very much, Mr. Chairman.
    Last year President Obama signed into law landmark health 
reform legislation to improve health care access for millions 
of American families and small business owners, prohibit 
abusive insurance practices, and to reduce our Nation's 
deficit. Today's hearing is focused on implementation of the 
law's prohibition on annual and lifetime limits on health care 
coverage, an important consumer protection that prevents people 
with chronic or catastrophic illnesses from losing their 
coverage after they reach an arbitrary cap on expenses 
established by their insurer.
    This is a provision that is already protecting consumers 
and will protect millions more individuals with chronic and 
expensive diseases like diabetes, and it is widely supported.
    Mr. Chairman, I would like to insert into the record 
letters from the American Cancer Society and the American Heart 
Association about the importance of this provision.
    Mr. Stearns. By unanimous consent, so ordered.
    Ms. DeGette. Thank you.
    [The information appears at the conclusion of the hearing.]
    Ms. DeGette. We are transitioning to this new policy, and 
millions of Americans with insurance are benefiting 
immediately, but a small percentage of insured Americans are in 
plans that will need waivers from these provisions until the 
Health Care Bill takes effect in its entirety in 2014. The law 
allows for those waivers which are the subject of today's 
hearing.
    And, Mr. Chairman, you noted that two-and-a-half million 
people are subject to these waivers, but I would point out that 
is two-and-a-half million out of 164 million, which is less 
than 2 percent of the market.
    The Center for Consumer Information and Insurance Oversight 
is responsible for implementing the consumer protections 
against insurers' annual limits. CCL announced that that 
process in a public role last summer and issued further 
guidance based on input from affected entities. CCO is granting 
waivers to this provision in cases where insurance providers 
show that compliance, ``would result in a significant decrease 
in access to benefits,'' or, ``would significantly increase 
premiums.''
    Republicans on this committee and elsewhere have made a 
number of allegations about this agency and its process for 
implementing the ban on annual limits. Senator Kyl and others 
have made statements suggesting that CCO may be providing 
waivers to political allies such as unions, and in fact, Mr. 
Chairman, you, yourself, have suggested that the volume of 
waivers granted indicates flaws in the Health Reform Law.
    But the information and documents that the committee has 
received tell a different story. They show that the 
Administration is implementing the law in a fair, transparent, 
flexible, and efficient way. The Administration data shows over 
90 percent of applicants who sought waivers--I am working on a 
cold. I will try not to sit too close. Ninety percent of the 
applicants who sought waivers for their plans received HHS 
approval. The average completed application was approved by HHS 
within 13 days with over one-third approved in under 1 week.
    Now, this is exactly the kind of governmental efficiency 
that everybody across the aisle should be standing up and 
applauding. We reviewed e-mails that the companies requesting 
waivers exchanged with CMS. Here is--formerly HCFA, by the way. 
Here is what a few of the companies had to say.
    ``I want to sincerely thank HHS for working so hard to 
process and approve our waiver application.'' ``Thanks to you 
and all the staff at CCIIO for your consideration and effort.'' 
``We just want to thank you for the prompt and courteous 
service you gave these applications.''
    Mr. Chairman, these don't sound like businesses that are 
overburdened and fearful of government regulation. They sound 
like satisfied clients.
    As for the claim of bias towards unions, the data received 
by the committee shows that the plans that serve union 
employees were almost five times more likely than average to be 
denied waivers. If the Administration is somehow biased in 
favor of unions, that frankly is a pretty strange way of 
showing it.
    In the subcommittee's first hearing we learned from the 
Administration how the President's executive order on 
regulations has instructed agencies to implement laws in a 
manner that protects consumers while imposing the least burden 
possible on business. The implementation of the Annual Limits 
Provision provides a case in point in how the Administration is 
acting on those principles.
    The plans that are receiving waivers need improvement. They 
are often so-called mini-med plans that offer limited benefits. 
In 2014, thanks to the new Health Care Bill almost all 
Americans will get better coverage than this, but for now these 
limited plans are the best coverage available for many of these 
workers, and the waiver process accommodates business and 
insurers so that consumers can retain access to these plans in 
bridge years.
    Based on clear regulation and guidance CCO evaluates waiver 
requests on clearly-explained criteria such as premium changes 
in percentage terms and dollar terms, the number and type of 
benefits affected by the annual limits, and the number of 
enrollees under the plan seeking the waivers. Approvals once 
granted are rapidly posted on the HHS Web site. The overall 
process for implementing this important health reform provision 
and the waiver provisions within it embodies the principles 
that all of us on this committee seek in the regulatory 
process.
    I look forward to hearing from our two witnesses today. I 
hope we can talk about facts and why this is necessary and why 
it is working, and I yield back.
    [The prepared statement of Ms. DeGette follows:]

                Prepared Statement of Hon. Diana DeGette

    Last year, President Obama signed into law landmark health 
reform legislation to improve health care access for millions 
of American families and small business owners, prohibit 
abusive insurance practices, and reduce our nation's deficit. 
Today's hearing is focused on implementation of the law's 
prohibition on annual and lifetime limits on health care 
coverage, an important consumer protection that prevents people 
with chronic or catastrophic illnesses from losing their 
coverage after they reach an arbitrary cap on expenses 
established by their insurer.
    This is a provision that is already protecting consumers, 
and will protect millions more--individuals with chronic and 
expensive diseases like diabetes.
    We are transitioning to this new policy, and millions of 
Americans with insurance are benefitting immediately. But a 
small percentage of insured Americans are in plans that will 
need waivers from these provisions until the health care bill 
takes effect in its entirety in 2014. The law allows for these 
waivers, which are the subject of today's hearing.
    The Center for Consumer Information and Insurance 
Oversight, or CCIIO, is responsible for implementing the 
consumer protections against insurer's annual limits. CCIIO 
announced that process in a public rule last summer and issued 
further guidance based on input from affected entities.
    CCIIO is granting waivers to this provision in cases where 
insurance providers show that compliance ``would result in a 
significant decrease in access to benefits'' or ``would 
significantly increase premiums.''
    Republicans on this committee and elsewhere have made a 
number of allegations about CCIIO and its process for 
implementing the ban on annual limits. Senator Kyl and others 
have made statements suggesting CCIIO may be providing waivers 
to ``political allies'' such as unions. The subcommittee 
chairman has suggested that the volume of waivers granted 
indicates flaws in the health reform law.
    But the information and documents the Committee has 
received tell a different story. They show that the 
Administration is implementing the law in a fair, transparent, 
flexible, and efficient way.
    The Administration data show that over 90% of applicants 
who sought waivers for their plans received HHS approval. The 
average completed application was approved by HHS within 13 
days--with over one third approved in under one week. This is 
exactly the kind of government efficiency that my friends 
across the aisle ought to be standing up and applauding.
    We reviewed emails that the companies requesting waivers 
exchanged with CMS. Here's what a few of the companies had to 
say: ``I want to sincerely thank HHS.for working so hard to 
process and approve our waiver application.'' ``Thanks you and 
all the staff at OCIIO for your consideration and effort.'' 
``We just want to thank you for the prompt and courteous 
service you gave these applications.'' Mr. Chairman, these 
don't sound like businesses that are overburdened and fearful 
of government regulation - they sound like satisfied clients.
    As for the claim of bias toward unions, the data received 
by the Committee shows that plans that serve union employees 
were almost five times more likely than average to be denied 
waivers. If the Administration is somehow biased in favor of 
unions, this is a pretty strange way of showing it.
    In the Subcommittee's first hearing, we learned from the 
Administration how the President's Executive Order on 
regulations has instructed agencies to implement laws in a 
manner that protects consumers while imposing the least burden 
possible on business. The implementation of the annual limits 
provision provides a case in point of how the Administration is 
acting on these principles.
    The plans that are receiving waivers need improvement. They 
are often so-called mini-med plans that offer limited benefits. 
In 2014, thanks to the health care bill, almost all Americans 
will get better coverage. But for now, these limited plans are 
the best coverage available for many workers--and the waiver 
process accommodates business and insurers so that consumers 
can retain access to these plans in the bridge years.
    Based on clear regulation and guidance, CCIIO evaluates 
waiver requests on clearly explained criteria, such as premium 
changes in percentage terms and dollar terms, the number and 
type of benefits affected by the annual limits, and the number 
of enrollees under the plan seeking the waivers. Approvals, 
once granted, are rapidly posted on the HHS Web site.
    The overall process for implementing this important health 
reform provision, and the waiver provisions within it, embodies 
the principles that Republicans and Democrats alike seek in the 
regulatory process. It is fair. It is efficient. It is 
transparent. And it is allowing over two million Americans to 
keep their existing health insurance coverage.
    I look forward to hearing from our witnesses. I hope we can 
discuss the facts about CCIIO and its waiver process today 
rather than propagating myths about healthcare reform's 
implementation.

    Mr. Stearns. I thank the ranking member, and let me open up 
by saying I ask unanimous consent that the contents of the 
document binder be introduced into the record subject to any 
necessary redactions by the staff.
    Without objection, the documents will be entered into the 
record.
    [The information appears at the conclusion of the hearing.]
    Mr. Stearns. And let me address the two of you before we 
start your opening statement. You are aware that the committee 
is holding an investigative hearing and when doing so has had 
the practice of taking testimony under oath. Do you have any 
objection to testifying under oath?
    OK. The Chair also advises both of you that under the rules 
of the House and the rules of the Committee you are entitled to 
be advised by counsel. Do you desire to be advised by counsel 
during your testimony today?
    OK.
    [Witnesses sworn.]
    Mr. Stearns. You are now under oath and subject to the 
penalties set forth in Title XVIII, Section 1001, of the United 
States Code. If you would be so kind now as to give us, each of 
you, your 5-minute summary of your opening statement.
    Thank you. Mr. Larsen.

 TESTIMONY OF STEVE LARSEN, DEPUTY ADMINISTRATOR AND DIRECTOR, 
   CENTER FOR CONSUMER INFORMATION AND INSURANCE OVERSIGHT, 
   CENTERS FOR MEDICARE AND MEDICAID SERVICES, DEPARTMENT OF 
  HEALTH AND HUMAN SERVICES; AND JAY ANGOFF, SENIOR ADVISOR, 
    OFFICE OF THE SECRETARY, DEPARTMENT OF HEALTH AND HUMAN 
                            SERVICES

                   TESTIMONY OF STEVE LARSEN

    Mr. Larsen. Mr. Chairman----
    Mr. Stearns. I think you need to bring the mike a little 
closer.
    Mr. Larsen. Can you hear me now?
    Mr. Stearns. We can hear you good. Thank you.
    Mr. Larsen. OK.
    Mr. Stearns. Thank you, Mr. Larsen.
    Mr. Larsen. My full testimony has been submitted for the 
record. I serve as Director of the Center for Consumer 
Information and Insurance Oversight within CMS. Since taking on 
this role I have been involved in implementing many of the 
provisions of the Affordable Care Act, ACA, including 
overseeing private health insurance reforms, establishing the 
health insurance exchanges, and ensuring that consumers have 
access to information about their rights and coverage options.
    Prior to becoming the Director of CCIIO I served as the 
Director of the Office of Oversight within CCIIO, which works 
with the States to implement the new insurance market rules, 
including the new restrictions on annual dollar limits on 
health insurance benefits.
    As Director of CCIIO I am committed to improving the health 
insurance system so that it works for consumers now and in 
2014, when consumers will have more quality health care 
options. I am working to make sure that Americans who have 
insurance today can keep that coverage as we transition to the 
improved system in 2014.
    As part of improving the current health insurance system, 
the Affordable Care Act ensures that consumers are provided 
meaningful and reliable coverage for their premium dollars by 
phasing in restrictions on annual limits and insurance policies 
between now and 2014. This is one of the subjects that you have 
asked me to discuss today.
    Right now over 160 million Americans get their health 
insurance through an employer; however, not all coverage 
offered by employers is the same. A very small percentage of 
employees are offered policies with low annual limits, caps on 
the amounts of benefits that are provided under the policy in a 
year. Often, these policies are offered by employers who hire 
lower-wage, part-time, or seasonal workers.
    While having such limited coverage may be better than no 
coverage at all, this coverage, unfortunately, can fail those 
that need it most. These policies can have high deductibles and 
annual dollar caps as low as $2,500. Some are better, with 
$5,000 or even $25,000 in coverage, but in the case of a 
serious illness or accident, the coverage can be inadequate.
    In 2014, consumers will be able to purchase fuller health 
insurance coverage in State-based exchanges, competitive 
marketplaces, where consumers and small businesses can shop for 
private coverage and will have the market power similar to 
large employers. Small businesses with fewer than 25 employees 
will be eligible for tax credits to help pay for their 
employees' coverage, and small businesses with up to 100 
employees in a State will be able to join the shop exchanges.
    But in the time between now and 2014, we need to maintain 
the coverage that employees have until better options are 
available for them. For policies with low annual limits, 
immediate compliance with the new Affordable Care Act 
protections that restrict annual limits could cause disruption 
of this coverage.
    The Affordable Care Act directs the Secretary to implement 
the restrictions on annual limits in a manner that ensures 
continued access to coverage. This is accomplished by phasing 
in the annual restrictions for most policies and for this year 
we established a waiver process for the small percentage of 
policies that are substantially below the restricted annual 
limits set in the regulation.
    These waivers only apply to this single provision of the 
ACA. Insurance companies and employers that receive waivers 
must comply with all other parts of the Affordable Care Act. 
Our goal has been to implement the law but to do so in a manner 
consistent with the statute and in a way that preserves 
employees' coverage options until 2014.
    All employers and insurers that offer limited benefit plans 
may apply for a waiver if they demonstrate that there will be a 
significant increase in premiums or a significant decrease in 
access to coverage without the waiver. Applying for a waiver is 
simple, a basic process that CCIIO clearly published on our Web 
site. We administer the process fairly without regard to the 
type of the applicant or size of business. We published our 
standards for reviewing applications in the regulations 
implementing the law and again in the bulletins implementing 
the regulations.
    The vast majority of waivers were granted to health plans 
that are employer based, more than 95 percent. Of the waivers 
approved, 47 percent were to self-insured employer plans, 26 to 
HRAs, and 21 percent to Taft-Hartley plans, which are multi-
employer plans governed by collective bargaining agreements, 
and 3 percent to issuers, insurance companies who provide these 
policies.
    The limited benefit plans for which waivers are allowed 
cover an extremely small portion of people who have employer-
sponsored health plans. Since setting up the waiver program 
CCIIO has granted waivers to plans covering approximately 2.4 
million people out of the 150 million or so who have employer-
sponsored health coverage. This is less than 2 percent of all 
covered people in the private insurance market.
    The vast majority of employers who applied for a waiver 
reacted to the application process positively. We have been 
open to feedback from applicants, and based on their input we 
improved the application process so that it is timely and 
responsive to their needs. We view our work as a partnership 
between the Federal Government, States, employers, and 
consumers who are constantly striving to meet--and we are 
constantly striving to meet--our stakeholders' needs.
    As we work toward 2014, we are implementing the ACA 
carefully and responsibly so that coverage is maintained and 
the market is not disrupted.
    Thank you for the privilege of appearing before you, and I 
would be happy to answer any questions.
    [The prepared statement of Mr. Larsen follows:]

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    Mr. Stearns. Thank you, Mr. Larsen. Mr. Angoff.

                    TESTIMONY OF JAY ANGOFF

    Mr. Angoff. Mr. Chairman, Madam Ranking Member----
    Mr. Stearns. I think you have to pull it a little closer, 
and you got the mike on. Right?
    Mr. Angoff. Yes, sir.
    Mr. Stearns. OK.
    Mr. Angoff. Yes, sir.
    Mr. Stearns. OK. There you go.
    Mr. Angoff. Mr. Chairman, Madam Ranking Member, members of 
the committee, I appreciate the opportunity to testify here 
today to discuss the Department of Health and Human Services 
work to implement the Affordable Care Act.
    I currently serve as Senior Advisor to HHS Secretary 
Kathleen Sebelius. I also served as the Director of the Office 
of Consumer Information and Insurance Oversight, known as 
OCIIO, during its 9 months as an independent division of HHS 
until its recent merger into the Centers for Medicare & 
Medicaid Services, or CMS.
    OCIIO's accomplishments during that period include the 
following: during its first 3 months, the establishment of two 
major programs, the Pre-Existing Condition Insurance Plan and 
the Early Retiree Reinsurance Program, and the development and 
implementation of our new Web site, healthcare.gov. During its 
first 6 months, the promulgation of regulations implementing 
the insurance market reforms of the Affordable Care Act. Among 
other things, those rules now enable young adults to stay on 
their parents' policies until age 26; they prohibit insurers 
from discriminating against those under 19 with pre-existing 
conditions or from canceling coverage; and, they eliminate 
lifetime limits on coverage.
    During its first 7 months, we implemented three major grant 
programs to States: rate review grants, which are enabling 
States to establish or strengthen their capacity to review and, 
where appropriate, to disapprove proposed health insurance rate 
increases; exchange planning grants, which are enabling States 
to begin the work necessary for establishing their exchanges; 
and, consumer assistance grants, which are enabling States to 
develop or strengthen existing programs enabling consumers to 
obtain insurance and to more effectively deal with their 
insurance companies.
    By the end of 2010, the promulgation of the medical loss 
ratio rule and the rate review rule. Under our medical loss 
ratio rule, insurers in the individual and small group markets 
must spend at least 80 cents of the premium dollar on health 
care costs and quality improvement activities and no more than 
20 cents of the premium dollar on administrative expenses. 
Insurers that don't meet this standard must either reduce their 
premiums or issue rebates to their policyholders.
    Under the rate review rule, insurers must publicly justify 
proposed increases exceeding 10 percent, which are then 
reviewed for reasonableness by the State, or if the State does 
not review rates, by HHS.
    These reforms, Mr. Chairman, are already having a positive 
effect in the marketplace. For example, the Trade Press is now 
reporting that, as a result of the medical loss ratio rule, 
insurance companies are streamlining their expense structures, 
moderating their increases, and improving their benefit 
packages. And more than 1.2 million adults can now remain on 
their parents' health insurance plans because of our dependent 
coverage until 26 rule, part of what we call the Patients' Bill 
of Rights.
    Most importantly, individuals are being helped. People like 
Kayla Holmstrom, who was in a motorcycle accident when she was 
9 and has a chronic bone infection but who is studying to 
become a nurse at South Dakota State University and can now 
stay on her parents' policy until she is 26. And people like 
James Howard from Katy, Texas, who has brain cancer and was 
canceled by his insurance company but was able to get coverage 
through the PCIP Program that may well have saved his life.
    While the American health system has always set examples of 
shining successes and good care if you can get it, the system 
has failed other citizens for too long. People with pre-
existing conditions have been locked out of coverage by 
insurance companies. After long careers we have told Americans 
to keep working until they reach the age of 65 because without 
a job as a practical matter they can't get health insurance 
because insurance companies surcharge them both based on their 
age and based on health status. We have allowed insurance 
companies to select out risks and to segment the market, to 
cherrypick the healthy and to exclude the less healthy.
    The Affordable Care Act, Mr. Chairman, is changing this. It 
is building a more equitable health care system which empowers 
consumers, establishes new consumer protections under the law, 
and gives consumers new information so they can make the best 
choices for themselves and their families. It is putting 
consumers back in control of their health care coverage by 
giving them an unprecedented amount of clear information on the 
health care market, protections that bolster the rights of 
consumers in dealing with insurance companies, and an 
innovative new marketplace.
    Most importantly, beginning in 2014, the Affordable Care 
Act will allow individuals, families, and small business owners 
to pool their purchasing power through new State-based 
exchanges in which insurers will compete based on price and 
quality, and people will be able to make apples-to-apples 
comparisons.
    In conclusion, Mr. Chairman, I have every confidence that 
the new Center for Consumer Information and Insurance Oversight 
within CMS will continue the vital work of the Office of 
Consumer Information and Insurance Oversight, and I look 
forward to the results it will produce. Thank you for the 
opportunity to appear before you today, and I would be happy to 
answer any questions you or the members of the committee may 
have.
    Mr. Stearns. I thank you, and I thank both of you for your 
opening statements. I will open with my series of questions.
    The ranking member indicated the efficiency of the 
Obamacare and how the people who got the waivers sent thank you 
letters back. I would submit that is like saying to a person 
who won the lottery, are you happy with the efficiency of the 
lottery that you won? They would explicitly say, yes, and be 
glad to send a lot of thank you letters back.
    But having said that, Mr. Larsen, I just looked through 
your resume, and I noticed that Governor O'Malley appointed you 
as a member of the Maryland Health Service Cost Review 
Commission that actually sets the rates in the State. Is that 
true?
    Mr. Larsen. That is correct.
    Mr. Stearns. Are you still on that board?
    Mr. Larsen. No, I am not.
    Mr. Stearns. When did you leave that board?
    Mr. Larsen. When I started with the Federal Government.
    Mr. Stearns. OK. So I was a little concerned. I wasn't 
sure----
    Mr. Larsen. No, I am not.
    Mr. Stearns. OK. Let me move to this, Mr. Larsen, to this 
area of waivers. When we ask questions, we each have 5 minutes, 
so if you could just answer yes and no, and if we reach an 
impasse here, I will certainly give you a little time, but I am 
hopeful that you can answer most of the questions yes or no.
    I have been informed that you folks are considering or have 
given a waiver to the entire State of Florida. Is this true?
    Mr. Larsen. We established a process that permits States--
--
    Mr. Stearns. No, not----
    Mr. Larsen [continuing]. To apply.
    Mr. Stearns. Has the State of Florida received a waiver? 
Yes or no?
    Mr. Larsen. Yes.
    Mr. Stearns. OK.
    Mr. Larsen. Well, may I clarify?
    Mr. Stearns. Oh, sure.
    Mr. Larsen. The process that we set up for the States 
essentially allows the States to apply on behalf of----
    Mr. Stearns. I understand.
    Mr. Larsen [continuing]. The issuer.
    Mr. Stearns. Just in curiosity, did New York State get a 
waiver, the entire State?
    Mr. Larsen. Not to my knowledge.
    Mr. Stearns. So only Florida. Can you list to me all the 
States that got a complete waiver?
    Mr. Larsen. Yes. I can confirm, I think it is Ohio, 
Tennessee, Florida, and there may be one more.
    Mr. Stearns. And New York City being considered? New York?
    Mr. Larsen. I don't believe New York applied, but I can 
double check.
    Mr. Stearns. Can I ask you this question? Has New York 
applied?
    Mr. Larsen. The State of New York?
    Mr. Stearns. State of New York. Our understanding they have 
applied.
    Mr. Larsen. Oh, they have applied.
    Mr. Stearns. OK. New York----
    Mr. Larsen. But we haven't made a decision.
    Mr. Stearns. Oh. I understand, but New York has applied. 
OK. So the question is, obviously, why would Florida need a 
waiver, why would New York need a waiver, and all these other 
States you are giving complete current blocks for these States? 
You know, I think for many of us under the 10th Amendment we 
believe the States should be able to come up with their own 
health care and perhaps handle their health insurance market 
better than the government.
    Simply tell me why would the State of Florida, perhaps New 
York, and why are these people, why do you think Florida needs 
a waiver, the entire State?
    Mr. Larsen. Sure. Sure. So the waiver program is set up to 
ensure that that small percentage of employees under these 
small benefit policies can continue coverage. So in a small 
number of States there are State programs that authorize or 
require these limited-benefit policies. And so we made the 
determination to allow the States to apply on behalf of the 
issuers in their State.
    Mr. Stearns. Now, the big question is, OK, all these 
States, you are 1 year into this, and you are recognizing large 
States and small States, you are giving waivers, what happens 
in 2014? In fact, these waivers are only for 1 year, aren't 
they?
    Mr. Larsen. That is correct.
    Mr. Stearns. OK. So then all these States will have to come 
back in the year 2013?
    Mr. Larsen. We made the decision for a 1-year waiver in 
order to gather better information about these types of 
policies----
    Mr. Stearns. If they needed a waiver----
    Mr. Larsen [continuing]. And we will determine----
    Mr. Stearns [continuing]. In 2011, won't they need a waiver 
in 2012, and '13, so you will go back and give a waiver----
    Mr. Larsen. Well----
    Mr. Stearns [continuing]. Presumably again?
    Mr. Larsen [continuing]. I was trying to answer. We haven't 
made a determination about----
    Mr. Stearns. OK.
    Mr. Larsen [continuing]. What happens. These policies and 
these waivers represent a glide path, if you will, a transition 
to 2014, so we set them up to do the first year, to gather 
data, and then determine what the next steps would be between 
now and 2014.
    Mr. Stearns. Would it be fair to say then the year 2014, 
none of these people will get waivers, or will you consider 
giving waivers ever after the exchange is in place?
    Mr. Larsen. In 2014, consumers will have access to full 
coverage, not the types of limited-benefit policies that they 
have today, so in 2014, there won't be limited-benefit policies 
to be waived from. Consumers will have access to the full range 
of benefits.
    Mr. Stearns. I guess the basic question was McDonald's is a 
large corporation that got a waiver. Is that true?
    Mr. Larsen. The carrier that provides coverage to 
McDonald's, yes.
    Mr. Stearns. Got a waiver. And didn't Waffle House get a 
waiver? I don't know. I think the staff is saying yes.
    Mr. Larsen. OK.
    Mr. Stearns. So I assume--I would think you should know 
these.
    Mr. Larsen. Well, I haven't memorized the list of----
    Mr. Stearns. Well, some of the big ones like McDonald's and 
so forth I would think you would know.
    Mr. Larsen. Well, I do know about McDonald's.
    Mr. Stearns. Well, let me ask you. Did Denny's get one?
    Mr. Larsen. I would have to look at the list.
    Mr. Stearns. OK. How many private corporations, do you 
know, just off hand? A dozen or 100 or----
    Mr. Larsen. Well----
    Mr. Stearns [continuing]. Because you got 915 that got 
waivers, and you said you denied 61, so out of that 915 you 
gave me a percent. How--so I guess some of the large 
corporations got these waivers.
    Mr. Larsen. When we think about the waivers, we think about 
the type of employers and issuers that have applied. So self-
insured employers, for example----
    Mr. Stearns. OK.
    Mr. Larsen [continuing]. Represent 49 percent of the 
applicants, we have----
    Mr. Stearns. I can't miss this question. Where in the 
Health Care Bill does the word waiver--can you give me the 
specific line where it says waivers will be granted to health 
care providers in the Health Care Bill? Where do you get your--
--
    Mr. Larsen. Sure. The annual limits provision of the 
Affordable Care Act specifically directs the Secretary to 
implement this provision in a way that ensures----
    Mr. Stearns. But the word waiver is not in there.
    Mr. Larsen. I don't know whether the word----
    Mr. Stearns. We couldn't find it anywhere. So you are 
saying your interpretation is implying that your definition of 
waiver is through that interpretation of the language?
    Mr. Larsen. To comply with the requirements of the ACA.
    Mr. Stearns. OK. My time is expired.
    The ranking member, Ms. DeGette.
    Ms. DeGette. Thank you very much. Mr. Larsen, when you say 
that a waiver was given to Florida, that doesn't mean every 
insured person in Florida was given a waiver. Correct?
    Mr. Larsen. That is correct.
    Ms. DeGette. I mean, basically, what it is is waivers were 
given to some States that had State laws that would violate the 
new federal law, and they were given specifically for these 
individual market plans within those States. Correct?
    Mr. Larsen. Sure. States that have--yes.
    Ms. DeGette. So how many States did that involve?
    Mr. Larsen. I think we have approved four States to date.
    Ms. DeGette. Four States. And those States were approved 
based on their State laws that might have affected those 
individual plan markets. Correct?
    Mr. Larsen. Even the applicants in the States had to still 
satisfy the regulatory standard for getting a waiver.
    Ms. DeGette. So there was no political--someone from the 
White House didn't call you folks up and say, approve these 
States because it is going to be important in the election next 
year.
    Mr. Larsen. No, and we applied the standards consistently 
across all applicants----
    Ms. DeGette. Thank you.
    Mr. Larsen [continuing]. Whether it was State applicant 
or----
    Ms. DeGette. Now, Mr. Larsen, some have alleged that the 
process through which waivers to annual limits are granted 
lacks transparency, so I want you to walk us through the 
process by which your agency makes waiver decisions. Can you 
briefly describe the factors that you take into account when 
evaluating waiver requests?
    Mr. Larsen. Yes, and the standards were set out in the 
regulation that we issued subsequent to the passage of the ACA. 
The standard----
    Ms. DeGette. Can you briefly describe those standards?
    Mr. Larsen. Sure. So the regulatory standard requires that 
an applicant show that there either be a significant increase 
in premiums or significant decrease in access to care. So that 
is the regulatory standard. We then issued subsequent guidance, 
I believe in November, that articulated factors that we use in 
evaluating those two standards, which include whether the 
compliance with the restrictions on the annual limits would 
result in a decrease in access to benefits, looking at the 
policies' current annual limits. If the annual limits are 
particularly low, there will be more of an impact, looking at 
the change in percent of--the change in premiums in terms of 
percentage, and then the change in premiums in terms of 
absolute dollar values, and then the number and types of 
benefits that would be impacted by application of the law.
    Ms. DeGette. And is my understanding accurate that CCIIO 
has reached out and continues to reach out to stakeholders to 
make sure that you are addressing any concerns that they may 
have regarding the waiver process?
    Mr. Larsen. We do.
    Ms. DeGette. And in which way?
    Mr. Larsen. Well, we have constant interaction with the 
applicants as they file, and if they have issues, hopefully 
they are brought to my attention, and we seek to resolve them, 
and I think as was mentioned earlier we have what I believe is 
very positive feedback that we have received from applicants.
    Ms. DeGette. Now, as you describe, you put out an interim 
final rule and guidance on the waiver process, and about 90 
percent of the applicants for waivers have been approved, so 
that would seem to me that the process is working because 
people understand what the criteria are, and they understand 
how to go through the process.
    But there has been one concern that has been raised, and 
not by this committee but by Chairman Issa's committee, the 
Oversight Committee, they said that you had not adequately 
defined some of the criteria you use in making decisions. For 
example, he said you hadn't published a clear bright line 
numerical definition of a large premium increase.
    So I guess my question is is it accurate that you have not 
published a strict numerical definition of what constitutes a 
large or significant premium price increase?
    Mr. Larsen. That is right. We do not have----
    Ms. DeGette. And can you tell me why not?
    Mr. Larsen. Sure. We took the view that applying an 
absolute number would not adequately allow us to fairly process 
the applications as they came in because the applications in 
terms of the number of employees affected, in terms of their 
baseline premiums, they all--they vary significantly. So, for 
example, you could have a policy that had a very high premium 
but a low percent impact but actually still has a significant 
impact on people that pay the premiums.
    So picking an absolute number we didn't think would be the 
best approach.
    Ms. DeGette. But just because you don't have an absolute 
number doesn't mean you don't have criteria. Correct?
    Mr. Larsen. No. We do have criteria.
    Ms. DeGette. Thank you very much. I yield back.
    Mr. Stearns. The gentlelady yields back. Our next--Dr. 
Burgess.
    Dr. Burgess. Thank you, Mr. Chairman, and Mr. Angoff, it 
has already been pointed out we have 5-minute increments in 
which our lives are lived, so I am going to ask you a series of 
questions, and I am going to ask us to go fairly quickly, so if 
we can, yes or no answers.
    When you came and visited me in my office, I believe it was 
November 30, I had some questions then you were kind enough to 
answer. We had the luxury of additional time, but today we need 
to go fairly quickly, so I am going to list a number of 
functions that it is my understanding were under your--when you 
were the head of OCIIO, the previous agency, that they were 
under your purview. So please let me know as I read through 
this list, please acknowledge that they were under your 
jurisdiction, or if they were not, let me know that as well.
    So children with pre-existing conditions?
    Mr. Angoff. Yes.
    Dr. Burgess. Healthcare.gov?
    Mr. Angoff. Yes.
    Dr. Burgess. Rescissions.
    Mr. Angoff. Yes.
    Dr. Burgess. No rescissions.
    Mr. Angoff. Right. The rule prohibiting rescissions.
    Dr. Burgess. The co-op program?
    Mr. Angoff. Yes.
    Dr. Burgess. Federal high risk pool?
    Mr. Angoff. Yes, which is the same as the pre-existing 
condition insurance plan.
    Dr. Burgess. Waivers for insurance plans?
    Mr. Angoff. Yes.
    Dr. Burgess. Grandfathered regulations?
    Mr. Angoff. Yes.
    Dr. Burgess. Early retiree programs?
    Mr. Angoff. Yes.
    Dr. Burgess. Annual limits?
    Mr. Angoff . Yes.
    Dr. Burgess. Waivers for businesses?
    Mr. Angoff. Yes.
    Dr. Burgess. State exchanges?
    Mr. Angoff. Yes.
    Dr. Burgess. Coverage for children under parents' plans?
    Mr. Angoff. Yes.
    Dr. Burgess. Age 26.
    Mr. Angoff. Right.
    Dr. Burgess. And the medical loss ratio?
    Mr. Angoff. Yes, sir.
    Dr. Burgess. So all these things are functions for which 
you were responsible for overseeing and implementing?
    Mr. Angoff. Correct.
    Dr. Burgess. Can you help us--I have got a copy of the 
Patient Protection Affordable Care Act here. Can you direct us 
to the section of PPACA that authorizes OCIIO to speak in 
acronyms for just a moment?
    Mr. Angoff. The Secretary has discretion to manage and 
operate her office, but to answer your question, Congressman, 
there is no particular specific authorization in the bill that 
says there shall be created an Office of Consumer Information 
and Insurance Oversight. That is part of the Secretary's 
discretion.
    Dr. Burgess. So there is no authorization statute in the 
law that was signed by the President on March 23 of last year?
    Mr. Angoff. Well, the functions are authorized. The 
specific office, there is no section of the bill which----
    Dr. Burgess. So what about CCIIO, the follow-on 
organization? Is there a section in here that I have missed 
that authorizes the follow-on organization? CCIIO, whatever 
exists today?
    Mr. Angoff. There is no section specifying the name OCIIO 
or CCIIO.
    Dr. Burgess. Neither branch of the federal agency was 
specifically authorized under the legislation.
    Mr. Angoff. But the functions that those agencies carry out 
are authorized in the bill.
    Dr. Burgess. So when in the timeline were you hired by the 
Administration for the purposes of creating and running OCIIO?
    Mr. Angoff. I was hired, I believe my first day on the job 
was February 16, and----
    Dr. Burgess. February 16 of 2010?
    Mr. Angoff. February 16 of 2010. The----
    Dr. Burgess. Happy anniversary then.
    Mr. Angoff. Oh, thank you very much.
    Dr. Burgess. And I have the Federal Register from April 19, 
2010----
    Mr. Angoff. Right.
    Dr. Burgess [continuing]. Which talks about the Secretary 
organizing your agency.
    Mr. Angoff. Yes. Before you wished me happy anniversary I 
was about to say that the office was authorized on April 19.
    Dr. Burgess. So March 23, signed into law, April 19, 
Federal Register, within a month of passage the Administration 
realized that they needed and the legislation lacked and they 
were able to divert funds to hire you, create OCIIO, and do 
this whole creation basically out of thin air, out of whole 
cloth because it wasn't authorized in statute.
    Mr. Angoff. Well, obviously I wouldn't agree with that 
characterization.
    Dr. Burgess. Well, OK. Well, what about--this is pretty 
simple then. Where did the money come from? Where was the 
funding for OCIIO?
    Mr. Angoff. The money came from the $1 billion that was 
appropriated as part of the ACA and then in addition, there are 
certain statutes, certain provisions of the Affordable Care Act 
which carried with them funding to carry out those particular 
provisions.
    Dr. Burgess. So would a correct characterization be you 
were able to skim money off say some areas like the money for 
the high risk pools to fund your organization?
    Mr. Angoff. No. That is not a characterization, and that is 
not an accurate characterization because--for this reason.
    Dr. Burgess. Perhaps you would be able to provide to the 
Committee a detailed budget of where the money came from, the 
million dollar initial authorization, but there were other 
agencies making draws on that as well. Presumably you had at 
the end of the day your agency merged into another one, how 
many employees were working for you?
    Mr. Angoff. Two hundred and fifty-two.
    Dr. Burgess. All right. That is not inexpensive to hire 252 
people in Washington or Maryland.
    Mr. Angoff. No. If I could just go back, though, 
Congressman, just to one point because I think it is very 
important to realize that the Act has certain sections which 
carry with it specific appropriations for those sections.
    Dr. Burgess. Let me just ask you very briefly. Do you have 
and can you produce for the Committee a delegation of authority 
from the Secretary of HHS that we can use to better understand 
what your services were at OCIIO?
    Mr. Angoff. Yes. There was such a delegation, and I am 
happy to produce it.
    Dr. Burgess. I yield back. Thank you, Mr. Chairman.
    Mr. Stearns. Thank the gentleman, and the gentleman from 
Michigan, Mr. Dingell, is recognized for 5 minutes.
    Mr. Dingell. Please respond yes or no to this--these 
questions if you can, and if the answer is no, would you also 
please submit a detailed explanation for the record?
    One, the underlying goal of the Affordable Care Act was to 
provide affordable quality health care for all. Do you believe 
the limited benefits plans provide that quality and that they 
provide comprehensive care to consumers? Yes or no?
    Mr. Angoff. No.
    Mr. Dingell. OK. Next, we know that millions of Americans 
do rely on limited-benefit plans. Do you believe consumers have 
been adequately informed about the benefit limits under these 
plans? Yes or no?
    Mr. Angoff. No.
    Mr. Dingell. The waivers are for how long? Only for 1 year. 
Right?
    Mr. Angoff. Yes, sir.
    Mr. Dingell. And they will be reviewed at the end of that 
year?
    Mr. Angoff. Yes, sir.
    Mr. Dingell. So you will have the chance to reissue the 
waiver or to deny the waiver at that particular time.
    Mr. Angoff. That is correct.
    Mr. Dingell. This is a transitional step, is it not?
    Mr. Angoff. Yes, it is.
    Mr. Dingell. And the purpose is to see to it that you don't 
take away from the recipients of the benefits under these 
plans, the benefits that they are receiving while you set up 
the larger plan as required by the statute. Is that right?
    Mr. Angoff. That is exactly right.
    Mr. Dingell. Now, under ACA the Secretary has authority to 
determine what is restricted annual limits, and the 
responsibility to also protect consumer access to essential 
health benefits. We know that we allow an appropriate 
transition time. Some States, employers, and insurers would be 
unable to comply with the no annual limits provision and 
without an adverse impact on coverage or premiums. Is that 
correct?
    Mr. Angoff. Yes, sir.
    Mr. Dingell. Do you believe that waivers are necessary to 
provide an uninterrupted, affordable transition coverage to 
individuals?
    Mr. Angoff. I do.
    Mr. Dingell. And you will be reviewing these matters as we 
move towards 2014, and the full statute goes into effect.
    Mr. Angoff. That is correct.
    Mr. Dingell. Is that right? Do you believe that the 
necessary guidance and assistance from the CCIIO has been 
readily available and accessible to assist potential applicants 
in completing the waiver application process? Yes or no?
    Mr. Angoff. Yes.
    Mr. Dingell. Do you believe that CCIIO has dedicated an 
adequate amount of staff time to be responsive to potential 
applicants regarding the waiver application process? Yes or no?
    Mr. Angoff. I do.
    Mr. Dingell. And you have put considerable effort into 
seeing to it that those resources are available for that 
purpose.
    Mr. Angoff. Yes, we have.
    Mr. Dingell. Do you believe that the waiver process has 
provided an ample and an adequate transition time for employers 
and employees to comply with the Affordable Care Act?
    Mr. Angoff. Yes, sir.
    Mr. Dingell. And that, of course, is, again, one of the 
purposes of the waiver provisions.
    Mr. Angoff. Yes, it is.
    Mr. Dingell. Waivers are being granted. Is that right?
    Mr. Angoff. Yes, it is.
    Mr. Dingell. Now, do you believe that the enrollees will 
receive greater information about the limited benefits in their 
health plan under the waiver process?
    Mr. Angoff. I do.
    Mr. Dingell. Now, let us try and summarize. The--we are 
moving towards the establishment of the national plan which 
takes place in about 2014. This is going to be a very 
complicated exercise and a complicated plan. You will be 
reviewing these waivers periodically to see to it that they 
further your purposes of and the purposes of the statute in 
getting us where we can have a good workable national plan 
which provides to an orderly transition to that. Is that 
correct?
    Mr. Angoff. That is correct.
    Mr. Dingell. Now, if you did not grant these waivers, what 
would be the practical result? As I read it, you would be 
kicking all these people off their plans, they would receive no 
benefits, and so we would have a very large problem of a lot of 
people not receiving any coverage at all. Is that correct?
    Mr. Angoff. Yes, it is.
    Mr. Dingell. The plans are--a lot of these plans are 
subject to criticism on the adequacy of the benefits provided, 
but nonetheless, that is better than having no plans to cover 
these people, which could happen if you did not give the 
waiver. Is that correct?
    Mr. Angoff. That is true.
    Mr. Dingell. Mr. Chairman, I note that I have 18 seconds to 
yield back. Thank you.
    Mr. Stearns. I thank the gentleman, and next we will go to 
Mr. Murphy.
    Mr. Murphy. Thank you, Mr. Chairman. The Institute of 
Medicine has been asked by HHS to make recommendations on the 
criteria and methods for determining and updating the essential 
health benefits package called for by the Affordable Care Act, 
and you know, Congress did not call for definition of medical 
necessity in the bill. While the House bill included a 
definition, it was not included in the final bill as amended.
    But as I understand it Health and Human Services has asked 
the Institute of Medicine to review definitions and 
applications of medical necessity, which we didn't call for in 
the Affordable Care Act, and is outside the scope of defining 
essential benefits.
    Can you tell me what authority does HHS believe it has to 
include this in the definition of essential health benefits?
    Mr. Larsen. Well, I can try and answer that. I apologize. I 
know that the Institute of Medicine has been tasked with 
helping HHS define what essential benefits are, and that will 
also be supplemented with a study by the Department of Labor. I 
have to confess I am not familiar with the medical necessity 
component of the task that has been asked, so I can follow up.
    Mr. Murphy. Can you do that? I would really appreciate if 
you would follow up. That would be great. Thank you.
    Mr. Larsen. I will do that.
    Mr. Murphy. Now, I want to ask a little bit more about 
these waivers. One of the waivers from the State of Ohio, my 
neighbor in Pennsylvania, and it is interesting a statement 
from Mary Jo Hudson, who is the Director of the Ohio Department 
of Insurance, was this. She said, ``Not allowing a blanket 
waiver for all companies for basic and standard open enrollment 
in group conversion options would lead to an unlevel playing 
field. Some companies will seek waivers while others won't.''
    I think that is a good point, but how are you sure you 
haven't created some sort of an unlevel playing field, make 
sure everyone affected by the bill, the annual limits, know 
that they can apply for waiver?
    Mr. Larsen. Yes, thank you, and I don't think we have 
created an unlevel playing field. There are a small number of 
States that, through State policy, have encouraged or required 
insurance companies to offer these as we call them, mini-med 
policies, in order to make sure that there is a policy 
available for some people who otherwise couldn't afford 
coverage.
    And in establishing the waiver process and particularly the 
State process, we did want to make sure that people who have 
that coverage can, today, continue that coverage. So we set up 
a process that allows for the States, when there is a State 
policy or law or program that requires carriers or establishes 
a program that offers these types of mini-med policies to apply 
for a waiver.
    Mr. Murphy. It still is a situation in question, is 
everybody well-informed? Are you comfortable with how people 
are informed that they can apply for waivers, and they 
understand the terms and conditions of--once they can obtain a 
waiver?
    Mr. Larsen. We are. Again, I think we have been very 
transparent in publicizing this. The States are aware of it. We 
have worked through a number of different outside entities and 
trade groups and the NEIC to make sure that the word got out 
that there was an option to apply for these types of waivers.
    Mr. Murphy. How about a medical loss ratio? A number of 
States have applied for things, Georgia, Iowa, Maine, South 
Carolina, Texas, et cetera, all requesting waivers for medical 
loss ratio. Have any of the States contacted you about waivers 
for the MLR?
    Mr. Larsen. I would answer that in two ways. Before the 
medical loss ratio regulation was issued in December, we 
received a number of letters from States because the statute 
contemplates a State-based waiver process, but we hadn't set up 
the process yet. So we did receive letters from States before 
the regulations were issued.
    Since the regulations were issued in December that laid out 
the process for applying, I believe we have received three 
States----
    Mr. Murphy. Would you let us know all the States that have 
that under--and what standards would a State obtain an 
exemption?
    Mr. Larsen. Sure. Well, the standards are set out in the 
regulation.
    Mr. Murphy. Just make sure we know that.
    Mr. Larsen. Yes.
    Mr. Murphy. The other thing I want to know is with the 
waivers that are being granted on multiple levels, has anyone 
done an economic or financial analysis of what this means in 
terms of the overall financial stability or instability, 
whatever, of the entire health care package?
    Would either of you know what that is?
    Mr. Larsen. I am not familiar with a study that looks at 
the impact of waivers.
    Mr. Murphy. The issue being that if someone is required to 
participate, then they are waived from that, I don't know what 
this actually means in terms of revenues spent, revenues locked 
in. We are trying to get a handle on what all this means and 
the whole financial analysis of this bill and not clear if 
anybody is doing that analysis.
    Mr. Larsen. Well, in the transition between now and 2014, I 
think these limited waivers are beneficial to all the 
stakeholders, to both--either the companies or the issuers or 
the States or the beneficiaries so that they can continue the 
coverage between now and 2014.
    Mr. Murphy. Thank you very much.
    Mr. Stearns. The gentleman yields back the balance of his 
time. Mr. Green is recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. Annual limits or 
coverages we understand can be a pretty rotten deal if you are 
really ill for consumers. You pay premiums for many years and 
then all of a sudden you find out that your wife has cancer or 
maybe your child that was just born has some terrible illness 
that you have to have a lot of health care for, and your 
insurance company ends up paying a lot and then they end up 
hitting up against that annual limit and sometimes even a 
lifetime limit.
    Unfortunately until health care law was implemented, will 
be implemented in 2014, there are some people who have a choice 
between a plan with low annual limits on coverage or no 
coverage at all, and Congress intended to make sure that people 
enrolled in these plans wouldn't see their premiums rise 
dramatically or see their options for coverage disappear while 
employers adjust to new consumer protection rules and the full 
range of health care reforms.
    Mr. Larsen, am I correct that the waiver process that we 
are talking about today was envisioned by Congress and put into 
place to help consumers in these low-cost and low-benefit 
plans?
    Mr. Larsen. That is correct.
    Mr. Green. It is my understanding that these waivers are 
temporary and that they only last for a year, and they won't be 
available in 2014, or after. Is that correct?
    Mr. Larsen. That is correct.
    Mr. Green. Mr. Larsen, what are some of the benefits that 
will be available to low-wage workers once the annual limit ban 
becomes firm in 2014?
    Mr. Larsen. Well, the entire landscape changes to the 
benefit of the consumer. They will have access to an insurance 
marketplace; there will be increased competition, benefits will 
be fuller; there will be premium subsidies available for 
individuals who can't afford to purchase insurance; but, the 
insurance that they purchase will now have full coverage and 
not the restricted limits that, unfortunately, some people have 
today.
    Mr. Green. OK, and the waiver process I know benefits 
businesses, too. Health and Human Services implementing the ban 
on annual limits incrementally, starting with the floor of 
$750,000 in coverage for central care annually and raising that 
floor gradually until annual limits are eventually prohibited. 
Business and health plans would see substantially higher 
exposure to claims under even this incremental approach can 
apply for short-term waivers.
    What percentage of the businesses that have applied for 
these short-term waivers received them?
    Mr. Larsen. Well, we approved the vast majority of the 
applicants that came in. Some are Taft-Hartley Plan, some are 
self-insured businesses, some are issuers, but overall I think 
the approval rate is about 95 percent or so.
    Mr. Green. That is what our staff has come up with, about 
90 percent and these are requests from businesses who are 
asking for that short-term waiver so they can grow into the 
health care.
    Mr. Larsen. That is right.
    Mr. Green. It seems to me the waiver process implemented is 
just the sort of thoughtful approach that we want in a health 
insurance reform plan. The President advocated the ban on 
annual limits is a critical consumer protection, and the waiver 
process allows the Administration to implement that protection 
with due regard to individual circumstances and individual 
particular consumers and businesses.
    The prohibiting annual limits is important reform that 
responds to one of the worst features of our insurance market 
today, and, again, I served 20 years in the legislature, and I 
understand what happens in legislatures where you have very 
low-limit policies because you hope sometimes somebody has one, 
just has a policy.
    Annual limits can leave consumers, particularly those with 
expensive and chronic conditions and those experiencing 
catastrophic medical limits, with enormous medical debt and 
without an ability to access the health care. Congress included 
a ban on annual limits in the Reform Bill, but it also gave HHS 
the authority to waive it.
    It is my understanding this waiver process was necessary to 
ensure the small number of people in certain low-cost, low-
benefit plans, often called mini-meds, which still have access 
to at least some coverage before health care reform is fully 
implemented. Is that your understanding, Mr. Larsen?
    Mr. Larsen. That is right.
    Mr. Green. Since this waiver process does not represent a 
flaw in the health care law but rather a recognition that 
flexibility and accommodation of unique circumstances--you 
don't turn around a battleship or an aircraft carrier 
immediately just like you don't turn around our health care 
plan.
    Under circumstances would be required we build towards full 
range of consumer protections, and benefits will be available 
to all Americans in 2014. Is that correct?
    Mr. Larsen. That is correct.
    Mr. Green. In fact, the waiver process responds to an 
uncommon, relatively uncommon set of circumstances. What 
percentage of the people in private insurance plans, Mr. 
Larsen, are covered by plans that have received a waiver?
    Mr. Larsen. Well, again, the number is about 2\1/2\, so 
less than 2 percent of people that have employer-based coverage 
are in plans that have received a waiver.
    Mr. Green. So we are addressing this problem, but less than 
2 percent----
    Mr. Larsen. That is right.
    Mr. Green [continuing]. Have requested or received a 
waiver. Compared to the number of people receiving protection 
against annual limits under the Affordable Care Act, I would 
call that number a very small amount. I wish we didn't have to 
issue any waivers from this important protection, but just over 
1 or 2 percent seems fairly minor.
    In addition, the annual limit restrictions are but one 
important part of the series of protections that have been 
implemented since enactment. Young adults can now stay on their 
parents' policies until 26, lifetime limits have been 
eliminated, plans must cover preventative care for free.
    Mr. Larsen, are any of these protections or any of those 
protections being waived?
    Mr. Larsen. No. No, sir.
    Mr. Green. OK. So the core protections of the law continue 
to be implemented smoothly with benefits for families, 
employers in this area. Is that correct?
    Mr. Larsen. That is correct.
    Mr. Green. OK. Thank you, Mr. Chairman. I will yield back 
my time.
    Mr. Stearns. All right. Thank the gentleman. The 
gentlelady, Mrs. Myrick, is recognized for 5 minutes.
    Mrs. Myrick. Thank you, Mr. Chairman. Thank you both for 
being here.
    The center contains the Office of Insurance Programs, which 
will administer the temporary high-risk pool program called the 
Pre-Existing Condition Insurance Plan. The health care law 
created this program with $5 billion in funding. Correct? I 
guess these probably go to Mr. Larsen since you are the head of 
that right now. Correct?
    Mr. Larsen. I can speak somewhat, and Jay can as well.
    Mrs. Myrick. OK. Well, whoever wants to answer. Go ahead. 
OK. Is--the $5 billion is correct. Right?
    Mr. Angoff. Yes.
    Mrs. Myrick. And HHS recently announced the enrollment in 
the program. What was the number?
    Mr. Angoff. Approximately 12,000.
    Mrs. Myrick. Twelve thousand, which seems awfully low 
considering the fact that pre-existing conditions were used 
routinely as one of the reasons that we needed to have the law. 
So don't you think the health care law, an unprecedented 
intrusion into the health care sector, was probably oversold by 
continually referencing those who had pre-existing conditions?
    Mr. Angoff. No, I don't think so, Congresswoman. And I 
don't think it is law. The program has only been up for a 
couple of months. It is a transitional mechanism. It is only 
necessary because, under current law, insurance companies are 
permitted to exclude people based on health status and to 
charge more based on that.
    Mrs. Myrick. Well, when the report was issued last April 
CMS's Chief Actuary said the creation of a national high-risk 
insurance pool will result in roughly 375,000 people getting 
coverage in 2010, and if only 12,000 have enrolled, it seems to 
me that that is an overestimate of about 360,000 people for 
last year.
    Mr. Angoff. No question that prediction has proved to be 
inaccurate. There were fears that the program would be overrun, 
and that has not occurred.
    Mrs. Myrick. Well, the Washington Post did a story also at 
the end of 2010, in December, the open question was--this is 
what they said. It is an open question whether the $5 billion 
allotted by Congress to start up the plans will be sufficient. 
Do you think these high-risk pools will need additional 
funding?
    Mr. Angoff. No, I don't.
    Mrs. Myrick. The same news article states New Hampshire's 
plan has only about 80 members, but they already have spent 
nearly double the $650,000 the State was allotted. Is this 
true?
    Mr. Angoff. No, it is not. They spent more than the amount 
that was allotted for 1 year, but they are well under the 
amount that was allotted for the entire lifetime of the 
program.
    Mrs. Myrick. And how many people are they scheduled to 
enroll then in the program?
    Mr. Angoff. I am sorry?
    Mrs. Myrick. How many people are they scheduled to enroll 
in the program based on what you are saying?
    Mr. Angoff. I can't give you a projected number of people, 
but I do know that the projections are that they will not 
exceed the amount that they have been allotted for the entire 
lifetime of the program.
    Mrs. Myrick. Will States like New Hampshire be provided any 
more money then in case they do?
    Mr. Angoff. There is a process pursuant to which money 
could be reallocated but----
    Mrs. Myrick. Does that mean reallocated from other States 
that aren't spending it or----
    Mr. Angoff. Yes, but that is very unlikely because there is 
no State which has spent more than its allocation for the 
period of----
    Mrs. Myrick. At this point.
    Mr. Angoff [continuing]. That the program would be in 
place, and as you pointed out, there is a lot of money left to 
insure a lot of people, and we are looking forward to doing 
that.
    Mrs. Myrick. The article also states that although they 
collect enrollment data monthly, they have decided--you have 
decided to report it on a quarterly basis. Can you commit to 
reporting it on a monthly basis instead of quarterly since the 
data is available?
    Mr. Larsen. I would have to go back and check with our 
systems folks.
    Mrs. Myrick. Would you do that?
    Mr. Larsen. Sure.
    Mrs. Myrick. Because it seems like, if it is overestimated 
enrollment that is still spending more than it was originally 
promised, if you wait on the quarterly data instead of doing it 
monthly, it just doesn't----
    Mr. Larsen. Sure.
    Mrs. Myrick [continuing]. Serve the purpose, and it 
technically kind of eliminates political damage.
    Mr. Larsen. Well, we can do that, and to Mr. Angoff's 
point, the initial period, the start-up, getting this set up 
was where the resources were devoted to, to make sure that the 
program was up and running.
    Mrs. Myrick. OK.
    Mr. Larsen. So we understand that there are estimates out 
there that are higher than the 12. We know, for example, that 
after we got the program up and running and we started the 
outreach, I think, in the last period, enrollment has increased 
50 percent. So we are already seeing a very rapid rise in the 
enrollment of this, and we fully expect that to grow as we now, 
having stood the program, have had the opportunity to get the 
work----
    Mrs. Myrick. Got one more question because I am running out 
of time. HHS recently announced that new resources will be 
available to increase awareness of the program. Correct?
    Mr. Larsen. Correct.
    Mrs. Myrick. And so some of those include working with the 
U.S. Social Security Administration on a comprehensive outreach 
campaign. Any idea on the cost of that?
    Mr. Larsen. I don't, sitting here today, but I will get 
that----
    Mrs. Myrick. If you will get it back to me.
    Mr. Larsen. Absolutely.
    Mrs. Myrick. I mean, there has already been so much 
discussion about this Health Care Bill, and there has been so 
much awareness, et cetera, during the long period we debated it 
that my concern is do we really need to spend more dollars 
right now on additional outreach? So----
    Mr. Larsen. Well, I think we----
    Mrs. Myrick [continuing]. Mr. Chairman--go ahead.
    Mr. Larsen [continuing]. Have learned that it really takes 
a lot of effort. Many of these people have had a tough time; 
they have medical conditions; they don't have coverage; so, we 
are going to work with hospitals and providers and other 
sources to make sure that they get what they need, and they are 
aware of this program.
    Mrs. Myrick. Thanks. I am out of time.
    Mr. Stearns. Thank the gentlelady. Ms. Schakowsky, 
recognized for 5 minutes.
    Oh, Mr. Waxman. I didn't see you.
    Mr. Waxman. Thank you very much, Mr. Chairman. Some of the 
Republicans on this committee and elsewhere have been 
relentless in their attacks on the Health Care Bill generally 
and on your Office's implementation of the bill in particular. 
One of the main allegations is that CCIIO has acted with bias 
in granting waivers to annual limits on essential benefits 
coverage.
    Representative Gingrey alleged that the waiver process has 
been ``highly political and selective,'' and that politics and 
insider status rather than objective criteria have been guiding 
this process. Others have suggested that an increase in waiver 
grants following the November, 2010, election reflects 
potential reward of political allies. Subcommittee Chairman 
Stearns said, ``From December, 2010, to January, 2011, the 
number of waivers grew from 222 to over 700, and yes, a lot of 
those waivers are going to unions.''
    Mr. Larsen, before this hearing HHS turned over to the 
Committee detailed information on all approvals and denials of 
requests for waivers from the New Annual Limits Provisions of 
the Affordable Care Act. I would like to get your thoughts on 
what this information shows about the allegations of bias.
    The information HHS has provided the committee shows that 
of applications by union plans or plans that serve union 
members 14 percent were denied waivers compared to denial rate 
of about 3 percent for all other applicants, so plans to serve 
union members are almost five times as likely to be denied 
waivers as other applicants.
    Do you think this information supports allegations that 
CCIIO is showing favoritism toward unions?
    Mr. Larsen. No. It doesn't, and to be clear, we didn't 
solicit applications from any particular sector. We didn't 
favor applicants from any particular sector or type of 
applicant. I know it has been described in some cases as a high 
percentage of union approvals, but as I think the data show, 
and hopefully we have clarified for you all, those are 
generally the Taft-Hartley Plans, which, in fact, are employer-
sponsored coverage. They are not union plans, and so as you 
point out, there is a very--a small percentage, in fact, of 
unions that have gotten waivers, a much higher percentage of 
employer-based coverage.
    Mr. Waxman. I guess to say that unions are getting special 
treatment, which they are not, is a way to get people angry 
because they want to stir up hostility to unions, although the 
unions, unfortunately, are shrinking to less and less an 
important part of our economy.
    Mr. Larsen, the information received from our committee 
indicates that there was a spike in waiver grants in January of 
this year. Can you explain why there was such an increase?
    Mr. Larsen. Yes. So we require applicants to submit their 
requests 30 days in advance of the plan year, the policy year 
for which the coverage takes effect, and because many plan and 
policy years begin on January 1, as you might expect, right 
around December 1 and the end of November we received an 
increase in the number of waiver applications to coincide with 
the large number of plans.
    So there is kind of a bubble, and things have receded back 
down closer to the levels that we saw right before December.
    Mr. Waxman. Well, let me be very specific. I want to ask 
you this question. Is political support for the Obama 
Administration a factor in any way for the CCIIO considering 
and evaluating applications for the waivers to annual limit?
    Mr. Larsen. No, not in any way.
    Mr. Waxman. And can you assure this committee that your 
office has handled the waiver process in an unbiased fashion?
    Mr. Larsen. We handle the applications in an unbiased 
fashion.
    Mr. Waxman. So when people make these charges, there is no 
basis for these charges. They are all political. It is all 
propaganda. It is just another attack on this Administration, 
another attack on the Health Care Bill.
    I am a strong believer in effective oversight, but this 
redoric and tone surrounding the attacks on HHS implementation 
of the health care law has me very concerned. Opponents have 
hurled one accusation after another at HHS and at the Health 
Care Bill, and then when the facts emerge, the allegation turns 
out to be unfounded.
    I hope that we are not going to do this in oversight on all 
the issues that we have before us. I just hear these statements 
that I know are untrue. The Republicans say that they had a 
bill that would have accomplished all the same things that the 
Democratic bill would have accomplished. It would have stopped 
the discrimination for pre-existing conditions, it would have 
stopped these discriminations by insurance companies. That 
isn't what they proposed at all, and they didn't propose 
anything that covered Americans. Maybe $3 million, not the $30 
million that the bill covered. I just get frustrated that we 
have to run after the falsehoods with truth.
    I yield back the balance of my time.
    Mr. Stearns. Gentlelady from Tennessee is recognized for 5 
minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman, and we are talking 
so much about the waivers that States are getting, including 
Tennessee, which came to you and asked for a waiver, and I have 
got their waiver letter with me. This came to you September 17, 
2010. This was during the administration of Governor Bredesen, 
who has since left office, and we have Governor Haslam.
    But talking about these waivers and our concern, our 
program in Tennessee, CoverTN, which is an innovative program 
that was put in place, and we are concerned about what is going 
to happen with these programs in the future, and I want to read 
for you page 6 of this letter that went to you. It says that 
absent a waiver, absent getting a waiver from you, from 
Obamacare, that the State would have to dis-enroll 20,000 
Tennesseans, who were not served by the commercial market in 
Tennessee prior to their enrollment in CoverTN. It seems likely 
that the majority of these individuals would become uninsured, 
and finally, it goes on and states that insurance premiums 
would go up, get this, 86 percent. Eighty-six percent.
    So would you agree with me that this would be a significant 
cost increase to individuals and the State?
    Mr. Angoff. I would. I would just like to make one thing 
clear, though, that I don't think has been made clear, which is 
this. The waivers are not granted to States. They are granted 
for coverage that is mandated by States. I am not as familiar 
with Tennessee as I am with New Jersey where I was Deputy 
Commissioner, and in New Jersey, for example, New Jersey 
mandates that all carriers shall have certain coverage.
    Mrs. Blackburn. That is right. You all had guaranteed issue 
in New Jersey, but we have a TennCare program that was put up 
as an executive order of the governor and then has been run 
under the purview of CMS. OK, but you all granted Tennessee a 
waiver for this program. Right?
    Mr. Angoff. For that specific program.
    Mrs. Blackburn. For the CoverTN Program. That is exactly 
right. The program that is working and providing coverage and 
is successful.
    Mr. Angoff. Correct.
    Mrs. Blackburn. Now, what is Tennessee and what are these 
Tennesseans going to do in 2014? Where are they going to go? 
What is going to happen? Because that program is not going to 
be there unless you give it another waiver.
    Mr. Angoff. Well, I'll just say this. We have been very 
conscious of this--when a State mandates certain coverage, and 
I will refer to New Jersey again because I am most familiar 
with that, New Jersey mandates that carriers sell relatively 
limited coverage, and so when a State mandates certain 
coverage----
    Mrs. Blackburn. Sir, I am going to interrupt you with that 
because I am not talking about guaranteed issue. I am talking 
about an innovative program in Tennessee that is working and 
what is going to happen with that program. And, see, I think my 
State is a great example of what is wrong with your approach to 
this with Obamacare, because you are going to take away a 
program that is working and then people are going to be left to 
go through and try to find something through an exchange, and 
they are going to face higher rates, and they are going to face 
a cramped access to health care services. Their insurance cost 
goes up, and the delivery costs goes up. It goes up on two 
fronts, two separate fronts.
    And I think that the letter--I was looking at page 3 of 
this where it defines the benefits. This is a State solution. 
CoverTN is a State solution to provide affordable basic health 
insurance for small businesses, the self-employed, and the 
recently unemployed that covers the most frequently-used 
services. This letter also explains to you that because of the 
way this program was set up, and the letter came to you from 
the Department of Finance and Administration from the State of 
Tennessee on behalf of the CoverTN Program, but it states this 
plan has seen enrollment climb because, number one, the plan is 
affordable, and the medical loss ratio for 2010 was 87 percent.
    Now, under the current rules this plan would disappear in 
2014. Is that correct?
    Mr. Larsen. Congresswoman, if I could respond, I actually 
think we are in agreement on many issues. The State of 
Tennessee, like other States, in response to the very broken 
marketplace that we are all trying to solve.
    Mrs. Blackburn. Our marketplace was broken because of the 
implementation of TennCare that ate up 35.3 percent of the 
budget----
    Mr. Larsen. I can't speak to TennCare.
    Mrs. Blackburn [continuing]. And saw hundreds of thousands 
of Tennesseans dis-enrolled from the program.
    Mr. Larsen. So Tennessee----
    Mrs. Blackburn. You are correct. We were under the 1115 
Waiver Program, and it did nearly bankrupt the State, and I 
would hope, I would like to move onto my last question.
    Mr. Larsen. If I could, ma'am.
    Mrs. Blackburn. No, sir. I have got one last question that 
I am going to ask and because you all avoid it. If history is a 
guide, what in heaven's name are you going to do with 
escalating costs? TennCare's cost quadrupled. They quadrupled 
within about a 5-year period of time.
    So if history is a guide and that happens with Obamacare, I 
would love to hear what is your plan for dealing with 
accelerated costs?
    Mr. Larsen. The Affordable Care Act, in fact, is full of 
provisions and its purpose is to lower the cost curve, and 
there is a series----
    Mrs. Blackburn. Sir, history tells you that when you go 
into this premise of near-term expenses banking on long-term 
savings, it doesn't work. What is your plan B?
    Mr. Larsen. The plan is the Affordable Care Act. That is 
the plan, and it is going to work.
    Mrs. Blackburn. Sir, there is no case in history in this 
country where this has worked.
    Mr. Larsen. This will work.
    Mrs. Blackburn. None. It is----
    Mr. Stearns. I thank the gentlelady. The time has expired 
and will recognize----
    Ms. DeGette. Mr. Chairman, I would like to ask unanimous 
consent to let Mr. Larsen answer the very important question 
that Ms. Blackburn asked.
    Mr. Stearns. Well, I think Mr. Larsen answered it. He said 
that the answer is Obamacare.
    Ms. DeGette. No. The previous question that she asked.
    Mr. Stearns. Mr. Larsen, did you answer her previous 
question?
    Mr. Larsen. Well, the point, the only point I was trying to 
make about the State programs and the point that I think we 
were in agreement on, which was the market is broken. People 
can't get coverage, haven't been able to get affordable 
coverage. One response at the State level, these are the States 
that applied for waivers, was to set up programs that have 
limited benefits, and we understand that. We agree that those 
programs between now and 2014 should continue so that those 
people do have access to care. Then in 2014, they will have 
access to much better--
    Mr. Stearns. I would advise all members we are going to 
have a second round here, so if anybody wants to stay, they can 
go into it.
    So Ms. Schakowsky.
    Ms. Schakowsky. Well, let me explore that a little further. 
The waiver that is granted to States like Tennessee and Florida 
is to allow the mini-med plans. Talk about those plans for a 
minute that Ms. Blackburn has lauded as some really great 
coverage. What are we really talking about in terms of mini-med 
plans? Are they not limited coverage?
    Mr. Larsen. They are limited coverage. They are not all the 
same. Some have very low annual limits. Some have restrictions 
on other types of benefits, and that is the dilemma because 
they are not good coverage. They don't provide comprehensive 
coverage, but, nonetheless, today until the full reforms of the 
Affordable Care Act kick in, that is an option for people.
    Ms. Schakowsky. Right.
    Mr. Larsen. And we want people to have that option, even 
though it is not necessarily full coverage.
    Ms. Schakowsky. So we see that as a bridge----
    Mr. Larsen. As a bridge.
    Ms. Schakowsky [continuing]. As you said to better 
coverage. Would you describe what happens to people who are in 
the mini-med programs now once the full implementation of the 
Affordable Care Act in 2014?
    Mr. Larsen. Well, they are going to get a much richer, 
fuller benefit package, and they are not going to have to worry 
about whether they spend 4 days in the hospital and run out of 
their inpatient coverage because there is an annual limit on 
their policy.
    So consumers are going to be better off. The system is 
going to be better off because we are not going to have the 
levels of uncompensated care that we have today. So that is the 
world in 2014.
    Ms. Schakowsky. I want to go back to the issue of the 
States for just a second, the overall policy, because, again, 
it was--it seemed to be promoted by our Chairman as, again, 
something political about Florida or New York. What States, 
what is the feature in the States that would uniquely make them 
eligible for a waiver?
    Mr. Larsen. The feature is if they have a law or program 
that establishes a package of benefits that insurers have to 
issue, or insurers issue pursuant to a State program. So there 
is a small number of States that have these types of programs, 
one of which is----
    Ms. Schakowsky. These are the limited-benefit programs.
    Mr. Larsen. That is right.
    Ms. Schakowsky. Yes. So----
    Mr. Larsen. And, otherwise, we apply the same regulatory 
criteria that we apply to all applicants to the States that 
apply. So there has to be a significant increase in premiums or 
decrease in access to benefits if they had to comply with the 
law.
    Ms. Schakowsky. OK. The other issue I wanted to deal with, 
there was a charge made somehow that there is skimming in order 
to create your office, and I wanted to talk a little bit about 
it.
    Mr. Angoff, I wanted to ask you about the Secretary's 
authority to create the office. Implementing landmark health 
insurance reform, of course, is a huge job, and following the 
enactment of the Affordable Care Act, Secretary Sebelius 
established the Office for Consumer Information and Insurance 
Oversight.
    So I think you talked a little bit about the 
responsibilities of the office, but I am more interested in 
getting to the question really of the authority because 
Representative Burgess questioned that authority. The committee 
looked into, the staff did some research and found that 
according to the Department's reorganization plan from 1953, 
the Secretary, ``may from time to time make some provisions as 
the Secretary deems appropriate, authorizing the performance of 
any of the functions of the Secretary by any other officer or 
by any agency or employee of the Department.''
    So it looks, Mr. Angoff, like the Secretary has had that 
power for nearly 60 years.
    Mr. Angoff. That is correct. There is no question about the 
Secretary's authority to create the Office. She has such 
authority.
    Ms. Schakowsky. Now, I also want to clarify what you said. 
You were saying that there is money in the bill to implement 
the provisions and that a decision was made about a structure 
to do that, taking money already in the bill. Is that what you 
were saying? To create an appropriate structure.
    Mr. Angoff. That is correct. There is $1 billion 
appropriated for the ACA as part of the Act, and then in 
addition there are specific provisions such as the provision 
authorizing the high-risk pools and the provision authorizing 
the Early Retiree Reinsurance Program, which carry independent 
funding with those provisions.
    Ms. Schakowsky. Thank you. So I just want to end by saying 
words like skim, I think, are very loaded, they create a very 
negative feeling that, in fact, all of the money to create this 
Office to help implement the bill was appropriated and in the 
legislation. Thank you.
    Mr. Stearns. Thank the gentlelady. Does the word fungible 
work better?
    Mr. Griffith, you are recognized for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman. I am curious 
following up on that line, you were hired on February 16, but 
the legislation wasn't passed until March 23. Why not put a 
line in there that specifically stated that you all were going 
to have this office?
    Mr. Angoff. That is not for me to answer.
    Mr. Griffith. It would have made things a lot clearer, 
would it not?
    Mr. Angoff. No, I don't think so. I mean, I think the 
provisions which Congresswoman Schakowsky cited make it clear 
that there has never been any question about the Secretary's 
authority to delegate authority and manage her jurisdiction in 
the way she sees fit. So I just don't see any issue there.
    Mr. Griffith. Do you know how much money you all spent in 
this endeavor, 252 employees, and I understand you had offices 
in Maryland at one time?
    Mr. Angoff. Yes. For fiscal year 2010, $33.4 million is the 
amount that comes out of the billion that was authorized, that 
was appropriated.
    Mr. Griffith. All right, and how much do you anticipate 
going forward?
    Mr. Griffith. That would be Mr. Larsen's area.
    Mr. Larsen. We are still working through the 2011 number, 
so I can't give you that number at this point. In the 
President's budget in 2012, we have got, I think $94 million 
for oversight and consumer assistance and functions like that 
in the President's budget.
    Mr. Griffith. And you indicated that--speaking to Mr. 
Larsen now, you indicated that you had an outreach program for 
folks to get into the programs regarding high risk or areas 
where people were----
    Mr. Larsen. We are starting that up now. We have not to 
date had a very vigorous outreach program, and I think that 
accounts for the lower-than-anticipated enrollment. So we are 
going to----
    Mr. Griffith. My question then would be do you also have an 
outreach program for micro-employers, people that have five or 
less employees? Do you have an outreach program to let them 
know about they can easily access the ability to get a waiver 
if they need one?
    Mr. Larsen. We don't have a specific program targeted to 
types of employers, but I would be happy to talk to you about 
ideas for doing that.
    Mr. Griffith. And as we go forward you don't anticipate 
there being any waivers after 2014?
    Mr. Larsen. We don't, because the law wouldn't allow for 
limited waivers or policies because the restrictions on the 
annual limits are complete at that point, and that is the point 
at which consumers have access to a full array of benefits.
    Mr. Griffith. And in regard to the minimum essential 
coverage penalty, you answered earlier your plan B was this is 
actually going to work and so forth, but how do you anticipate 
dealing with States like Virginia where it has been ruled 
unconstitutional because of that penalty and the 26 States that 
are in the Florida legislation----
    Mr. Larsen. Right.
    Mr. Griffith [continuing]. That, of course, got its own 
opinion? How do you all plan to deal with that? Are you going 
to continue to charge forward, notwithstanding the legal 
question which obviously is very serious with, I think, now 27 
States having a ruling that says that that provision at least 
is unconstitutional. Now, the difference, of course, Virginia 
not only had a separate piece of legislation but had a separate 
suit from the others and focused entirely on that one part of 
it.
    But how do you plan to go forward?
    Mr. Larsen. Yes. I guess I would answer in two ways. First, 
today, right now, we are proceeding with implementation of the 
law, but our lawyers at HHS are, as you can imagine, looking at 
the implications of the ruling and how we will be responding to 
that. So----
    Mr. Griffith. And I guess my question is what is the plan B 
if ultimately the 27 States that have already gotten a ruling 
that is unconstitutional prevail?
    Mr. Larsen. Yes. Well, that I can't speak to.
    Mr. Griffith. Does the plan work without mandatory 
purchase?
    Mr. Larsen. Well, I think as been discussed publicly, the 
individual responsibility provisions are an important part of 
the architecture of the ACA, but in terms of what happens, I 
can't get into----
    Mr. Griffith. Including the penalty provision?
    Mr. Larsen. I can't get into what happens in light of the 
pending litigation that we have.
    Mr. Griffith. So there is no plan B?
    Mr. Larsen. I am not saying there is or there isn't a plan 
B; but, in matters relating to the litigation that we have with 
the States, we are proceeding with implementation today as I 
sit here, and I will leave it to the lawyers to figure out----
    Mr. Griffith. Can you let me know when you develop a plan 
B?
    Mr. Larsen. We absolutely will.
    Mr. Griffith. Thank you.
    Mr. Stearns. Thank the gentleman. Mr. Scalise, the 
gentleman from Louisiana, is recognized for 5 minutes.
    Mr. Scalise. Thank you, Mr. Chairman. I appreciate you 
calling this hearing. Obviously we are trying to get as much 
information as we can about the impacts, unfortunately in many 
cases, the devastating impacts of President Obama's health care 
law that are now being felt.
    I want to talk to you first about the child only policies. 
We have been being a number of companies that used to offer 
child only policies that are now getting out of the market 
because of this law.
    Are you aware, first of all, of that problem of the 
companies that are just dropping this line of business 
altogether?
    Mr. Larsen. Well, the Affordable Care Act set up a system 
where, for the first time, insurance companies aren't going to 
be able to deny care for sick kids, and that was the goal of 
the Affordable Care Act, and it is unfortunate, frankly, that 
there are insurance companies that have decided that if they 
can--unless they can only insure healthy kids, they are not 
going to offer----
    Mr. Scalise. So what you are saying you are aware that 
there are companies now that just aren't offering these health 
care options to any parents who want to provide this for their 
children. Are you aware of this?
    Mr. Larsen. In the small segment of the market there are 
companies----
    Mr. Scalise. Can you tell me how many companies have gotten 
out of this line of business since----
    Mr. Larsen. I can't answer that exact question. I don't 
know.
    Mr. Scalise. You can't? I mean, I would understand it is 
your job, your Office's job to follow these effects on 
insurance injury and the ability for people to get access to 
health care. I would think it is your job, so I would think you 
would know how many.
    Mr. Larsen. Well, here is what we have done. We have 
provided guidance to States, Louisiana and other States, with a 
range of options to encourage them to take, in order to 
maintain a market for these carriers that otherwise don't want 
to insure sick kids. So, they are leaving the market because, 
unless they can just insure healthy people----
    Mr. Scalise. Right, and one of our concerns all along, and 
frankly it was discussed by those of us on this side of the 
aisle when this bill was being debated over the course of the 
last year and a half, that these kinds of mandates and laws 
that were included in Obamacare were going to deny access to 
people who had health care that they liked. And, of course, the 
President multiple times would say if you like what you have, 
you can keep it, and we pointed out in many cases that because 
of these changes, they were going to actually force a lot of 
people just out of the market altogether, which would deny 
coverage to many people who had health care that they liked. 
And so, you don't know the number of companies now. You are 
saying that. I would encourage you to go and find out how many 
there are and find out what things need to be done to unravel 
it unless, I guess, you all are more concerned about invoking a 
policy than actually improving access to people who want to get 
health care, because your policies that took effect.
    I see in September of 2010 are what ran a lot of these 
people out of the market altogether, and there are articles 
that started coincidentally right after the law took effect 
that talk about all of these companies that were offering 
health care options to children that no longer are doing it. So 
now you have denied access to families, parents who had good 
health care for their kids that don't have that option today.
    Mr. Larsen. We have not. The insurance companies----
    Mr. Scalise. Well, the law did. You personally didn't do 
it, but Obamacare did, and since it is your job to track these 
things, I would encourage you to go back and take a look.
    Mr. Larsen. Well, we have worked with the States. We have 
sent guidance out and worked with the States to provide them 
with----
    Mr. Scalise. Well, with the States, you are on your own now 
because families don't have the same options. They have limited 
options, and I appreciate maybe you have a difference on the 
overall law. I will say, and I am glad that the Chairman is 
having this. I am a little surprised that some of our 
counterparts on the other side are criticizing us for having 
this hearing. There is a letter, and I would like to get the 
letter in the record, there is a letter that a number of 
members of this committee wrote last year asking then Chairman 
Waxman to hold a hearing on these kind of problems, and for 
whatever reason Chairman then Waxman chose not to have any 
hearings, and maybe it is because they didn't want the American 
people to find out just how devastating this law, Obamacare, is 
on denying access to people today.
    Now, one other area I want to get----
    Mr. Stearns. Do you want to put that in the record?
    Mr. Scalise. And I would like, yes, to ask unanimous 
consent to put that letter in the record, because I think----
    Mr. Stearns. Without objection, so ordered.
    [The information appears in the exhibit binder at the 
conclusion of the hearing.]
    Mr. Scalise [continuing]. It is important to show we have 
been interested in this for a long time. Unfortunately, the 
folks on the other side when they were in charge didn't want to 
have these kind of oversight hearings where the American people 
could find out that people today are being denied health care 
that they liked because of this law.
    Now let us get to these waivers. I think probably one of 
the biggest heights of hypocrisy is the fact that the President 
ran around touting how great this law was going to be, it is 
going to be wonderful for American people, it is going to 
reform health care problems. Of course, we pointed out back 
then all the problems it would created. I am surprised at how 
many people have asked and now, I am not surprised how many 
people have asked. Frankly I think everybody would like and 
should get a waiver from the entire law and hopefully the 
courts will take care of that, but I am surprised how many 
waivers have been granted.
    Can you tell me how many waivers have been granted to 
companies that said we just, you know, we don't want to comply 
with some of these sections.
    Mr. Larsen. Sure. Through----
    Mr. Scalise. I am talking about the number. Do you know the 
number?
    Mr. Larsen. I believe the number that we gave you was 915.
    Mr. Scalise. OK. The 915. From what I am understanding 
about 60 companies have been denied that ability to get the 
waiver. Can you get us the list of those companies that have 
been denied, and even more specifically, I would ask you to 
submit to the committee matrix on the number of companies, the 
number of employees, if you don't want to include their name 
for other reasons, I can appreciate that, but at least get us 
the matrix on the number of companies, the number of employees, 
broken done by region, and also broken down by union versus 
non-union, because I think a lot of small businesses out there 
that would like to be exempted from this haven't been given 
that opportunity, you know, and maybe there is a line formed at 
the White House where you have to go and get it, but frankly, I 
think it is the public's right to know what that, what those 
matrix are and to get that data and who has been exempted from 
this----
    Mr. Larsen. We provided that to the committee.
    Mr. Scalise [continuing]. Was touted as a panacea and is, 
in fact, destroying access to health care for millions of 
Americans. Thanks. I yield back.
    Mr. Stearns. Thank the gentleman. We are going to go 
another round of questions. If you would engage us, I would 
appreciate your forbearance here.
    The President kept saying during his campaign, if you like 
your health care, you can keep it. He kept saying that as a 
mantra, but wouldn't both of you agree that without a waiver 
these people that you gave a waiver, they couldn't keep their 
health care? Isn't that true, Mr. Angoff?
    Mr. Angoff. We don't know whether those people liked their 
health care----
    Mr. Stearns. No, but, I mean, the fact is the President 
says you can keep it, you can keep your health care. If you 
like your health care, you can keep it, but without a waiver, 
they couldn't keep it. Isn't that true?
    Mr. Angoff. They are keeping it. Keep in mind that in 
2014----
    Mr. Stearns. Mr. Larsen, isn't that true, though, basically 
that without these waivers, McDonald's and these people, they 
couldn't provide?
    Mr. Larsen. I agree with Mr. Angoff. The fact is that they 
are keeping it, and the ACA contemplated setting up a system to 
ensure that people in these low annual limit policies could, in 
fact, keep----
    Mr. Stearns. Well, you know, the Democrats are continually 
trying to defend these waivers, but, you know, what the problem 
is the Administration health care, Obamacare, has created this 
problem, and now the Democrats are recommending a solution. If 
they didn't have this problem from the first place, we wouldn't 
need this solution, which is these waivers.
    So, you know, our response on this side is the only reason 
you have the waiver is because of the new requirements, all 
these new requirements of Obamacare making insurance, providing 
insurance too expense.
    For example, you indicated that you had 915 waivers. 2011, 
as I understand it, the ceiling per year is $750,000 a year. 
Isn't that true?
    Mr. Larsen. That is right.
    Mr. Stearns. OK, and does it go up to $1.25 million roughly 
in the year 2012?
    Mr. Larsen. That is correct.
    Mr. Stearns. And it goes up in 2013, to over $2 million. Is 
that roughly true?
    Mr. Larsen. Yes.
    Mr. Stearns. So if a person could not make it in 2011, like 
a McDonald's, aren't there going to be a lot more corporations 
that are going to come for waivers once they realize that the 
benefit is going to go up from $750,000 to $1.25 million? Don't 
you think more people will--just logically?
    Mr. Larsen. That is exactly why we set up a program where 
we are going to have a 1-year----
    Mr. Stearns. I understand, but all those people for 1 year 
are going to come back, and then more people are going to come. 
Then the year 2013, it goes to $2 million, and 2014, is 
unlimited. Right?
    Mr. Larsen. So what we are doing this year, to answer your 
question, is looking at the very question that you are asking, 
which is what is the best glide path for these types of 
policies between now and 2014, in light of the increasing 
annual limits that----
    Mr. Stearns. It goes to the heart of the whole question is 
the President said if you like your health care, you can keep 
it, but basically you can't keep it unless the government gives 
you waivers. Have you done an economic analysis, 2014, comes, 
right, all these companies you have given waivers now must 
comply. Have you done an economic analysis to see what it is 
going to cost these companies when they have to provide 
unlimited benefits every year for their employees?
    Mr. Larsen. Well----
    Mr. Stearns. I mean----
    Mr. Larsen [continuing]. Remember that this----
    Mr. Stearns [continuing]. We are seeing these waivers from 
2011, 2012, 2013, 2014 unlimited. I mean, have you done any 
kind of economic analysis?
    Mr. Larsen. But the vast majority of employer-based 
coverage will, or already does, meet those annual limits. So we 
are only talking about a very small percentage of the 
marketplace that has to be on a glide path to 2014.
    Mr. Stearns. Well, I think that I would disagree with you 
because when you say to a corporation, a small corporation that 
you have got to provide unlimited benefits, I think it is going 
to make it more expensive, and this whole process is just going 
to be very dependent upon high costs at which the government is 
going to have to supplement and pay to cover these. And I think 
you have got the indication of the problem with these waivers 
from States, and if New York gets a waiver, has, I mean, at 
what point after you have given these waivers to large States 
do we actually see the realization that we can't afford this?
    And so, I mean, we are just talking about escalating the 
number of waivers.
    Mr. Larsen. Well, I think that is the connection between 
today and 2014. We have a solution in 2014, and we need to make 
sure that this small part of the marketplace gets to 2014, and 
that those individuals as you suggest as the President wants, 
can continue their current coverage.
    Mr. Stearns. Well, I think for the benefit of acting on 
what the President says, if you like your health care, you can 
keep it, you should have some economic analysis, what is going 
to happen in 2014, based upon all these waivers you are 
anticipating that are going to increase.
    Just a last question. How does a corporation know that he, 
his corporation, his benefit, his union can get a waiver? Do 
you tell people? I mean, how does a normal small business find 
out? How did Waffle House find out that they could even do a 
waiver? Because I think there are many people out there that 
don't know they can get a waiver, they don't have the steps to 
do it. I don't--are you advertising that you can get waivers?
    Mr. Larsen. When we put the waiver process in place, we put 
out a press release, and we posted the information on the Web 
site.
    Mr. Stearns. On your webpage.
    Mr. Larsen. A number of--that is right. Trade groups, law 
firms----
    Mr. Stearns. When did you do that?
    Mr. Larsen [continuing]. Consultants.
    Mr. Stearns. How long ago? Did you do it 2 months ago or--
--
    Mr. Larsen. Well, we set the program up in September, and 
then we have had subsequent----
    Mr. Stearns. OK.
    Mr. Larsen [continuing]. Guidance since then and----
    Mr. Stearns. So I could advise any corporation in the State 
that wants a waiver to go to your Web page, and they would 
understand how to fill out the forms and do it?
    Mr. Larsen. Yes.
    Mr. Stearns. OK. My time has expired. The gentlelady, Ms. 
DeGette.
    Ms. DeGette. Thank you, Mr. Chairman. I just want to 
clarify a couple of things.
    The first thing I want to clarify, Mr. Larsen, is Mr. 
Scalise asked you if the information on all of the waivers, the 
applications, the approvals, et cetera, was available, and it 
is available online. Correct?
    Mr. Larsen. It is on our Web site. Yes.
    Ms. DeGette. So you guys aren't trying to hide any of that 
information. Right?
    Mr. Larsen. No, we are not in any way.
    Ms. DeGette. Thank you.
    Mr. Larsen. We are very----
    Ms. DeGette. The second question I have is, Mr. Scalise was 
talking quite a little bit about the insurance companies after 
the requirement that they couldn't drop children with pre-
existing conditions were leaving the market, in fact, most 
children are the cheapest group of folks to insure if they are 
healthy. Correct?
    Mr. Larsen. Correct.
    Ms. DeGette. And so really what these insurance companies 
are saying is we don't want to have to give insurance policies 
to children with pre-existing conditions or who are sick. Would 
that be a fair interpretation?
    Mr. Larsen. That is correct.
    Ms. DeGette. And the Affordable Care Act as it is phasing 
in now says, you know what, if you are going to offer parents 
an insurance policy, you have to offer people like Diana 
DeGette, who has a child with Type I Diabetes, an insurance 
policy just like you have to offer everybody else an insurance 
policy. Isn't that right?
    Mr. Larsen. Right.
    Ms. DeGette. Don't you think--well, never mind. I will say 
what I think. I think the parents of America would like to see 
sick children as well as well children insured.
    Let me ask you another question which is I guess I am a 
little bit perplexed by some of these lines of questioning on 
the other side, because the reason you folks set up these 
waivers is so that States or--well, strike that. So that 
employers that were offering these limited-benefit plans would 
be able to continue to offer those in the transition period 
before--between now and 2014. Right?
    Mr. Larsen. Correct.
    Ms. DeGette. And if we didn't have these waivers, then 
those folks would be bumping up against the caps. Correct?
    Mr. Larsen. For the small percent of the market. Yes.
    Ms. DeGette. For the 2 percent of the market that is 
getting the waivers. Right?
    Mr. Larsen. Correct.
    Ms. DeGette. And so it seems to me that what you are doing 
is you are allowing this gap to be filled between now and 2014, 
for people who need those policies. Right?
    Mr. Larsen. That is correct.
    Ms. DeGette. Now, I want to ask you this follows up on this 
last question, and the reason you are not going to need these 
waivers in 2014, is because there are many new tools that are 
coming on deck in 2014, that these employers will be able to 
have. Is that right?
    Mr. Larsen. That is correct.
    Ms. DeGette. I am wondering if you can explain some of 
those tools that we will have and why we will no longer need 
those waivers for these limited number of employers in 2014, 
briefly.
    Mr. Larsen. Well, consumers are going to have a range of 
new options. First of all, there is going to be a ban on all 
pre-existing conditions for all issuers. Everyone can get 
coverage. Everyone can get full coverage. There will be an 
essential package of benefits. There will be options within the 
exchanges with richer benefits, and not as rich benefits, 
covering still the same set of essential benefits. There will 
be a competitive marketplace where people can shop. Competition 
will increase, and for those who are low-income individuals, 
there will be opportunities for premium subsidies to get better 
coverage that will be affordable for them.
    Ms. DeGette. So, in fact, I don't know if you are aware but 
the non-partisan Congressional Budget Office made a projection, 
and what they said was Americans buying comparable health care 
plans to what they have today in the individual market would 
see their premiums fall after 2014, by 14 to 20 percent, which 
would save $732 on an individual policy and $1,975 for a family 
policy. Most Americans buying coverage on their own would 
qualify for these tax credits that would reduce their premiums 
by an average of 60 percent, even as they get better coverage 
as they have today.
    And the CBO also estimated that small businesses would see 
premium reductions of 8 to 11 percent and would receive tax 
credits worth nearly $40 billion over the next decade to help 
pay for coverage.
    Are you aware of the CBO analysis?
    Mr. Larsen. Generally, yes.
    Ms. DeGette. And one last question. According to what you 
know are the benefits that people, that employers are going to 
have to offer after 2014, unlimited benefits?
    Mr. Larsen. They are not going to be able to have lifetime 
and annual limits on the policies that they issue.
    Ms. DeGette. But the limits--are not unlimited. They are 
going to be----
    Mr. Larsen. Oh, that is right. That is right.
    Ms. DeGette. Thank you.
    Mr. Stearns. Thank the gentlelady. Dr. Burgess is 
recognized for 5 minutes.
    Dr. Burgess. Thank you, Mr. Chairman. In the interest of 
brevity I am interested in the private sector experience that 
both of you have, and perhaps you could provide that to the 
committee at some point so we would be able to review that.
    I want to just close the loop on a line of questioning that 
I was undertaking before, Mr. Angoff. So now we have the 
situation where OCIIO has become CCIIO, and it is located at 
CMS. Right?
    Mr. Angoff. Yes, sir.
    Dr. Burgess. Just recapitulate and all the functions that I 
mentioned before are now under the direction of Administrator 
Dr. Don Berwick. Is that correct?
    Mr. Angoff. Yes, sir.
    Dr. Burgess. So CMS, Center for Medicare and Medicaid 
Services oversees Medicare, Medicaid, SCHIP, and a very 
significant portion of the private insurance market over which 
it never had authority in the past. Is that a valid 
observation?
    Mr. Angoff. Not entirely, in that much of Medicaid and 
Medicare now is actually run through the private insurance 
system.
    Dr. Burgess. But it is all directly--Dr. Berwick is 
directly responsible for all of those federal programs.
    Mr. Angoff. yes.
    Dr. Burgess. So we have the public and private side by side 
as PPACA phases in. So, again, just to complete the story, we 
have an Administrator at CMS, who parenthetically has never 
been confirmed by the Senate because he was a recess 
appointment, so as much affection and respect that I have for 
Dr. Don Berwick, he has never come before the United States 
Senate to undergo the confirmation process. Maybe they will 
have an opportunity to do that before, but he is in charge of 
almost all insurance coverage in the United States of America 
as PPACA phases in, and it is all going to be led by this sub-
organization of HHS, CCIIO, that is a follow on from OCIIO that 
was a non-directly appropriated, non-authorized center without 
clear authority who cannot provide his budget to the committee 
at this time. Is that a fair assessment of the landscape as 
we--as it exists today?
    Mr. Angoff. I don't think it is fair because I think----
    Dr. Burgess. Of course it is. I went to great detail to, 
painstaking detail to outline it for you.
    Mr. Angoff. And Congresswoman Schakowsky went into specific 
detail about the specific provisions which authorize the 
Secretary to delegate her authority, and as I said before, 
there is a delegation, and we will provide that to the 
committee.
    Dr. Burgess. And again, I have been working for several 
months. I would very much like to have that delegation of 
authority and the budgetary plan under which you have been 
working, Mr. Larsen, under which you intend to work going 
forward because I just think for an entirely new federal agency 
that is going to have this broad of power, and I went through 
those powers with you, this broad a scope and reach over--into 
the lives of every single man, woman, and child in this 
country, not just now but for the next 3 decades, it is 
appropriate that this committee from time to time have some 
curiosity about just what is going on and kicking the tires on 
OCIIO or CCIIO or whatever it then becomes going forward.
    The Governor of Utah was in town this week and spoke at 
several places. I know we have been talking about the waiver 
authority under the mini-med plans, but you are also 
responsible for setting up the State exchanges. Is that 
correct?
    Mr. Angoff. That is correct.
    Dr. Burgess. And Governor Herbert had mentioned some 
difficulty that he was having getting an answer out of CMS or 
HHS on some flexibility that he wanted. Just the administrative 
flexibility of being able to do things electronically rather 
than on paper, that he estimated would save his State some $600 
million a year, but he had been waiting from July until this 
week to get an answer.
    Does that seem a little long?
    Mr. Larsen. Well, I apologize. I don't know the details of 
what he is looking for. I know that we have on ongoing dialogue 
with the States and the State Governors. I know Utah has an 
exchange as do one or two other States, and we look forward to 
working with the States. We view the States as our partners on 
the exchange process and----
    Dr. Burgess. Well, again, it just looks like July to the 
day after Valentine's Day seems like a long timeframe to get an 
answer on a relatively straightforward administrative 
simplification request that his State had with the expectation 
that it is going to save significant dollars for the State.
    And after all, I mean, the gentlelady from Tennessee 
pointed out a big problem for all of us, you guys at the 
witness table but for us guys up here at the dais, in that what 
do you do going forward? All this stuff--you are granting the 
waivers, you are kind of doubling down on the population as it 
is coming in. 2014, hits, you flip the switch, and no light 
comes on. What do we do then?
    Mr. Larsen. Well, I think in 2014----
    Dr. Burgess. You are betting on all this stuff working.
    Mr. Larsen. I think we are going to flip the switch and the 
lights are going to go on, and it is going to be----
    Dr. Burgess. But, again, as the gentlelady from Tennessee 
pointed out, where is the plan B? What rational person looks at 
the demographics of the United States of America today with 
people my age who within a very short period of time will be 
entering Medicare, the advancing complexity of what we are able 
to do to alleviate suffering and treat disease, what rational 
person looks at that and says, you know what? In 2014, it is 
going to cost $500 billion less than it did the year before. I 
mean, that is crazy talk. That is not going to happen.
    It is going to cost more to take care of the Medicare 
patients going forward, and other than waiting lists and 
rationing, I don't see that you have done anything that is 
going to be able to control costs going forward.
    Mr. Chairman, I appreciate the indulgence on the time. I 
would be happy to hear the answer from either of our panelists 
if they would care to do so.
    Mr. Angoff. Yes. I would just like to point out just one 
rule which really already is having an affect, and that is the 
medical loss ratio regulation. The trade press really is 
reporting that that is already having an effect of having 
companies reduce their rates and provide more generous benefit 
packages to their policyholders.
    So there are already things that are being done, even 
though it has only been in effect for a short while, that are 
actually driving down costs.
    Dr. Burgess. Yes. With all due respect you were late 
getting that done and let us revisit that in a year's time and 
see what the story looks like.
    Thank you, Mr. Chairman.
    Mr. Stearns. I thank the gentleman. The gentleman from 
Colorado, Mr. Gardner, is recognize for 5 minutes.
    Mr. Gardner. Thank you, Mr. Chairman, and Mr. Foster, in 
your opening statement that I was able to listen to you 
mentioned that you--it is your goal to allow people to keep the 
insurance that they currently have. That was something that you 
had said this Health Care Bill was attempting to do. Is that 
correct?
    Mr. Larsen. Yes. This bill and--yes.
    Mr. Gardner. And I believe that Mr. Foster, with the 
Medicare, in Medicare has testified before the House Budget 
Committee that that would not be the case, that people would 
not be able to keep the insurance they had. Is he wrong?
    Mr. Larsen. I have to confess that I am not familiar with 
the testimony that Mr. Foster gave I guess recently in front of 
the committee. I know that our view is absolutely people can 
keep the care that they have. They are doing it now. I think 
they will have in 2014.
    Mr. Gardner. So your Office is in charge of implementation 
in many of these things that we went through, and Mr. Burgess 
went through a long list with you, Mr. Angoff, of what 
responsibility your Office had. You don't communicate with the 
Chief Actuary of Medicare?
    Mr. Larsen. I am not saying that I do or don't. I am just 
not familiar with the testimony that he gave, and I apologize 
for this particular----
    Mr. Gardner. Has the Chief--had Medicare, has he expressed 
concern that--he actually made two statements. He said that it 
probably won't lower costs and that it will not allow people to 
keep their insurance. Have they expressed that to you?
    Mr. Larsen. I haven't heard that from Mr. Foster, but, 
again, we are 2 weeks into this transition so----
    Mr. Gardner. How long has your Office been open?
    Mr. Larsen. We have been in----
    Mr. Angoff. Since April 19. Rick Foster is the Actuary for 
Medicare, not for the Office of Consumer Information and 
Insurance Oversight.
    Mr. Gardner. Right, but do you not communicate with 
Medicare in terms of what is happening with the Health Care 
Bill? That is the Chief Actuary who said that these two primary 
tenants of the Health Care Bill aren't going to come true. That 
is pretty significant, is it not? Yes or no?
    Mr. Larsen. Like I said, I apologize. I would be happy to 
go back and review his statements with regard to the area. As 
Jay said, he is the Medicare Actuary. We are the private health 
insurance market coming into CMS, so we will go back and read 
his testimony.
    Mr. Gardner. Mr. Angoff, that is a pretty significant 
difference of opinion, isn't it?
    Mr. Angoff. Opinion is probably the right word. These 
actuaries make predictions. Sometimes they pan out, sometimes 
they don't.
    Mr. Gardner. And so you are just betting that he is wrong 
and you are right?
    Mr. Angoff. Again, I haven't seen--I am unfamiliar with the 
specific testimony that you are referring to.
    Mr. Gardner. So do you think he is wrong, that people will 
get to keep the insurance that they currently have?
    Mr. Angoff. Well, people are getting to keep the insurance 
they currently have. We have got to keep in mind there are 50 
million people today without any insurance at all.
    Mr. Gardner. That is not what he said. He said that it is 
doubtful that they won't be able to keep the insurance that 
they have. That is his testimony before the House Budget 
Committee. Was he wrong?
    Mr. Larsen. I don't know. I have got to take a look at it.
    Mr. Gardner. Before you if you look into your document 
file, you will notice that there is a letter from the Aspen 
Skiing Company. It is in the document tab that you should have. 
The document states at the bottom that compliance with the 
PPACA would cause the cost to increase substantially, which 
would render the plans unaffordable. Is that correct?
    Ms. Voice. Document 20 I believe.
    Mr. Gardner. I am sorry. Yes. Document 20.
    Mr. Angoff. I am sure it says what you say it says.
    Mr. Gardner. And this company did receive a waiver. Is that 
correct?
    Mr. Angoff. I would have to look at the list. I can do that 
if you want.
    Mr. Gardner. Well, they did, and so there are seasonal 
employees at the Aspen Skiing Company. The letter states that 
800 full and part-time employees during the summer go to 2,600 
employees in the winter season----
    Mr. Angoff. Yes.
    Mr. Gardner [continuing]. And that is what it talks about. 
So in 2014, what happens to the Aspen Skiing Company? They will 
go into the exchanges. Is that correct?
    Mr. Larsen. There will be a number of options for the 
employees of the company, and they will have an opportunity to 
get fuller health care coverage than they probably have today.
    Mr. Gardner. And do you believe that the ski resort knows 
what is best for their employees?
    Mr. Larsen. I don't understand your question.
    Mr. Gardner. I mean, do you think that the operator of a 
ski resort is better equipped to determine the health care 
needs of their employees than the Federal Government?
    Mr. Larsen. Well, I don't know who is best equipped to make 
that decision. I know that----
    Mr. Gardner. So the answer is, no, you think the government 
may be better equipped than the Aspen Skiing Company?
    Mr. Larsen. No. I don't think that is what I am saying. I 
think, what we want is, we want people to have full coverage, 
and my guess is that the employees of Aspen would like to have 
full coverage as compared to limited coverage.
    Mr. Gardner. So the letter says the plans are specifically 
designed to meet the needs of seasonal and part-time employees.
    Mr. Larsen. Right. That is typical of the applicants that 
we get for annual limits waivers. This is probably a very 
typical application. It is part-time coverage, seasonal 
coverage.
    Mr. Gardner. So they might be wrong, though? I mean, we 
think the Federal Government might know better how to provide 
coverage for those employees?
    Mr. Larsen. No. I don't think that is what we are saying.
    Mr. Stearns. The gentleman's time has expired.
    Dr. Gingrey, you are recognized for 5 minutes.
    Mr. Gingrey. Mr. Chairman, thank you, and to the witnesses 
let me apologize for not being here earlier. We have got 
concurrent subcommittee hearings, both extremely important, and 
this obviously is an extremely important hearing for me as a 
position member of the subcommittee and obviously the issue of 
the area which you have jurisdiction over regarding the Patient 
Protection Affordable Care Act is extremely important to all 
committee members.
    I think I will focus my attention on the Class Act. I don't 
know whether that has come up in--from previous questions, but 
I am very concerned about the Class Act, particularly in 
reference to information that has come out recently in regard 
to the unsustainability, the non-viability of the program as it 
is designed in regard to the monthly premiums and the benefit 
package.
    In testimony before the Finance Committee yesterday, in 
fact, Secretary Sebelius admitted that long-term care insurance 
program created by Obamacare called the Class Act, is totally 
unsustainable I think she put it. This statement mirrors 
similar remarks made by the Chief Actuary of CMS, Rick Foster, 
when he testified before the House Ways and Means Committee a 
couple of weeks ago. In fact, the President's Deficit Reduction 
Commission even cited the need to dramatically change or even 
repeal the Class Act because they also found the program 
completely unsustainable as currently proposed.
    Mr. Larsen, the President's budget proposal asks for $13.4 
million for an IT system and another $93.5 million for 
information, education in order to sign American workers up for 
the Class Act.
    So yes or no, if you will. In light of the Secretary's 
statement and those posted on your Web site, do you believe the 
Administration should provide proof to the American people 
before your agency begins signing them up for the Class 
Program?
    Mr. Larsen. Well, if I could answer this way, and I hope 
you will accept my apology, the Class Act is not actually part 
of CCIIO or OCIIO, so we don't oversee the Class Act. In fact, 
I am aware of the issues that you raised, and I know the 
Secretary spoke about this yesterday, but it is not in the 
purview of the----
    Mr. Gingrey. Do you have an opinion on that? Can you answer 
that question yes or no?
    Mr. Larsen. Well, I am not familiar with the issues 
surrounding----
    Mr. Gingrey. All right. Mr. Angoff, do you have an opinion?
    Mr. Angoff. No, I don't. The Class Act is part now of the 
Administration on Aging, and so it is under their jurisdiction.
    Mr. Gingrey. Well, given the Secretary's dire warning and 
should the Secretary not listen to reason, will the Center for 
Consumer Information and Insurance Oversight, that is you. 
Right? Include a disclaimer in its education material to 
workers stating clearly that the Class Act is not sustainable? 
It is unsustainable?
    Mr. Larsen. I would be happy to look at whatever proposal 
there is on that.
    Mr. Gingrey. Again, you are punting on this.
    Mr. Larsen. I am punting.
    Mr. Gingrey. Mr. Angoff, would you like to take the ball 
and run with it?
    Mr. Angoff. No, I wouldn't.
    Mr. Gingrey. You are also a punter. Well, look, let me just 
comment then, Mr. Chairman, in the remaining time that I have 
left since these gentlemen have stated that this is not under 
their purview and they don't want to express an opinion, and I 
certainly will express an opinion.
    Back in, I guess it was in the late '80s when we had the 
bill that was enacted, catastrophic coverage under Medicare 
forced on the American people, and the seniors just went nuts 
when they found out what it was going to cost them in regard to 
their part B premiums, and then Ross Stankowsky I think almost 
had his automobile destroyed in downtown Chicago with umbrellas 
over that bad piece of legislation.
    This is the kind of thing that--why we feel so important to 
have the oversight on every aspect of this bill, all 2,400 
pages of it, PPACA, Obamacare, however you want to call it, 
Patient Protection Affordable Care Act, but this is one I think 
that is very important, even though it is not under your 
authority specifically, that the committee, the subcommittee 
understands that something like the Class Act, it was just part 
of so much of this bill that was thrown together just to get it 
passed so that hopefully after people read the bill they would 
come to like it.
    They are not going to come to like the Class Act, and 
hopefully we are not going to spend $100 million putting it 
into effect.
    Mr. Chairman, I will yield back.
    Mr. Stearns. Thank the gentleman. The gentlelady from 
Tennessee is recognized for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman. I want to go back 
to Mr. Larsen's answer to Mr. DeGette.
    You continue to talk about, well, come 2014, you are going 
to have all of these wonderful benefits, it is going to be 
better, it is going to be fuller coverage, and, sir, I just 
have to tell you this is our concern. We have lived through 
this in Tennessee, and it does not work. You cannot incentivize 
use, and there is no way to pay for it. Doing this investment 
on the front end and expecting to get savings on the back end, 
it doesn't work. And I have got plenty of charts here that show 
you what happened in our State.
    Now, what you have not been able to define for me is how do 
you plan to pay for it? What is going to happen to these 
innovative plans like CoverTN when you get to 2014? How, you 
know, you talk about this exchange market, but I have to tell 
you, sir, unless you can point to a pilot project that has 
worked, the examples that are out there now do not work. You 
are speaking on theory. Is that not correct? Your statement to 
me was Obamacare would work. This plan would work, but you have 
no data to back it up. You have no analysis that says, we ran 
this program, and we looked at it, and this worked.
    So, we are looking at this, and we are shaking our heads. 
In 2014, the CoverTN Program would cease to exist. Is that not 
correct?
    Mr. Larsen. If I can respond this way, we know the system 
prior to the passage of this bill was broken. Fifty million 
people without insurance. I think there were----
    Mrs. Blackburn. Sir, I am not even going to--I am going to 
jump in, and it is not out of disrespect. It is just that you 
are talking apples and oranges. There are reforms that need to 
be placed. People want them to be in place as free market, 
patient-centered reforms. When you have tried a public option 
health care system, see, you are avoiding my question. You 
cannot give me an example of where public option health care 
has worked successfully, and that is because you don't got one.
    Mr. Larsen. Well----
    Mrs. Blackburn. As they say in Tennessee. You just don't. 
Let me go onto something else.
    When we are looking at the Center moving from HHS to CMS, 
when was that--why was the decision made? When was that 
decision made?
    Mr. Angoff. I am sorry. When was it made?
    Mrs. Blackburn. Why and then when?
    Mr. Angoff. Oh. The reason it was made is that it made 
sense to have a separate organization reporting directly to the 
Secretary that had to do a lot of things quickly as an 
independent organization. Once all----
    Mrs. Blackburn. OK. Who was involved in the decision 
making?
    Mr. Angoff. Sorry?
    Mrs. Blackburn. Who? Who was involved in the decision-
making process, sir?
    Mr. Angoff. Several people at HHS. I don't know.
    Mrs. Blackburn. Several people at HHS. Would you please 
supply me with a list of those that were involved in that 
decision making?
    Mr. Angoff. Yes, I will.
    Mrs. Blackburn. Thank you very much. And why did you not 
start the Office in CMS?
    Mr. Angoff. Because it was--we had a lot to get done in a 
very short time, we needed a mechanism to do it, we thought----
    Mrs. Blackburn. OK.
    Mr. Angoff [continuing]. The best way to do it would be to 
have an independent organization.
    Mrs. Blackburn. OK.
    Mr. Angoff. Now that it has matured and all the major 
regs----
    Mrs. Blackburn. All right, and then when did you decide to 
move it?
    Mr. Angoff. In December, late December.
    Mrs. Blackburn. OK. Mr. Chairman, I would like to submit 
for the record the letter from Secretary Sebelius on January 5, 
2011, writing to inform that they were moving it to CMS. I find 
that date to be a little bit curious.
    Mr. Stearns. Without objection, so ordered.
    [The information appears in the document binder at the 
conclusion of the hearing.]
    Mrs. Blackburn. Thank you, sir. Was any discussion had 
about the fact that by moving the Center into CMS where funding 
is directed for Medicare and Medicaid that it would either 
better protect or give less subject to oversight or be harder 
to de-fund that, and would it allow you to run that office more 
along the vein of the 1115 Waiver Program that Tennessee 
operated TennCare under which put the feds in control of how a 
State would deliver their program and basically took those 
State lawmakers out of the process, basically handed State 
lawmakers the bill, and said, here you go. The feds say you 
have to fund it.
    You know, I find it so curious you did this, and then I 
look back at what has transpired in our State and when I was in 
the State Senate there, and we were trying to figure out how to 
pay for this program and then I went back and read the 
statement from our former Governor who said this would be the 
mother of all unfunded mandates, and you know what, I am 
beginning to think they are about right on that.
    What was your decision for moving that?
    Mr. Angoff. I am sorry. What was the question?
    Mrs. Blackburn. What was your decision matrix for moving 
it? Why did you move it?
    Mr. Angoff. There are efficiencies to be gained by merging 
the two organizations, functions such as----
    Mrs. Blackburn. I thought you just told me you wanted it 
over there because it would be an independent organization and 
not tied to HHS.
    Mr. Angoff. At the beginning.
    Mrs. Blackburn. Did it have anything to do with funding?
    Mr. Angoff. No.
    Mrs. Blackburn. Could it easier to protect? Would it 
eliminate oversight? Would it tie the hands of State 
Legislators?
    I yield back.
    Mr. Angoff. No. It was a question of efficiencies. There 
are overlapping functions, budget, grants, personnel, external 
affairs, IT. Now that the regs have been adopted and the 
programs established, there are efficiencies to be gained by 
merging the two organizations.
    Mr. Stearns. I thank the gentlelady. The gentleman from 
Virginia is recognized for 5 minutes.
    Ms. DeGette. Mr. Chairman, before the gentleman----
    Mr. Stearns. Sure. Point of----
    Ms. DeGette [continuing]. I would just like to note--move 
to strike the last----
    Mr. Stearns. Right. Or a question of personal privilege.
    Ms. DeGette. I just want to note that we have now had two 
rounds of questions----
    Mr. Stearns. That is correct.
    Ms. DeGette [continuing]. And the Chairman is proceeding to 
the third round of questioning.
    Mr. Stearns. That is correct.
    Ms. DeGette. I object to that because I believe these 
witnesses have thoroughly and adequately answered all of the 
questions put to them regarding their agency and the waivers 
that have been granted, and I think now what we are moving into 
is the majority is using this hearing as a way to attack the 
Affordable Care Act, and frankly, I think it is abusive to the 
witnesses.
    Having registered that objection, you are the Chairman. You 
are going to do what you want, and I will reserve any time I 
have in this third round of questioning until the conclusion.
    Mr. Stearns. And I thank the gentlelady. You know, this is 
our first hearing really. We have only been here 2\1/2\ hours 
for this huge new government program, so I think Members having 
a chance for the first time to do this is very reasonable, and 
I think the witnesses are doing an adequate job as best they 
can to explain it, and I think it is worthwhile to Members who 
perhaps had not been able to ask questions, come back, and so 
we are going to continue.
    So, Mr. Griffith.
    Dr. Burgess. Mr. Chairman, if I might----
    Mr. Stearns. Sure.
    Dr. Burgess. [continuing]. Just make a point of personal 
privilege----
    Mr. Stearns. Yes.
    Dr. Burgess. [continuing]. As well, it is far less abusive 
to not make the witnesses listen to opening statements from 
every member of the committee as we did during the last 
Congress.
    I will yield.
    Ms. DeGette. I will agree with that.
    Mr. Stearns. I think Ms. DeGette will agree with that.
    The gentleman from Virginia.
    Mr. Griffith. Just to note, this is only my second time, 
but anyway--no, no. I was here. I just didn't get my first and 
second--I was here. This is just my second, though, and I am 
the last one, but it is only my second time.
    We talked earlier, Mr. Angoff, about the $33.4 million in 
expenses and that that came out of the $1 billion appropriated 
or that was mentioned in the Act.
    Mr. Angoff. Yes, sir.
    Mr. Griffith. And at one point in the questioning with 
someone else you indicated that there were three sources of 
money from which you could get your funds, the $1 billion in 
the Act, the high-risk area, and the early retirees. And when I 
asked the question, and I am not trying to make any accusation, 
I am just saying that you said there was $33.4. Did that 
include all the pots of money or just the billion?
    Mr. Angoff. No. That $33.4 million is only out of the 
billion.
    Mr. Griffith. What monies came out of the other two 
sources?
    Mr. Angoff. There is additional money coming out of those 
two sources, and I don't have that with me.
    Mr. Griffith. Can you get that for us?
    Mr. Angoff. Absolutely.
    Mr. Griffith. OK, and I do appreciate that there were 
additional monies.
    Now onto the $1 billion it is interesting because the 
waiver program, can you tell me how much just the waiver 
program costs?
    Mr. Angoff. No, I can't.
    Mr. Larsen. I don't have that broken out by the staff that 
work on the waiver program compared to the entire $33 million. 
We can, you know, try and get that to you.
    Mr. Griffith. If you can do that for me, I would appreciate 
it, and here is the point, and I touched on this in my previous 
questioning. We have got this giant Act. Now, while it does 
have the catchall that the Secretary has the authority to, you 
know, implement, and it has the $1 billion in the back of it, 
it doesn't actually have waiver in here.
    And I guess my problem is is that one of the things that I 
fear is is that part of the distrust that people have in 
general is that when you have a gigantic Act it is hard to 
figure it out, and then you can't find things, and it looks 
like to me what we have done is we have built a program based 
on the Secretary's authority to try to implement the law and 
then we have bootstrapped back in that she can use the $1 
billion to implement the law, but we have got layer upon layer 
of interpretation, and that might be OK if this was a 5-page 
bill and you could say, well, we couldn't get it all in here, 
but I mean, we have got this, you know, it is a textbook in 
length. It is 1,000 pages this way. It was more than 2,000 
pages when it was in bill form.
    And so I just have great concerns that we are building 
assumptions on top of assumptions, and it may very well be the 
fault of Congress for not having been specific in past years 
going back not just during this bill but many other bills, but 
it seems to me that we are the ones that ought to be making the 
laws and that if there is something that is unclear, it ought 
to come back to the Legislative Branch. In this case that would 
be United States Congress.
    And I just wonder if you had any comments on that.
    Mr. Angoff. Just this. On the waiver issue there is 
language there that makes it clear that statutory language, not 
regulatory language, in the statute that says that the 
restricted annual limits should be interpreted in a way so that 
people can keep their coverage. Everything that we have done is 
done pursuant to specific language in the statute.
    Mr. Griffith. Well, and I guess the concern that I have is 
we are spending money to notify folks of part of the program, 
but we are not spending money yet to let folks know about the 
waivers, as I mentioned earlier, and while we have given 
McDonald's a waiver, I don't know how they work their system, 
but I have a letter from a constituent of mine who owns several 
Burger King establishments. He is panicked about how this is 
going to impact him, and I, of course, as soon as I get back to 
the office I will notify him of the waiver program. I am not 
sure he knows about that.
    And so, that is what happens when you make things so 
complex, and you can't find it in the written word. You have to 
go to an assumption made on an assumption made by an attempt to 
try to implement something that apparently the legislation 
wasn't crafted as well as maybe it should have been. I wasn't 
here, so I didn't take part in that, but it just seems to me 
that there is an awful lot of confusion out there, and we are 
spending money on some things based on assumption what we are 
supposed to do, and we are not spending it on others. And it 
would seem to me that we would want consumers to be aware of 
the waivers as well as to be aware of knowing how they get into 
any of the other programs.
    I yield back the remainder of my time, Mr. Chairman.
    Mr. Stearns. I thank the gentleman. I dare say that if you 
took an ad and put it in the Final Four basketball, announcing 
to the American public that they can receive waivers from the 
Obamacare, I think you would be offering waivers well in 
adjustment of 915, because I think as the gentleman from 
Virginia had indicated, a lot of people don't know that you can 
get these waivers, and they are not going to your Web site.
    But lo and behold if you told all 50 States in a very clear 
manner and you told all the corporations in America that they 
could get a waiver, I think everybody would do that, and they 
would want to waiver every year, and they would want to waiver 
in 2014.
    The ranking member mentioned about the new tools coming on 
in 2014, and Mr. Larsen consumed a little bit of time talking 
about the ranges of these new benefits, but I guess, Mr. 
Larsen, who is going to pay for those benefits? Because the 
benefits are all inclusive, and lo and behold, the taxpayers or 
the corporations are going to have to charge more money.
    And she also indicated that she was concerned about 
recently that a lot of sick children were not being insured, 
but--before Obamacare, but the reason a lot of people now are 
pulling back is because, frankly because they are concerned 
about these benefits going from $750,000 up to $1.2 and $2.2. I 
mean, that is a little bit of a chilling factor for a lot of 
companies, so they are deciding that they don't want to insure, 
and I don't think they know about the waivers.
    I guess I want to ask you a little bit of question, Mr. 
Larsen, about some of the spending here. How much money in 
total has HHS spent so far in setting up and operating your 
Office? Can you just give me an estimate? Just approximate.
    Mr. Larsen. Yes, and I think Jay touched on this earlier, 
of the $1 billion that was appropriated at the outset of the 
implementation of the ACA----
    Mr. Stearns. So it is about a billion dollars?
    Mr. Larsen. Well, that--no, no, no.
    Mr. Stearns. OK.
    Mr. Larsen. Thirty-three million is the answer----
    Mr. Stearns. OK.
    Mr. Larsen [continuing]. Spending to date for OCIIO, now 
CCIIO.
    Mr. Stearns. So $33 billion----
    Mr. Larsen. Million.
    Mr. Stearns [continuing]. From all sources.
    Mr. Larsen. I am sorry. Did I say billion?
    Mr. Stearns. Billion?
    Mr. Larsen. No, $33 million----
    Mr. Stearns. Thirty-three million.
    Mr. Larsen [continuing]. Out of the $1 billion.
    Mr. Stearns. All right. I respect that. OK. Now, I think 
our staff is a little non-plussed here because $33 million 
seems like a pretty small amount. Does this include all the 
sources of funding?
    Mr. Larsen. Well, that is essentially to operate the 252 
and the programs. I think this was earlier----
    Mr. Stearns. Two hundred and fifty-two employees out of 
Bethesda?
    Mr. Larsen. Right.
    Mr. Stearns. Are they still out in Bethesda?
    Mr. Larsen. Yes.
    Mr. Stearns. OK. You seem a little puzzled. Have they moved 
since you left? You were a little puzzled.
    Mr. Larsen. I didn't know whether you knew something I 
didn't. No. They are still out there.
    Mr. Stearns. OK. How did HHS come up with $465 million for 
implementation of the President's budget for HHS? Do you know 
that?
    Mr. Larsen. Well, I know----
    Mr. Stearns. Either one of you know that?
    Mr. Larsen [continuing]. Generally, the breakdown, because 
I know which part is attributable to the CCIIO-related 
activities. There is about $94 million for oversight and 
consumer information, which includes the Healthcare.gov Web 
site, which is a fantastic consumer tool. People can go in 
today and find out what policies are available to them, what 
coverages, what options are available. So it includes that 
money. There is consumer assistance, setting up the appeals 
unit again, so consumers that have been denied, they are going 
to have an appeal process.
    So there is $94 million associated with all of those 
activities and then, of the $400 million figure you mentioned, 
there are exchanges. We are now standing up the exchanges. We 
have got IT programs that we have got to get up and running.
    Mr. Stearns. Yes.
    Mr. Larsen. So I think that is the composition of the 
request in the President's budget.
    Mr. Stearns. You asserted that these waivers are necessary 
between now and 2014, to help people retain their coverage 
until they have access to comprehensive coverage through the 
exchange, but isn't it true that these plans and employers have 
access to comprehensive coverage now, but it is just too 
expensive and so that the employees themselves choose a lower-
cost plan?
    Mr. Larsen. Well, it is a good question. It is not always 
clear why employers offer different levels of coverage and, 
certainly, in some cases, they are aware that their employees 
can only afford--because they may be part-time workers or 
seasonal workers, can only afford benefit packages that have 
limited benefits.
    So, that is what we know today. There is a range of 
options----
    Mr. Stearns. Yes.
    Mr. Larsen [continuing]. But sometimes many of them aren't 
affordable. In 2014, I think we are going to have a better set 
of options available for employees and employers.
    Mr. Stearns. I guess the question is do you and perhaps Mr. 
Angoff think that the comprehensive coverage that we mandated 
in 2014, through the exchanges or offered by employers, do you 
think they will be less expensive and more affordable than it 
is today? Based upon what we are saying and all these waivers 
and----
    Mr. Larsen. Yes. You know, there are----
    Mr. Stearns. Don't you think----
    Mr. Larsen [continuing]. Offsetting factors at play 
because, when you bring, when you expand the insurance pool, 
you are going to bring down costs because now you have a full 
pool, and the exchanges also reduce administrative expenses 
because all the time and money that insurance companies spend 
today underwriting people and trying to figure out how not to 
provide coverage with the--without having the pre-existing 
condition, having a pre-existing condition exclusion ban, so 
there are a number of factors that help to bring the cost down 
in 2014. I think that was referenced even in the----
    Mr. Stearns. Mr. Larsen, in all deference to you, you say 
these based upon your opinion, that you think that it will 
bring the cost down and so forth, but if you look at countries 
that have a government universal health care plan, the costs 
have not come down, and in fact, the costs have gone up, and 
many countries now are trying to get from out--from underneath 
the universal government health care. And there is a long line.
    So is there any study or any analysis that you have done to 
corroborate what you have just indicated that you think----
    Mr. Larsen. Well, I know----
    Mr. Stearns [continuing]. Through this universal magic wand 
that everybody is going to get cheaper and more coverage.
    Mr. Larsen [continuing]. Even--back to your earlier 
question----
    Mr. Stearns. Because, see, basically, in my opinion you are 
putting price controls by--people are asking for waivers 
because you are putting in price controllers. You are saying 
basically these people got to comply with this or else, and 
those people are saying we need waivers.
    So it is a form of price control. You might not agree, but 
when you do that, then what happens is you don't have the 
opportunity for the market to bring it down because the 
government is putting all these mandates down.
    So I am just philosophizing----
    Mr. Larsen. Well, I think----
    Mr. Stearns. So the question is, do you have an analysis to 
show, to back up, corroborate what your analysis is?
    Mr. Larsen. Well, here is what we do know.
    Mr. Stearns. Do you have an analysis?
    Mr. Larsen. Consulting firms like Hewitt and Mercer looked 
at the impact of the ACA on employer-based coverage and found 
the impact might be in the 1 to 2 percent range, because most 
coverage is meeting the requirements of the ACA, but we want to 
raise the bar for everyone----
    Mr. Stearns. OK.
    Mr. Larsen [continuing]. So the financial impact on 
premiums has been in the 1 to 2 percent range, and that is 
offset by the benefits that consumers get. They don't have cost 
sharing now for preventative services. So their out-of-pocket 
expenses are much less now than they were before the passage of 
the----
    Mr. Stearns. All right. My time has expired.
    Dr. Burgess. Thank you. Just a couple loose ends to tie up, 
and it may not even take the full time.
    There was some discussion, Mr. Stearns, and you with 
Ranking Member DeGette about new tools versus new benefits. New 
tools, one thing, new benefits certainly are a cost driver, so 
when you flip the switch in 2014, and all the lights do come on 
on all the new benefits, it is--there is going to be increased 
cost.
    So have you done an economic analysis on what is going to 
be the effect on companies that are having difficulty meeting 
the financial obligation today and require a waiver, they have 
got new tools or new benefits, which means new costs? Have you 
done an economic analysis, or can you point us toward a single 
study that shows how that is going to work?
    Mr. Larsen. I know it is subject to disagreement, but the 
CBO estimated that the bill is going to lower overall health 
care costs for many of the reasons that we have talked about.
    Dr. Burgess. Well, OK. So they did, and that is the point 
of some disagreement.
    Actually, I had a resolution of inquiry the last Congress 
and had the Democratic Chairman accepted it, we could have had 
Mr. Foster in to talk about just that, because I was concerned 
that Congress voted on a bill without knowing the actual cost. 
Mr. Foster--Mr. Elmendorf had dramatically different cost 
estimates, about a $450 billion spread over 10 years as I 
recall, and that was pretty significant.
    But we never got an opportunity to do that. Perhaps, Mr. 
Chairman, we will get to do that make up.
    Now, Mr. Angoff, you actually said that I was 
mischaracterizing things when I said that the Office of 
Consumer Information and Insurance Oversight skimmed from the 
appropriations, the $1 billion for appropriations when you were 
setting up the Act. So let me rephrase my question so it won't 
be a mischaracterization.
    Would it be inaccurate for anyone to say that, for example, 
$5 billion was set aside for subsidizing the high-risk pools?
    Mr. Angoff. No. That is accurate.
    Dr. Burgess. But because you used some of that figure for 
your Office for start-up costs, then the entire $5 billion was 
not available, was it?
    Mr. Angoff. And that is the intent because the language 
says $5 billion is authorized to carry out the provision.
    Dr. Burgess. Oftentimes we have a limiting amount that only 
5 percent can be used for administrative function, but there 
was no such limitation in this case, was there?
    Mr. Angoff. That is right.
    Dr. Burgess. So, again, I point to the fact that it would 
be great to have that budgetary information, that detailed 
budgetary information.
    Now, you were hired a year ago as we have already 
established, and you were involved in the outline of the 
development of the creation of OCIIO, the predecessor of CCIIO 
or whatever it is. I get confused. Who appointed you?
    Mr. Angoff. The Secretary.
    Dr. Burgess. And who advised the Secretary on the creation 
of the Office of Consumer Information and Insurance Oversight?
    Mr. Angoff. I did not.
    Dr. Burgess. Do we know who?
    Mr. Angoff. I don't know.
    Dr. Burgess. You had a Deputy at the time. Was the Deputy 
involved in providing that advise to the Secretary?
    Mr. Angoff. My Deputy?
    Dr. Burgess. Yes.
    Mr. Angoff. Not to my knowledge.
    Dr. Burgess. Well, who decided that it was a good idea to 
put it in the Secretary's office?
    Mr. Angoff. I don't know.
    Dr. Burgess. Well, we have already established that there 
was a reason then to move it to CMS. Mr. Larsen, can you help 
us with that just a little bit more why it was so important to 
have it freely mobile within HHS at one point and then suddenly 
bring it under the control of CMS?
    I got to tell you with all due respect it does look like we 
were trying to move things around, and it was because this 
committee indirectly started asking questions about what was 
happening and beginning to shine a little light on the 
activities, because I got to tell you, most members of Congress 
were blissfully unaware, Mr. Angoff, of your activities last 
fall.
    Mr. Larsen. I would characterize it this way. I hope this 
is helpful. It is kind of the difference between a startup and 
then running the operation. They had to start this thing up 
from scratch.
    Dr. Burgess. And I don't dispute that, but it is just 
interesting that after the questions started to get asked when 
the discussion was made----
    Mr. Larsen. They weren't connected. We concluded that----
    Dr. Burgess. Let me ask you this, Mr. Angoff. We had a nice 
discussion in November, and I was concerned, if I got a 
constituent back home that says, well, I want one of these 
waivers, how do I get one? And it actually wasn't available on 
the Web site that, at that time. It was shortly after our visit 
that that information did become available on the Web site, so 
I am greatly appreciative that you did that, but as you were 
developing this, why was there not more thought given to how do 
we get this out to just the regular guy on the street who may 
run a small business or a restaurant or may need this waiver?
    Mr. Angoff. Well, we did give it some thought. As you said, 
it is on the Web site now. It is a transparent process, and we 
think it has worked well.
    Dr. Burgess. But, again, this was all in the works for some 
time, and it just strikes me as odd that you wouldn't have had 
that one simple feature out there early on to make this more 
accessible to more people. Obviously it is a very popular 
waiver program, very popular, and many people want to 
participate in it, and again, I dare say they will still want 
to after 2014.
    Mr. Chairman, I yield back.
    Mr. Stearns. All right. Mr. Griffith from Virginia is 
recognized for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman. Let me ask you this 
in regard to the shift. I think I heard earlier that part of 
the reason for that was that there were would be efficiencies 
gained. I have also heard there were 252 employees. I am 
wondering how many employees have been let go or been 
transferred subsequent to the shifts in the attempt to make 
efficiencies.
    Mr. Larsen. Sure. Well, I guess a couple of answers. One, 
we are in a 60- to 90-day transition period. We have a 
transition team from CMS and a transition team from our shop 
working together to nail down these efficiencies. We don't 
anticipate laying people off, but as Jay mentioned there are 
certainly areas where we don't--we are not going to staff up in 
the future, for example, and we have got to figure out what 
exactly that staffing level is going forward.
    So we are right in the middle of that process from a 
staffing perspective.
    Mr. Griffith. So you made the move for the efficiencies, 
but we don't know what--how much you are going to----
    Mr. Larsen. Well----
    Mr. Griffith [continuing]. How many employees you are going 
to be able to save, how many spots you are going to be able to 
reduce?
    Mr. Larsen. Well, let me rephrase that. We are not talking 
about necessarily reducing--meaning laying people off. I mean, 
we have told our people we are not laying people off, but as 
attrition comes in and as we get efficiencies with the budget 
people and with the legislative office and with the programs 
office, there is----
    Mr. Griffith. So you are planning to do it through 
attrition, but do you have any idea what your target--how 
many----
    Mr. Larsen. That is--no.
    Mr. Griffith [continuing]. Spots you wish to get of?
    Mr. Larsen. That is what we are working--we are, literally 
as we speak, working through the exact components.
    Mr. Griffith. And I am new to the Federal Government but 
wouldn't it make sense to have some idea of what--how many 
folks or how many spots you were going to eliminate if the 
reason for shifting was efficiencies----
    Mr. Larsen. Well, we didn't----
    Mr. Griffith [continuing]. Before you made the shift?
    Mr. Larsen [continuing]. Go in with a hard and fast number 
about what we want to save. We clearly understood as we were 
continuing to stand up OCIIO,and that we need to have functions 
here, and that CMS has those functions, and those----
    Mr. Griffith. Let me shift gears.
    Mr. Larsen. Sure.
    Mr. Griffith. Isn't it true that the employers' plans which 
have received these waivers are likely to drop coverage for 
their employees is no longer affordable in 2014, finding it 
cheaper to pay the penalty, if applicable?
    Mr. Larsen. I don't think so.
    Mr. Griffith. Well, the CBO estimates approximately three 
million employees will be dropped by their employers into the 
exchanges, and in that circumstance won't the individuals be 
forced to buy a more comprehensive plan at a greater cost to 
themselves and at a greater cost to the taxpayer if that 
premium then has to be subsidized through the exchange?
    Mr. Larsen. Well, they will have an option for better 
coverage, and if they meet the guidelines for subsidies, then 
they will have the opportunity to get that coverage, but that 
is paid through the various sources as you know, the funds, the 
Affordable Care Act.
    Mr. Griffith. But isn't it correct that if there are, in 
fact, three million employees that are dropped, that that is 
going to put some burden onto the exchanges and the subsidies?
    Mr. Larsen. Well, it means there would be more people 
there, but I think, as we have talked about, there are a number 
of aspects of the ACA that reduce costs overall, so I think 
those costs are going to be manageable and affordable for 
people in those policies.
    Mr. Griffith. But as Mr. Angoff said earlier when he didn't 
like somebody's opinion, actuaries just give you opinions and 
then you have to see if they are right. This would also be the 
case with what you have just said. We have to see whether or 
not those actuaries are right, and many times they are not. 
Isn't that correct?
    Mr. Larsen. Well, if you have two actuaries, there is 
always the possibility----
    Mr. Griffith. One of them is going to be wrong.
    Mr. Larsen. Right.
    Mr. Griffith. I yield back my time.
    Mr. Stearns. I thank the gentleman. Before I recognize the 
gentleman from New York for 5 minutes I ask unanimous consent 
to put this into the record, a letter from Kathleen Sebelius.
    Without objection, so ordered, and it is dated January 5, 
2011.
    [The information appears in the exhibit binder at the 
conclusion of the hearing.]
    Mr. Stearns. The gentleman from New York is recognized for 
5 minutes.
    Mr. Weiner. Thank you, Mr. Chairman. I have been watching 
with some interest in--my office has been trying to do the 
appropriation bill on the floor at the same time.
    I just want to try to set this up a little bit. You know, 
we have this tendency to believe that this debate is about 
health care, and to some degree it is, but what it is really 
about is how we pay for the health care we get. I mean, isn't 
it true, Mr. Larsen, that if someone is struck by lightening 
and they are lying on the street, that an ambulance will come 
and pick them up, that a doctor will try to resuscitate them, 
if they need surgery, they will probably get it, but the 
question becomes how it is we pay for that care and how we 
insure certain minimum standard of care.
    Is that right, Mr. Larsen?
    Mr. Larsen. That is correct.
    Mr. Weiner. And are there not really three possibilities? 
One is the employer-based model, which is we pay premiums to an 
insurance company, they set the rules, they set the standards, 
we go to them, we pay them, and they pass the money along to 
the hospitals, to the doctors, to the ambulance driver, and 
then they take a certain amount of profit.
    The second model is the one where basically you don't have 
a private company passing along costs. A government agency kind 
of does that. For example, Medicare is like that. No government 
officer, Mr. Larsen, is paid to be the doctor. It is just a 
matter of how we are paid for that care.
    And then there is the third traunch of people which have no 
coverage whatsoever. They are the people that don't have any 
insurance whatsoever, and we hope and hope and hope they have 
money in their own pocket to pay for that care, but if they 
don't, isn't it true, Mr. Larsen, that what would wind up 
happening is we are stuck with some tough choices. We can say 
to the hospital doctor, tough. You got to suck it up, and 
sometimes hospitals go out of business. We lost 17 hospitals, 
Ms. DeGette, in New York just since the year 2000.
    Or we can say, you know, let us come up with some kind of 
reimbursement program, own reimbursed care. Different States 
have different rules, the Federal Government has different 
rules. Or we can do this. We can say to the taxpayer, why don't 
you pay it, and we will figure out later on how we need to work 
that, and that is why States get stuck with such a large cost, 
localities get stuck with large costs.
    When we had this discussion about how to come up with a 
system for dealing with those people that are uninsured, what 
did we do? We didn't go for the model that someone like I would 
have liked, which is let us say like Medicare, for more 
Americans, eventually covering all Americans. We went with 
basically a free-market model and said, let us try the 
employer-based system. Let us try to offer people both 
incentives, subsidies, and then if they don't do it, we are 
going to say to them, you know what? You can't pass your bills 
along to everyone else. You are going to have to pay a little 
extra if you are going to do that.
    Wasn't it, in fact, the system that we set up a reliance 
upon the market-based model, the free-market model that says 
insurance companies, you go do this work? Wasn't that basically 
the path we followed here, Mr. Larsen?
    Mr. Larsen. Yes.
    Mr. Weiner. And further, Mr. Larsen, do not insurance 
companies, and they are not venal people. They are in a 
business. They are in a free-market business. Do they not make 
the most profits if they take in the highest amount of premiums 
and pay out the least amount in care? Don't they then make the 
most profit?
    Mr. Larsen. Yes.
    Mr. Weiner. And isn't the model today structured to 
incentivize them to do that? The problem is, Mr. Larsen, and 
Mr. Angoff, is that that model is not necessarily in the 
interest of our constituents or good care.
    I will give you an example. What if they decide we don't 
want to cover preventative care, or we don't want to cover 
people for the entire life of their illness. We just want to 
cover the first couple of days. They are going to make more 
money. Their stockholders are going to do well. That company is 
going to do well, but it is not necessarily in the best 
interest of the American people, whether you are in a 
Republican congressional district or a Democratic. Sometimes we 
want to say to them, you know what? We want to have some 
standards we want you to uphold. We don't want you to go out of 
business. We have socked it in on this process. We obviously 
want insurance companies to do well to make a healthy profit. 
We want them to be around for years to come.
    But the question is should we say to them, maybe we should 
put basic requirements that if that guy is lying on the street, 
you can't look at him and say, oh, I don't think this guy is 
going to be a good deal and have the insurance company keep 
driving by. No, of course not. We got to be able to make 
coverage.
    And you know what? They are doing remarkably well. Let us 
face it. If you bought insurance company stock at the beginning 
of the recent downfall, you would still be doing pretty well 
because people keep getting sick, people keep getting struck by 
lightning, people keep needing that care. They are doing OK. As 
a matter of fact, if you want to find the easiest, let us say 
$300 billion or so, you can take out, you can transfer in 
health care costs to better care and reduce taxes for people. 
You might want to look at the percentage of the health care 
budget that we put to insurance company profits.
    So the idea that somehow government is coming in and 
imposing some government solution, there is not a single 
government doctor that has been hired, a single government 
nurse, a single government operator of an X-ray machine. But 
that doesn't mean we should simply say you are unfettered by 
any regulatory force.
    For all of the talk about let us have transferring of being 
able to buy insurance policies over State lines, none of my 
Republican friends have said, let us get rid of State insurance 
commissioners and State insurance regulations because we 
acknowledge we need some basic regulations.
    Mr. Larsen, is that basically in a broad form what your 
office has been spending part of its time doing?
    Mr. Larsen. Yes.
    Mr. Weiner. Thank you, and I await a second round, Mr. 
Chairman.
    Mr. Stearns. All right. The gentleman has advocated 
strongly for Medicare as a solution, so he has made that 
argument all during our markups, and I think he--and I 
appreciate him coming down.
    I think what we are going to do, we are finished the 
rounds. I thought the ranking member would have a chance to 
close, and then I would say a few----
    Ms. DeGette. I would ask unanimous consent that----
    Mr. Stearns. Objection. Just let me just clarify. Generally 
when we do the rounds, a member has to be here. So--but if the 
member shows up in the beginning and then goes to the restroom 
and comes back, then that is OK, but if someone comes at the 
very end--I think your eloquent goes to the equivalent of 
three.
    So at this point I think we are going to have--we have been 
here 3 hours, and we are going to let the ranking member 
conclude, and then I will say a few closing comments, and we 
appreciate the witnesses bearing through the rest of us.
    Go ahead.
    Ms. DeGette. Thank you so much, Mr. Chairman. I just have a 
couple of questions to clarify. I guess I would ask either one 
of you gentlemen, if this agency was moved because of any 
action that this Oversight and Investigations Committee or the 
Energy and Commerce Committee in general made?
    Mr. Angoff. No, it was not.
    Ms. DeGette. And why was it moved?
    Mr. Angoff. It was moved because there are efficiencies to 
be gained, as we mentioned, in such functions as budget, 
personnel, external affairs, IT, and other front office 
functions. There are efficiencies to be gained.
    Ms. DeGette. So it was actually done to make the program 
operate in a more efficient manner?
    Mr. Angoff. That is correct.
    Ms. DeGette. Now, there was some question about the 
agency's budget, and I just wanted to clarify. As I recall, the 
HHS overall budget request was about $79 billion, and from what 
I have heard is that your Office's budget, Mr. Larsen, is 
roughly about $330 million for 2012. Is that correct?
    Mr. Larsen. Yes.
    Ms. DeGette. So of that amount that would--of the CMS 
budget, which, of course, is much smaller than the overall HHS 
budget, your budget request would be around $7.5 of the CMS 
budget request and less than one-half of 1 percent of the 
overall HHS discretionary budget request for 2012. Is that 
correct?
    Mr. Larsen. Correct.
    Ms. DeGette. And what your agency is doing by giving these 
waivers, it is working with companies, both private companies 
and also group plans, to give them appropriate waiver so that 
they can give insurance to their employees during the gap 
between now and 2014, when those employees will be having more 
options. Is that correct?
    Mr. Larsen. That is correct.
    Ms. DeGette. Mr. Chairman, I will yield my remaining 2 
minutes to Mr. Weiner.
    Mr. Weiner. While you are here, can you clear up a couple 
of things? I understand in the Health Care Act we hired 16,000 
IRS officers. That is not true, is it?
    Mr. Larsen. I don't know.
    Mr. Weiner. Yes. That was one of those made-up things. I 
actually wanted a couple of moments to tick off the made-up 
stories about the health care, but I realize 2 minutes and 48 
seconds will barely tip the iceberg, but let me just--that is 
one of the stories that is made up,
    Secondly, there is this notion about the Health Care Act 
that has been perpetuated widely that government is going and 
taking over health care, government takeover of health care is 
said over and over again.
    Under the Act today, under the Act today, or under the Act 
when it is implemented, will there ever be a situation where 
there will be a government employee, a government employee 
telling a doctor what process or processes that they can offer 
to a patient?
    Mr. Larsen. Not to my knowledge.
    Mr. Weiner. However, there still will be, because we have 
private insurance companies, still will be insurance companies 
that are going to have broad discretion to be jackasses with 
their customers. Right? You can't--there are still going to be 
people, they are still going to keep you on hold for hours. 
There is nothing in the bill that prevents that. Right?
    Mr. Larsen. If your question is does it preserve the 
private market for insurance companies, yes.
    Mr. Weiner. Yes. You are much more delicate than I am, Mr. 
Larsen.
    Let me ask you another question. There is this notion that 
we are paying a couple of years, we are paying 10 years of 
taxes for 6 years of service. Isn't it true that today as we 
speak that senior citizens have--that senior citizens are 
getting help reducing the cost for prescription drugs, the so-
called donut hole? Isn't that true that that is true today, 
this second?
    Mr. Larsen. Yes.
    Mr. Weiner. Is it also not true that under Medicare 
processes that used to be subject to a co-payment are now not 
covered--that now do not--or has that not taken affect yet?
    Mr. Angoff. No, that is in effect.
    Mr. Weiner. That has. That is today?
    Mr. Angoff. Yes, sir.
    Mr. Weiner. Year--basically year 1, week 1, month 1 of the 
new Health Care Act.
    Let me finally ask you in the remaining 60 seconds about 
the idea of the death panel. What section or line is the death 
panel in? And just so you know, it was widely circulated by all 
kinds of media outlets and perpetuated by some members of this 
Congress that there was an effort going to be made in order to 
reduce end-of-life coverage. They were going to tell some 
people they could not get that coverage. Is that anywhere in 
the Act, anywhere in the regulation, or anywhere in the attempt 
of the law?
    Mr. Angoff. No. I haven't been able to find it.
    Mr. Weiner. Now, can I ask you this question. Is it also 
true that the way the private insurance model is supposed to 
work is that if you aggregate the cost on a wider population, 
meaning more people get private coverage, that in theory 
according to free-market principles that aggregation of cost 
means lower costs to the whole population?
    Mr. Angoff. That is right. That is the fundamental 
principle of insurance. You spread the risk as widely as 
possible.
    Mr. Weiner. Thank you very much, and I yield back what time 
is remaining.
    Mr. Stearns. All right. The gentlelady yields back, and we 
are going to conclude. I have, as Chairman I have the 
opportunity to offer a few closing comments.
    I would say a question that, you don't have to answer but 
there is a competitive effectiveness for it which is part of 
this bill which is trying to determine efficiency of delivery, 
which is being construed by some as a case of cutting off 
certain services for, shall we say, medical practice.
    But anytime you have a government mandate on insurance 
companies, you have a government mandate on employers and 
employees, that is considered a government-run system, and that 
is why in both the State of Virginia and the State of Florida 
they have ruled this mandate unconstitutional.
    But I would just close with this comment. The New York 
Times recently reported on December 8, 2010, that you folks 
have leased an office in Bethesda and are, ``paying almost 
double the market rate for the space.'' This is what the New 
York Times reported, and I assume that is true.
    Mr. Angoff. No, it is not, Mr. Chairman.
    Mr. Stearns. It is not true. I will give you a chance to 
correct that----
    Mr. Angoff. No, it is not.
    Mr. Stearns [continuing]. Because you think the New York 
Times is incorrect.
    Mr. Angoff. In that case, yes, it is. The Bethesda office 
space was something that we didn't seek. We rented in Bethesda 
because the rates in Bethesda were lower, substantially lower 
than they were in Washington, DC, and in addition, there was 
the extra added bonus that the space there was already built 
out. We didn't want to go to Bethesda. We would much rather 
have preferred to be----
    Mr. Stearns. In Washington.
    Mr. Angoff [continuing]. DC, but it was cheaper, and we 
could get it, get in there faster.
    Mr. Stearns. OK. So if I went to the landlord of that 
building you are in, they would lease it to me for the same 
amount that you are paying?
    Mr. Angoff. I don't know what they would do.
    Mr. Stearns. So it is possible that you are paying, even 
though you are paying less than you would be in Washington, DC, 
you are paying more than the market rate for that Bethesda 
facility. I think that is what the New York Times----
    Mr. Angoff. No, and I think----
    Mr. Larsen. I think that the error was that there is a 
difference between rentable space and usable space, and you get 
different rates based on whether it is, for example, ready to 
move in. So the market rate for rentable space, which is what 
my understanding is the GSA negotiated, was, in fact, the 
market rate for rental space.
    Mr. Stearns. Just giving you an opportunity. I just thought 
it ironic when we are trying to bring health care costs and the 
main core constituency that is deciding what the Health Care 
Bill should be is paying too high a market rate. So that is my 
only thought about it.
    Let me just close by allowing all members to offer 
questions for a period of up to 10 days. If you have additional 
questions, you are welcome to offer those. I want to thank the 
witnesses for your participation, and without further ado, the 
Committee is adjourned.
    [Whereupon, at 12:30 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared Statement of Hon. Fred Upton

    Thank you, Mr. Chairman, for convening our first oversight 
hearing on the Patient Protection and Affordable Care Act 
(``PPAC'').
    This oversight hearing is long overdue. The PPACA was 
enacted almost 1 year ago, and this is the first time this 
Committee has held an oversight hearing on the law. I know some 
may think we are moving too fast, or asking too many questions 
of the Department of Health and Human Services about the 
implementation of health care reform. But if you ask me, over 
the last year, this Committee didn't ask enough questions.
    So today we begin our work. We will start by examining the 
Center for Consumer Information and Insurance Oversight. The 
Center is part of HHS and is responsible for implementing the 
PPACA. The current director of the Center, Mr. Steve Larsen, 
and its former director, Mr. Jay Angoff, are here to testify on 
behalf of HHS.
    I think it is fair to say that this subcommittee has enough 
questions about the implementation of health care reform that 
we could keep Mr. Larsen and Mr. Angoff here testifying for the 
rest of the week. Today I am anxious to hear about the waivers 
the Center has been busy issuing to various health care plans 
offered by states, unions, and other employers. These waivers 
exempt those plans from the PPACA's requirements, in 
particular, the requirement that prohibits employers from 
imposing annual or lifetime limits on benefits. To date, the 
Center has issued over 900 waivers to health plans, and that 
number is rising every day.
    This Committee has requested a number of documents about 
the waivers issued by the Center. We have some documents, but 
not all. The documents we do have show that complying with the 
PPACA would have forced hundreds of businesses to drop the 
health insurance plans they provide to their workers because 
the plans that Obamacare would have forced them to have would 
have been too expensive, and would have bankrupted those 
businesses.
    What does it say about the feasibility of a law when you 
need to exempt over 900 health plans (so far)--or 2.5 million 
people--from complying with it? While I think it is a good 
thing that HHS recognized the significant problems posed by the 
PPACA--and exempted these health plans from a requirement that 
would have resulted in thousands of people losing their health 
insurance or having reduced benefits--I think it's a tacit 
admission that the PPACA is fundamentally flawed.
    I also have questions for Mr. Angoff and Mr. Larsen about 
the Center's operations and its role, now that it has been 
moved from the Office of the Secretary of HHS to the Centers 
for Medicare and Medicaid Services (``CMS''). As the entity 
responsible for the massive changes being made to the private 
health care industry, I want to know what lessons the Center 
has learned as we approach the 1-year anniversary of the 
PPACA's enactment. I hope the witnesses will have some insights 
to share.
    As Chairman of this Committee, I am committed to 
investigating the implementation of the PPACA. I think it is 
important that we uncover the facts about how this law is being 
implemented and what it means for the individuals and employers 
who have to live with its costly requirements. Only when we 
understand what worked and what didn't can this Congress enact 
meaningful healthcare reform that lets people keep their 
coverage and doesn't pass the bill to future generations.
    I thank you, Mr. Chairman, and I yield back.
                              ----------                              


               Prepared Statement of Hon. John D. Dingell

    Thank you, Mr. Chairman.
    The Department of Health and Human Services was tasked with 
the tremendous responsibility of implementing the Affordable 
Care Act, with the Center for Consumer Information and 
Insurance Oversight serving as one of the greatest consumer 
protections under this new law.
    CCIIO has the critical responsibilities of providing 
consumers with comprehensive and accessible information about 
health plans, monitoring and ensuring compliance within the 
private insurance market, and overseeing the creation of state 
insurance exchanges. The success of CCIIO in these tasks is 
essential to providing consumers with affordable and quality 
health coverage now and when the health insurance exchanges are 
up and running.
    In the time since the Affordable Care Act has been 
implemented, I believe that CCIIO used its authority 
appropriately to assist States, employers and insurers in 
complying with the law, while also ensuring that employers--
both small and large--are not unnecessarily and negatively 
impacted by the Affordable Care Act. Their efforts at creating 
and providing transparency in implementing key provisions of 
the law have resulted in effective and efficient roll-outs of 
the Early Retiree Reinsurance Program and the Pre-existing 
Condition Insurance Plan.
    Further, the development of the waiver process for annual 
limits has struck a delicate balance between protecting the 
access of millions of consumers in ``mini-med'' plans to 
affordable coverage, while also assisting a diverse array of 
employers and insurers with the information and tools necessary 
to navigate the application process.
    The work CCIIO is doing now in the areas of annual limits, 
rate review, Early Retiree and PCIP all will lay a solid and 
necessary foundation for the creation of the health insurance 
exchanges, while ensuring uninterrupted care in the meantime. I 
commend CCIIO for their work done thus far, and I hope that 
today's hearing will serve as yet another opportunity for the 
American people to learn about how ACA is improving the quality 
of their health coverage.
                              ----------                              

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