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



    THE PPACA'S HIGH RISK POOL REGIME: HIGH COST, LOW PARTICIPATION

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 1, 2011

                               __________

                           Serial No. 112-29


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov


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

                                  (ii)
              Subcommittee on Oversight and Investigations

                         CLIFF STEARNS, Florida
                                 Chairman
LEE TERRY, Nebraska                  DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma                Ranking Member
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            MIKE ROSS, Arkansas
MARSHA BLACKBURN, Tennessee          ANTHONY D. WEINER, New York
BRIAN P. BILBRAY, California         EDWARD J. MARKEY, Massachusetts
PHIL GINGREY, Georgia                GENE GREEN, Texas
STEVE SCALISE, Louisiana             DONNA M. CHRISTENSEN, Virgin 
CORY GARDNER, Colorado                   Islands
H. MORGAN GRIFFITH, Virginia         JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        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. Diana DeGette, a Representative in Congress from the state 
  of Colorado, opening statement.................................     4
    Prepared statement...........................................     6
Hon. Henry A. Waxman, a Representative in Congress from the state 
  of California, opening statement...............................     8
    Prepared statement...........................................    10
Hon. Fred Upton, a Representative in Congress from the state of 
  Michigan, prepared statement...................................    58
Hon. John D. Dingell, a Representative in Congress from the state 
  of Michigan, prepared statement................................    59

                               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.......................................................    11
    Prepared statement...........................................    14

                           Submitted Material

Letter of March 31, 2011, from John Barthell, submitted by Ms. 
  DeGette........................................................    60
Early Retiree Reinsurance Program (ERRP) reports dated March 2, 
  2011, and March 31, 2011, respectively, submitted by Mr. 
  Stearns........................................................    62
Energy and Commerce Staff memorandum dated March 23, 2011, 
  submitted by Mr. Stearns.......................................   132
Department of Health & Human Services (HHS) Chief Actuary report 
  dated April 22, 2010, submitted by Mr. Stearns.................   143
HHS response to Committee dated February 28, 2011, submitted by 
  Mr. Stearns....................................................   181
New York Times article entitled, ``G.E.'s Strategies Let it Avoid 
  Taxes Altogether,'' by David Kocieniewski, dated March 24, 
  2011, submitted by Mr. Stearns.................................   203
www.HealthCare.gov Newsroom, posted February 10, 2011, submitted 
  by Ms. DeGette.................................................   209

 
    THE PPACA'S HIGH RISK POOL REGIME: HIGH COST, LOW PARTICIPATION

                              ----------                              


                         FRIDAY, APRIL 1, 2011

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:05 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Cliff 
Stearns (chairman of the subcommittee) presiding.
    Members present: Representatives Stearns, Terry, Sullivan, 
Murphy, Burgess, Blackburn, Myrick, Bilbray, Gingrey, Scalise, 
Gardner, Griffith, DeGette, Schakowsky, Markey, Green, 
Christensen, Dingell, and Waxman (ex officio).
    Staff present: Carl Anderson, Counsel, Oversight; Stacy 
Cline, Counsel, Oversight; Julie Goon, Health Policy Advisor; 
Todd Harrison, Chief Counsel, Oversight & Investigations; Sean 
Hayes, Counsel, Oversight & Investigations; Carly McWilliams, 
Legislative Clerk; Andrew Powaleny, Press Assistant; Krista 
Rosenthall, Counsel to Chairman Emeritus; Ruth Saunders, 
Detailee, ICE; Alan Slobodin, Deputy Chief Counsel, Oversight; 
Sam Spector, Counsel, Oversight; John Stone, Associate Counsel; 
Phil Barnett, Democratic Staff Director; Brian Cohen, 
Democratic Investigations Director and Senior Policy Advisor; 
Karen Lightfoot, Democratic Communications Director, and Senior 
Policy Advisor; Ali Neubauer, Democratic Investigator; and Anne 
Tindall, Democratic Counsel.

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

    Mr. Stearns. Good morning, everybody, and let me welcome 
the members here, and our witness to the Subcommittee on 
Oversight and Investigations, and I will start with my opening 
statement.
    We convene this hearing of the Subcommittee on Oversight 
and Investigation today to gather information concerning the 
Patient Protection and Affordable Care Act High Risk Pool 
Regime. The Administration's healthcare allocated $5 billion to 
provide healthcare coverage for individuals who have been 
locked out of insurance market. The President and the Democrats 
try to sell this law to the American people by telling us how 
many people were unable to get health insurance, and how this 
law was going to protect these individuals, while somehow 
saving the American taxpayers money.
    It has been 1 year since the healthcare law was forced on 
the American people. It has been 9 months since the high risk 
pools became operational. The chief actuary of Medicare and 
Medicaid estimated that 375,000 people would enroll in these 
high risk pools by the end of 2010, but only 12,000 actually 
did enroll. CMS informed us that they have conducted a massive 
outreach campaign to try to advertise this program in order to 
get people to sign up. Who is paying for this advertising tour 
is a good question. The taxpayers. Through the $5 billion 
allotted to this program in the healthcare reform law, this 
means money that was allocated to help the uninsured is being 
used to help the Administration save face and rescue this 
program.
    This is on top of the previous Democrat majority spending 
an entire year talking about nothing but this healthcare law. 
If countless speeches by the President can't advertise these 
high risk pools, how can a bureaucratic advertising campaign 
hope to accomplish the same goal?
    Just as alarming as the law enrollment numbers, this 
Committee has learned through its investigation that low 
enrollment does not equal low costs. For example, California 
expects to accumulate $1 billion in claims over the lifetime of 
this program, with approximately 70 percent of the tab paid for 
by the Federal Government. This means that California alone, 
one state, that is, expects claims to eat up almost one-fifth 
of the total cost of the program. Our investigation revealed 
that not a single state expects premium revenue to be near the 
cost of claims over the life of this program.
    Now back in December, The Washington Post reported that 
``New Hampshire's plan has only about 80 members, but they have 
actually spent nearly double the $650,000 that the state was 
allocated for this program. HHS agreed to give New Hampshire 
more money.'' So this is a program that must operate within a 
fixed budget of $5 billion. HHS has not explained how it 
intends to keep the program running through 2014 without 
additional funding.
    Our investigation has also uncovered problems with the 
implementation of the high risk pool. In order to get the 
program up so quickly, HHS used the CHIP formula to allocate 
money between the States. While the CHIP formula is used to 
determine the number of uninsured children in each State, we 
would think that HHS would use a formula that measures the 
number of uninsured children with preexisting conditions in 
each State, since this fund is supposed to help the uninsured 
with the preexisting condition. This program uses a non-
relevant formula simply because it was easy and already 
available. This inequity could mean people in some states are 
getting more than they need, while people in others aren't 
getting enough. We want to make sure that the money is being 
allocated fairly and properly.
    Obamacare was supposed to be the solution to our Nation's 
healthcare ills, but here we are, 1 year later, and has a 
single promise made by the President and the healthcare plan 
that the Democrats passed--promises they made about this law 
come true? The high risk pool program is yet another promise 
that has fallen short, in our opinion. We were supposed to 
enroll over a quarter of a million Americans. We didn't even 
reach 5 percent of that goal.
    Steve Larsen, the Deputy Administrator and Director of the 
Center for Consumer Information Insurance Oversight was before 
the Subcommittee back in February to talk about the waivers--
you remember that--that HHS has been granting to states and 
entities that can't afford the Administration's healthcare 
plan. Since he testified just 2 months ago, we have seen more 
states' struggling companies all seek waivers. A big indicator 
to me that we are on the wrong track is the number of people in 
need of waivers to relieve them of the legislative and 
financial burdens of the Democrat healthcare plan. As we have 
seen through our investigations, this is a problem that is 
getting worse. We intend to hold HHS accountable today for what 
we see as low enrollment, skyrocketing costs, and poor 
implementation of a program that was promised to help support 
one of our most vulnerable populations.
    So I welcome Mr. Larsen returning, and recognize the 
ranking member, my colleague, Ms. DeGette from Colorado.
    [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 concerning The 
Patient Protection and Affordable Care Act's High Risk Pool 
Regime. Obamacare allocated $5 billion to provide health 
coverage for individuals who have been locked out of the 
insurance market. Obama and the Democrats tried to sell this 
law to the American people by telling us how many people were 
unable to get health insurance and how this law was going to 
protect these individuals, while somehow saving the American 
taxpayer money.
    It has been one year since the health care law was forced 
on the American people. It's been nine months since the high 
risk pools became operational. The Chief Actuary of Medicare 
and Medicaid estimated that 375,000 people would enroll in 
these high risk pools by the end of 2010. But only 12,000 
actually did enroll. CMS informed us that they've conducted a 
massive outreach campaign to try to advertise this program in 
order to get people to sign up. Who is paying for that 
advertising tour? The taxpayers.through the $5 billion allotted 
to this program in the health care reform law. That means money 
that was allocated to help the uninsured is being used to help 
the administration save face and rescue the program. This is on 
top of the previous Democrat majority spending an entire year 
talking about nothing but this health care law-if countless 
speeches by the President can't advertise these pools, how can 
a bureaucratic advertising campaign hope to accomplish this 
goal?
    Just as alarming as the low enrollment numbers, this 
committee has learned through its investigation that low 
enrollment does not equal low costs. For example, California 
expects to accumulate $1 billion in claims over the lifetime of 
the program, with approximately 70 percent of the tab paid for 
by the federal government. That means that California alone, 
one state, expects claims to eat up almost one fifth of the 
total cost of the program. Our investigation revealed that not 
a single state expects premium revenue to be near the cost of 
claims over the life of the program.
    Back in December, the Washington Post reported that ``New 
Hampshire's plan has only about 80 members, but they have 
already spent nearly double the $650,000 the state was 
allotted. HHS agreed to give New Hampshire more money.'' This 
is a program that must operate within a fixed budget of $5 
billion. HHS has not explained how it intends to keep the 
program running through 2014 without additional funding.
    Our investigation has also uncovered problems with the 
implementation of the high-risk pool. In order to get the 
program up so quickly, HHS used the CHIP formula to allocate 
money between the states. While the CHIP formula is used to 
determine the number of uninsured children in each state, we 
would think HHS would use a formula that measures the number of 
uninsured children with pre-existing conditions in each state, 
since this fund is supposed to help the uninsured with pre-
existing conditions. This program uses a non-relevant formula 
simply because it was easy and already available. This inequity 
could mean people in some states are getting more than they 
need, while people in others aren't getting enough. We want to 
make sure that the money is being allocated fairly.
    ObamaCare is supposed to be the solution to our nation's 
health care ills but here we are, one year later, and has a 
single promise made by President Obama and the Democrats about 
this law come true? The high risk pool program is yet another 
enormous promise that has fallen short: we were supposed to 
enroll over a quarter of a million Americans. We didn't even 
reach five percent of that goal.
    Steve Larsen, Deputy Administrator and Director of the 
Center for Consumer Information and Insurance Oversight, was 
before the Subcommittee back in February to talk about the 
waivers that HHS has been granting to states and entities that 
can't afford Obamacare. Since he testified just two months ago, 
we've seen more states and struggling companies seek waivers. A 
big indicator to me that we are on the wrong track is the 
number of people in need of waivers to relieve them of the 
legislative and financial burdens of ObamaCare. As we've seen 
through our investigations, this is a problem that is getting 
worse. We intend to hold HHS accountable today for what we see 
as low enrollment, skyrocketing costs, and poor implementation 
of a program that was promised to help support one of our most 
vulnerable populations.
    With that, I welcome Mr. Larsen, and recognize the ranking 
member, Congresswoman Degette.

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

    Ms. DeGette. Thank you so much, Mr. Chairman.
    Before I give my opening statement, I would like to take a 
moment of personal privilege and introduce my sister Cathy and 
her family who have come here to visit and see how sausage is 
made all week long.
    Mr. Stearns. Cathy, you are welcome.
    Ms. DeGette. Mr. Chairman, President Obama signed the 
historic healthcare reform legislation into law just 1 year 
ago. When the law's full benefits have been implemented, every 
American will have access to affordable health insurance, and 
abuse of insurance industry practices like discrimination with 
people--against people with preexisting conditions will be 
banned entirely. Millions of Americans are already benefiting 
from the law, including Americans with preexisting conditions. 
Thousands of these individuals, thanks to the subject of this 
hearing, the preexisting condition insurance pools, or PCIPs, 
have access to affordable individual coverage for the first 
time. Prior to the passage of the Affordable Care Act, health 
insurance for people with illnesses like diabetes, asthma, 
cancer, arthritis, or HIV/AIDS was either not available on the 
individual market or was so expensive as to make it effectively 
unavailable. But the Affordable Care Act immediately banned the 
egregious practice of denying coverage to children with 
preexisting conditions. The Affordable Care Act also offered 
immediate benefits to adults with preexisting conditions 
through the PCIP program. These plans also offer individuals 
with preexisting conditions insurance at the standard 
individual market rate, not the exorbitant rates offered on the 
private market. These plans began accepting applications in 
late 2010, and over 12,000 people are now enrolled in them.
    One of the enrollees is John Barzel, who is a constituent 
of mine from Colorado. Mr. Barzel, a bartender who works on his 
feet all day long, suffered from a condition I am well aware 
of, severe arthritis in both hips and desperately needed two 
hip replacements to keep his job, but his employer doesn't 
offer health insurance and he could not obtain health insurance 
on the individual market. When he learned about PCIP, he signed 
up immediately. He has since had two hip replacements and in 
his words to my staff, he got a new lease on life. He says 
that, and I quote, ``The health insurance coverage provided for 
me under the Affordable Care Act took me from chronic pain to 
free daily life and restored by ability to support myself.'' 
Now Mr. Chairman, I wanted to have Mr. Barzel come here in 
person at this hearing, but we were told that he would not be 
allowed to testify, so I am disappointed by this decision, but 
I would at least ask unanimous consent that his letter to the 
Committee be included in the record.
    Mr. Stearns. By unanimous consent, so ordered.
    Ms. DeGette. Thank you.
    Mr. Waxman. I would like to object, and I do so to inquire 
why he was not allowed to come. Here is a man who could tell us 
from his own experience what these high risk pools meant to 
him. Why wouldn't we allow him to come, Mr. Chairman?
    Mr. Stearns. Mr. Waxman, you understand that we are going 
to have continued hearings on this, and we will have another 
opportunity to bring your witness in. I thought as we started 
this process, dealing with one specific subject we would have 
just the government explain exactly what the status is, and so 
that is why we have just one witness. I think----
    Mr. Waxman. How many hearings do you intend to call on this 
subject?
    Mr. Stearns. Well, I would be glad to sit down with you at 
a later date. We are just in the early stages of this. As you 
know, we have got plenty of hearings on the healthcare plan, 
and this is just one of many. So at this point, by unanimous 
consent, so ordered the letter will be entered into the record.
    [The information appears at the conclusion of the hearing.]
    Ms. DeGette. Chairman, not to put too fine a point on it, 
this is the second hearing the Minority was denied their 
witness, so I hope we can work this out for future hearings.
    I know that we are going to hear--in fact, we already heard 
from the chairman that PCIP enrollment is lower than 
anticipated, and I appreciate that CCIIO, in recognition of 
these concerns, has outreaches--has improved its outreach 
efforts. I hope we will hear more about those efforts from our 
witness, but I find it a little ironic that my friends across 
the aisle would complain about low enrollment in a plan that 
every single one of them voted to repeal, because when I hear 
about stories like John Barzel, I find repeal efforts 
impossible to understand. These thousands of people who now 
have access to insurance for the first time would have it 
whisked away immediately. So it seems to me that the solution 
to the problem is to try to increase outreach efforts so that 
we can get a lot of people who are uninsurable because of 
preexisting conditions to be enrolled in insurance.
    Now, PCIP is not a permanent solution to the problems faced 
by people with preexisting conditions, that is for sure. It is 
a transitional benefit that will be superseded by the full 
panoply of the Affordable Care Act's reforms in 2014. But what 
the program is right now is critically important to that slice 
of people who are and will be enrolled. That is why we should 
not repeal this law. Doing so would rob thousands of PCIP 
enrollees of the healthcare coverage they now have and take it 
away.
    A more productive discussion would be a discussion about 
how we can enroll more people with preexisting conditions in 
this program until we transition to full coverage in 2014.
    Thank you.
    [The prepared statement of Ms. DeGette follows:]

                Prepared Statement of Hon. Diana DeGette

    President Obama signed the historic healthcare reform 
legislation into law just over 1 year ago. When the law's full 
benefits have been implemented, every American will have access 
to affordable health insurance, and abusive insurance industry 
practices, like discrimination against people with pre-existing 
conditions, will be banned entirely.
    Millions of Americans are already benefiting from the law, 
including Americans with pre-existing conditions. Thousands of 
these individuals, thanks to the subject of this hearing--the 
pre-existing condition insurance pools (P-CIPs), have access to 
affordable individual coverage for the first time.
    Prior to passage of the Affordable Care Act, health 
insurance for people with illnesses like diabetes, asthma, 
cancer, arthritis, or HIV/AIDS was either not available on the 
individual market, or was so expensive as to make it 
effectively unavailable.
    But the Affordable Care Act immediately banned the 
egregious practice of denying coverage to children with pre-
existing conditions. And the Affordable Care Act also offered 
immediate benefits to adults with pre-existing conditions 
through the PCIP program. PCIP plans offer individuals with 
pre-existing conditions insurance at the standard individual 
market rate--not the exorbitant rates offered on the private 
market.
    PCIP plans began accepting applications in late 2010, and 
over 12,000 people are now enrolled in them. One of those 
enrollees is John Barthell, a constituent of mine from 
Colorado.
    Mr. Barthell, a bartender who works on his feet all day 
long, suffered from severe arthritis in both hips and 
desperately needed two hip replacements to keep his job. But 
his employer doesn't offer health insurance, and he could not 
obtain affordable insurance on the individual market. When he 
learned about PCIP, he signed up immediately. He has since had 
two hip replacements, and in his words to our staff, ``got a 
new lease on life.'' He says that--and I quote--``the health 
insurance coverage provided for me under the Affordable Health 
Care Act took me from chronic pain to a pain-free daily life 
and restored my ability to support myself.''
    I wanted to hear from Mr. Barthell in person at this 
hearing. I thought that it would be obviously worthwhile to 
learn about PCIP from the perspective of someone enrolled in 
the program. But we were told by the Majority that he would not 
be allowed to testify. I'm very disappointed by this decision, 
and I would at least like to ask that Mr. Barthell's letter to 
the Committee be included in the record.
    I know that we will hear from my Republican colleagues 
today that PCIP enrollment is lower than anticipated. And I 
appreciate that CCIIO, in recognition of these concerns, has 
improved their outreach efforts. I hope we will hear more about 
those efforts from our witness.
    It is ironic, however, that my friends across the aisle 
would complain about low enrollment in a plan that every single 
one of them voted to repeal. When I hear stories about what 
that would mean to people like John Barthell, I find these 
repeal efforts impossible to understand. Repeal would mean that 
thousands of people who now have access to insurance for the 
first time will have it whisked away from them immediately. One 
of those people, Suzanne Hannon of Maryland, also spoke with 
our staff.
    Suzanne's husband worked for Bethlehem Steel for decades, 
but when he turned 65, they cancelled his health benefits, 
leaving her uninsured. She was unable to obtain affordable 
coverage because of a pre-existing condition: moderately high 
cholesterol.
    Then last fall, Suzanne heard about PCIP and enrolled. A 
month later, she went in for a check-up-something she would not 
have done without insurance-and learned she had uterine cancer. 
She caught it early, and her prognosis is good, as long as she 
can continue her treatment. She is terrified, however, that the 
Affordable Care Act will be repealed and that she'll have to 
end her chemotherapy. In her words, the repeal of PCIP would be 
``a death sentence.''
    PCIP is not a permanent solution to the problems faced by 
people with pre-existing conditions. It is a transitional 
benefit that will be superseded by the full panoply of the 
Affordable Care Act's reforms in 2014.
    But the program is critically important to the people who 
are and will be enrolled. That's why it would be shameful for 
Congress to repeal this law. Doing so would rob thousands of 
PCIP enrollees of the health coverage they now have, and take 
away their rights to even better coverage in the future.

    Mr. Burgess [presiding]. The gentlelady yields back. I will 
yield myself 2 minutes, and then we will hear from other 
members on the Majority side.
    This hearing, once again, represents legitimate oversight 
of ongoing federal activities over this healthcare law, what we 
should be doing in this committee, and I would just address to 
the ranking member, we are doing it this year as opposed to 
last year, when we had not a single oversight hearing on the 
implementation of the healthcare law.
    And those with preexisting conditions was identified as one 
of the major reasons that the healthcare law was necessary, but 
I guess I would just simply ask the question, I don't really 
recall the provision in H.R. 3200 that we marked up in this 
committee on preexisting conditions, but was it really 
necessary to spend $1 trillion to fix this problem, which after 
all, is what we have done with the Patient Protection and 
Affordable Care Act? We all want to help, but was it necessary 
to go to the lengths that we did and essentially upset the 
system that was working arguably for two-thirds of the 
population in implementing this program?
    We have heard that the universe of people with a medical 
diagnosis who were locked out of the system was vast. We were 
led to believe that it was in the millions, at different times 
eight million, 12 million were used by the President in his 
addresses during the summer of 2009. But at the end of the 
first year, 2010, we had 8,000 people and then with a massive 
advertising campaign, we signed up 12,000 people. Well, why is 
that? Is it because the premiums were too high? Is it because 
we mandated that you had to go uninsured for 6 months to 
qualify? That is kind of risky. Is it because people don't know 
we spent a lot of money in advertising, or was it because the 
problem just wasn't as bad as we thought? Despite the low 
enrollment, the program's finances are high. It begs the 
question, was this the proper path to take or could we have 
provided subsidized risk pools?
    The last Congress, the ranking member of the Health 
Subcommittee, Nathan Deal and I introduced H.R. 4019 and 4020, 
which actually attempted to get this population as locked out 
of the current system while providing the right incentives for 
those who have lost their jobs.
    At this point, let me yield 2 minutes to--1 minute to the 
gentleman from Nebraska, Mr. Terry.
    Mr. Terry. Well, thank you, Mr. Chairman--acting chairman. 
I appreciate the opportunity to hear from this agency how we 
can remove waste and perhaps even abuse of funds under their 
control. So it concerns me that my friends on the other side of 
the aisle do not wish us to press to find wasteful use of 
taxpayer dollars or abuse. Hopefully we can get an explanation 
on the early retirement and insurance program where there has 
been, in the last day or two, several news articles that 
concern me about waste and possible abuse of $5 billion that 
seem to be going--sent to companies that are quite healthy and 
wouldn't need government subsidies for early retirees.
    For example, the United Auto Workers received the most this 
last year at $206 million. A healthy company, AT&T, received 
$140 billion. Verizon received $91 billion. General Electric, I 
guess if you hug the President enough, you will get $36 
billion. General Motors received an additional $19 billion. I 
would like an explanation of why these companies were even 
eligible for government subsidies for an early retirement 
program.
    I yield back.
    Mr. Burgess. The gentleman's time has expired. Yield the 
balance of our time to gentlelady from Tennessee, Ms. 
Blackburn.
    Mrs. Blackburn. Thank you, Mr. Chairman. Yes indeed, if my 
colleagues are wondering why we are not calling or if we are 
going to call other witnesses on programs such as this early 
retirement program, I think we need to call the American 
taxpayer who is footing the bill for this and is livid with the 
lack of accountability and the lack of measurable results that 
they see coming from these programs. It is not hard to 
understand, in my book, why we would vote to repeal these 
programs.
    When you look at this program and the burn rate of this 
money, I am curious as to why you have flown through $1.3 
billion over the last 2\1/2\ months when you have a total of $5 
billion which was supposed to last you for a few more years? 
You know, this is a little bit of a head scratcher. Why are you 
trying to get this money out the door? Why are there so few 
people enrolled in this program? Why is it not giving the 
results that are necessary, and of course, as I have said many 
times, there is no successful example of public option 
healthcare being implemented and achieving a savings, either a 
near-term or a long-term savings. The wasteful spending has to 
stop. The American taxpayer is growing ill and fatigued with 
the practices they see in Washington, DC.
    I thank the chairman for calling the hearing. I yield back.
    Mr. Stearns. Gentlelady yields back, and the gentlelady 
from Colorado.
    Ms. DeGette. The gentleman from California----
    Mr. Stearns. The gentleman from California is recognized 
for 5 minutes.

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

    Mr. Waxman. Thank you, Mr. Chairman.
    I have been involved in congressional oversight for 
decades. I have seen firsthand how oversight can, when it is 
done right, educate and inform the public and make government 
programs work better, but I have also seen how the oversight 
process can be abused for no purpose other than to fight 
partisan ideological battles, and that is what I see here 
today.
    This hearing is ironic because it is about the new state of 
federal preexisting condition insurance plans, or high risk 
pools, established under the Affordable Care Act. These plans 
are supposed to be a transition for people who couldn't buy 
insurance. They can't go to the individual market because 
insurance companies won't give them coverage because of 
preexisting medical conditions. So we set up some high risk 
pools for them until we get to the transition where we will 
insist that insurance companies cover those people at the same 
time that we are requiring everybody to be covered so that the 
costs are being spread so that everybody gets coverage. Not the 
kind of situation we have had up until now where it doesn't 
make sense, but insurance companies will not give a policy to 
somebody with a preexisting condition because they are just 
very likely to be expensive. So the insurance companies want to 
exclude people, not cover people.
    This is ironic because this is exactly what the Republicans 
proposed instead of the bill that we passed. You would think 
the Republicans would love this idea. These high risk pools 
were the centerpiece of their health reform. They didn't want 
to actually eliminate the insurance company discrimination 
against people with preexisting conditions. What they wanted to 
do was to let the insurance companies treat them differently in 
a high risk pool.
    Mr. Burgess, who I seem to believe is an outspoken opponent 
of the healthcare reform law, said ``The programs to deal with 
preexisting conditions would involve risk pools to be sure.'' 
Politico described high risk pools as one of the old GOP 
standbys.
    So when we have this high risk pool to give people care 
until we transition into the new healthcare system, suddenly 
Republican leaders decide they don't like them anymore. Why 
don't they like them? Well, they don't like them because not 
enough people are taking advantage of these high risk pools. 
This hearing isn't about why some are taking advantage and 
others not. We are not hearing from people, we are only hearing 
from the administrator of this program. Mr. Barthell, a 
constituent of Representative DeGette, who is enrolled in one 
of these preexisting condition insurance programs, was denied 
the ability to be here for this hearing. Now maybe in the next 
five or six hearings on the subject he will get a chance to 
come in and talk about it. But Republicans are attacking this 
program because it is not popular enough and it has too low an 
enrollment. Then they are attacking the Early Retiree 
Reinsurance Program for being too popular and having enrollment 
that is too high. There is just nothing you can do that won't 
bring Republican criticism, because what they see is their job 
is to whine and complain and attack and confuse people about 
the health insurance law so that people won't start realizing 
that it is a pretty good law. It ends the worst insurance 
company abuses. It helps seniors in Medicare. It helps small 
businesses afford healthcare coverage. It makes sure that all 
Americans have access to high quality, affordable healthcare.
    Now, they say they want to repeal and reform, repeal and 
replace. Well, we haven't seen their replacement, but we do 
note that they did propose some ideas as alternatives, and one 
of the ideas they proposed were high risk pools. Now we are 
having a series of hearings on high risk pools and why they are 
not successful enough. High risk pools could have been the ones 
we would have adopted on a bipartisan basis, but they wouldn't 
work with us to do anything on a bipartisan basis.
    This hearing is not a serious hearing. This hearing is not 
really trying to get facts that will help bring about some 
understanding that could lead to reforms. This is just a 
partisan show. It is not a legitimate oversight hearing, and 
unfortunately, that seems to be par for the course for this 
committee, even though this subcommittee is called the 
Oversight Subcommittee. I think at some point we need to stop 
these partisan games, learn how to work together for the 
benefit of the American people.
    [The prepared statement of Mr. Waxman follows:]

               Prepared Statement of Hon. Henry A. Waxman

    I've been involved in congressional oversight for decades, 
and I've seen firsthand how oversight, when done right, can 
educate and inform the public and make government programs work 
better. And I've also seen how the oversight process can be 
abused, for no purpose other than to fight ideological battles.
    This kind of partisan oversight helps nobody, but it is 
apparently becoming the norm in this Subcommittee.
    Today's hearing is about the new state and federal pre-
existing condition insurance plans, or high-risk pools, 
established under the Affordable Care Act. These plans are a 
good example of the immediate benefits provided by the landmark 
health care reform law. They have allowed thousands of 
individuals desperately in need of health care coverage to 
purchase insurance. They have provided an essential lifeline to 
individuals who were shut out of the market for individual 
health insurance.
    Thanks to the Affordable Care Act, discrimination by 
insurance companies against individuals with pre-existing 
conditions will be banned. In 2014, everyone will have a wide 
variety of choices of health care plans through state-based 
exchanges. Families will receive subsidies to help pay for 
coverage if they cannot afford it.
    Until then, the high-risk pools available in every state 
will serve as a bridge to these state-based exchanges, allowing 
individuals with pre-existing conditions to purchase coverage 
at market-based rates.
    You would think Republicans would love this program. In 
fact, these high-risk pools were the centerpiece of Republican 
health care reform proposals. Last Congress, Republicans 
introduced 11 bills creating state-based high-risk pools. One 
Committee member, Mr. Burgess, an outspoken opponent of the 
health care reform law, said: ``The programs to deal with 
preexisting conditions would involve risk pools to be sure.'' 
Politco has described high-risk pools as one of ``the old GOP 
standbys.''
    But when these high-risk pools were included in the health 
care reform law, suddenly Republican leaders in Congress 
decided they don't like them anymore.
    We have one excellent witness today, Steve Larsen from HHS. 
He's responsible for administering the program, and I'm glad 
he's here to share his insights with us. But we asked Chairman 
Stearns for an additional witness: John Barthell, a constituent 
of Rep. Degette's from Colorado who is enrolled in the pre-
existing condition insurance program. We wanted to get his 
perspective on the value of the program. We heard Ms. DeGette 
read some of his testimony for the record.
    This request was denied. Apparently, the Committee does not 
want to hear from individual Americans who disagree with 
Republican orthodoxy.
    Last week, Committee Republicans put out a memo attacking 
one part of the law--the Early Retiree Reinsurance Program--for 
being too popular and having enrollment that is too high. In 
today's hearing, they will attack the high-risk pools for 
exactly the opposite reason: they are not popular enough and 
have too low an enrollment.
    The Affordable Care Act is simply not going to get a fair 
hearing from the Republicans on this Committee.
    And that's a shame, because it's a good law. It ends the 
worst insurance company abuses, helps seniors in Medicare, 
helps small businesses afford health care coverage, and makes 
sure that all Americans have access to high-quality, affordable 
health care coverage. Americans of all ages in all 50 states 
are already benefitting from the health care reform law.
    Our country faces grave challenges. We need to grow our 
economy and create jobs. We need an energy policy that protects 
our national security and our environment. We need a health 
care system that provides quality, affordable coverage to all 
Americans.
    But to achieve these goals, we need to stop these partisan 
hearings and learn how to work together for the American 
people.

    Mr. Stearns. I thank the gentleman, and with that, there 
are no additional opening statements. At this point, we will 
ask Steve Larsen, the Deputy Administrator and Director of the 
Center for Consumer Information and Insurance Oversight, who is 
part of the Democrat administration, to stand before the 
committee.
    Mr. Larsen, you are well 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 taking testimony under oath?
    Mr. Larsen. No, I don't.
    Mr. Stearns. The chair then advises 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?
    Mr. Larsen. I don't.
    Mr. Stearns. In that case, if you please rise, raise your 
right hand. I will swear you in.
    [Witness sworn.]
    Mr. Stearns. Thank you. You are now under oath and subject 
to the penalties set forth in Title 18, Section 1001 of the 
United States Code, and you may now give your 5-minute summary 
of your written statement.

    TESTIMONY OF STEVEN B. LARSEN, DEPUTY ADMINISTRATOR AND 
     DIRECTOR, CENTER FOR CONSUMER INFORMATION & INSURANCE 
     OVERSIGHT, CENTERS FOR MEDICARE AND MEDICAID SERVICES

    Mr. Larsen. Thank you, Chairman Stearns, Ranking Member----
    Mr. Stearns. I think you should put the mic just a little 
closer, if you don't mind.
    Mr. Larsen. Is that better?
    Mr. Stearns. I think that is. Yes, that is good.
    Mr. Larsen. Chairman Stearns, Ranking Member DeGette, 
members of the subcommittee, thank you for the chance to appear 
before you this morning. I have submitted my full testimony for 
the record.
    As was mentioned, I serve as Deputy Administrator and 
Director of the Center for Consumer Information and Insurance 
Oversight, or CCIIO, within CMS. I have been involved in 
implementing many of the provisions of the Affordable Care Act, 
including overseeing private health insurance reforms, working 
with States to establish exchanges, and ensuring that consumers 
have access to information about their rights and coverage 
options.
    At this time last year, Congress passed and the President 
signed into law the Affordable Care Act, which will expand 
access to affordable quality coverage to over 30 million 
Americans, and ensure individuals have coverage when they need 
it most. Just 1 year after the Affordable Care Act became law, 
many reforms have taken effect, including eliminating 
preexisting condition exclusions for children, prohibiting 
insurance companies from rescinding insurance policies simply 
because a consumer may have made an error on a form, ending 
lifetime dollar limits on health benefits, and enabling many 
young people to stay on their parent's insurance plans up to 
the age of 26.
    The Affordable Care Act also established new programs to 
expand and support coverage options as a bridge to 2014. In 
2014, everyone will have access to affordable health insurance 
choices through the new competitive marketplaces, the exchanges 
which prohibit discrimination based on preexisting conditions.
    The bridge to 2014 includes the Preexisting Condition 
Insurance Plan, or PCIP. The Affordable Care Act created PCIP 
to make health insurance available to people whom private 
insurance companies denied coverage because of their 
preexisting conditions. The presence of a preexisting condition 
is one of the major barriers to obtaining health insurance for 
individuals, and the fact that so many people are denied 
coverage for these conditions is yet another reason why 
healthcare reform is so important.
    PCIP provides health coverage options for people who have 
been uninsured for at least 6 months, have a preexisting 
condition, or have been denied health coverage because of a 
condition, and are U.S. citizens or residing in the U.S. 
legally. The program covers a broad range of health benefits, 
including primary and specialty care. PCIP eligibility is not 
based on income, and the plan does not charge people higher 
premiums because of their medical condition.
    Previously, many states have run high risk pools or other 
programs that offer insurance to people with preexisting 
conditions. While the PCIP and existing state pools cannot be 
combined, states have the option to build on their current 
programs and choose to run the new program under contract with 
HHS, or elect to rely on HHS to provide PCIP coverage in their 
State. Twenty-seven states run PCIP programs, and HHS, along 
with the Office of Personnel Management and the Department of 
Agriculture's National Finance Center, are running the federal 
PCIP programs, which cover 23 states and the District of 
Columbia. The Federal Government is contracting with the 
National Finance Center to administer benefits in those states 
covered by the federal PCIP program, and we are flexible about 
how each state chooses to implement the state program, allowing 
every State-administered PCIP to be uniquely tailored to their 
local market.
    The law appropriates $5 billion of federal funds to support 
PCIP beginning on July 1, 2010, through July 1, 2014, and an 
allocation of these funds was made across the states based on 
the CHIP formula that takes into account the population of the 
State, the number of uninsured in the State, and local cost 
factors. A 10 percent cap limits administrative expenses in the 
PCIP program over the life of the program, and CCIIO and the 
states work together to monitor expenditures to ensure we are 
maximizing the value of the program while staying within the 10 
percent administrative cost limit, and within the total funds 
that were allocated.
    Based on the data released in March, PCIP has 12,437 
members. Of this total, over 8,000 people have been enrolled in 
the State-run PCIPs in the 27 States, and over 3,000 have been 
enrolled in the federal PCIP in the 23 States. I am very 
pleased that enrollment in the PCIP program increased by over 
50 percent in the last few months, and we expect it to continue 
to grow between now and 2014.
    I am proud of all that we have accomplished over the past 
year and look forward to 2014 when Americans will have access 
to more affordable, comprehensive health insurance plans 
without worrying about preexisting conditions. PCIP is an 
important part of the bridge to the exchanges in 2014. Until 
then, I look forward to continuing to implement the Affordable 
Care Act and strengthening CCIIO's partnership with Congress, 
the States, consumers, and other stakeholders across the 
country.
    Thank you so much for the opportunity to discuss the work 
that CCIIO has been doing to implement the Affordable Care Act 
and to help people with preexisting conditions, and I look 
forward to your questions.
    [The prepared statement of Mr. Larsen follows:]



    
    Mr. Stearns. Mr. Larsen, thank you very much. I will take 
the opportunity to ask the first set of questions.
    As you know, as everybody in the room knows, this is an 
oversight investigation committee that is looking at high risk 
insurance program, and I thought I would, before we start on 
that, a recent AP story just came out this morning indicating 
that your office has given out large sums of money under the 
Early Retiree Healthcare Program. You are familiar with that 
program?
    Mr. Larsen. I am.
    Mr. Stearns. And you were cited as the person who was 
involved with this. So we wanted to just, in passing, ask a few 
questions, that it appears that a lot of corporations, 
including General Electric, got $36 million for their early 
retirees. It appears that United Auto Workers got over 200 
million, Verizon Communications got 91 million, AT&T got 140 
million, and so the list goes on and on. It is a huge amount of 
money that you are giving out to subsidize retirees--early 
retirees. I guess the question is how can you justify giving 
out so much of taxpayers' money to these corporations?
    Mr. Larsen. Well, these----
    Mr. Stearns. These are profitable corporations.
    Mr. Larsen. The Early Retiree Reimbursement Program in fact 
has been an incredibly successful program in accomplishing the 
goals that we set out to accomplish. The fact is that history 
has shown that the rate in which large companies are dropping 
coverage--insurance coverage for early retirees----
    Mr. Stearns. But these are corporations that are 
profitable, and when you talk about AT&T and General Electric 
and Verizon Communications, United Auto Workers, why would they 
need taxpayers to subsidize them, and why do--I mean, you have 
Northrop-Grumman, Boeing Company, the State Teachers Retirement 
System Ohio. If this is a healthcare program that is going to 
work, why would you be taking taxpayers' money and giving so 
much out to companies that are very successful and have a very 
good profitable history?
    Mr. Larsen. Well, those companies are companies that, in 
fact, continue to offer retiree benefits, health benefits for 
early retirees----
    Mr. Stearns. But shouldn't they have the responsibility of 
taking care of that themselves and not asking for the 
taxpayers-- basically giving them free money?
    Mr. Larsen. Well, the program allows them and positions 
them to continue to offer this critical benefit to early 
retirees, because I will tell you, early retirees, folks that 
are between 50 and 65, when they are put out into the 
individual market, are the ones that are the most at risk for 
not being able to get insurance.
    Mr. Stearns. Well I understand that, but that was part of 
when they got to work for GE or AT&T or Verizon, this is part 
of the package they understood. I guess are you going to give 
money out like this to all major corporations, all the unions, 
all the public employee retiree systems? I think the point 
would be that if you think the healthcare system that the 
Democrats passed is so successful, why in the flip are you 
giving out so much money of taxpayers so freely and 
overwhelming to companies that are very profitable?
    Mr. Larsen. Well, I would respond with a couple points.
    First of all, there are a number of different types of 
recipients. Certainly, State and local governments are also one 
of the main recipients so that employees and retirees of State 
and local governments can continue to have retiree benefits.
    Mr. Stearns. OK, but Mr. Larsen, I have a statement from 
you. You said, ``The overwhelming response to this program 
demonstrates exactly how broken the current healthcare system 
is, exactly why we needed reform in the first place.'' Is the 
reform you are talking about is taking taxpayers' money and 
giving it out to successful, profitable corporations? Is that 
your definition of why we need the Democrat healthcare bill?
    Mr. Larsen. We think the program is successful because it 
has allowed these companies and State and local governments and 
non-profits and commercials to continue to be able to offer 
coverage for early retirees.
    Mr. Stearns. Now, you followed the recent publicity with 
General Electric paying no taxes on the huge amount of money 
they paid, so I understand you gave General Electric $36 
million to help their early retirees. Do you think it was 
absolutely necessary the taxpayers fund early retirees for 
General Electric? Is that your position today?
    Mr. Larsen. Well, when a sponsor in the program receives 
the money, it must apply the money to the benefits that are 
received by the retirees or to the costs that the company 
incurred----
    Mr. Stearns. OK, I understand. Let me--my time is almost 
expired, but let me just move on to what we are here for also 
is the high risk insurance program.
    Enrollment in the high risk pool was supposed to be about 
375,000 in the first year, according to the chief actuary of 
Medicare. Is that correct?
    Mr. Larsen. That is my understanding, yes.
    Mr. Stearns. OK. You know, based upon what we have seen so 
little, as you saw in my opening statement, how can you justify 
those costs if you have only done so little at this point? 
Where are you going to get the money to do this high risk for 
everybody?
    Mr. Larsen. Well, it has been a fact across the country as 
States, and certainly for the federal high risk pool, that the 
pools are generally slow to start up. When the bill was passed, 
we devoted our efforts to standing the program up----
    Mr. Stearns. I will just close by saying if you have only 
got 12,000 in the program today, and you have indicated 375,000 
people is your goal, and you spent this huge amount of money on 
12,000, you won't possibly have enough money to do 375,000. 
Wouldn't you and I agree that you won't have the money to do 
375,000, based just upon the 12,000 you have done?
    Mr. Larsen. I don't think, respectfully, we agree because 
we have not spent a large amount of money on the program to 
date.
    Mr. Stearns. OK. All right, my time is expired.
    The gentlelady from Colorado.
    Ms. DeGette. Thank you, Mr. Chairman.
    Mr. Larsen, how much money has the program spent to date?
    Mr. Larsen. For outlays or incurred expenses associated 
with----
    Ms. DeGette. Either one.
    Mr. Larsen. The federal program and the state program 
combined is about $33 million as of February 28.
    Ms. DeGette. OK, and how much was set aside in the 
healthcare for this program?
    Mr. Larsen. Five billion.
    Ms. DeGette. Five billion. So you have spent several 
hundred million of the 5 billion?
    Mr. Larsen. Well, not--we have spent about $33 million on 
what I will call program costs, and then additional funds on 
administrative costs, but together it is less than $100 
million.
    Ms. DeGette. OK, it is less than $100 million of the $5 
billion, correct?
    Mr. Larsen. That is correct.
    Ms. DeGette. Now, you are making efforts to try to enroll 
more people with preexisting conditions in this program, 
correct?
    Mr. Larsen. In fact, I think they have been successful.
    Ms. DeGette. And why do you think that?
    Mr. Larsen. Well, we had several phases of enrollment 
initiatives. The second phase started from January to March in 
which we conducted outreach with staff, by the way, just--
hitting nine cities, talking with providers, and we have seen 
enrollment double--well, increase by 50 percent between 
November and February. So we have made those efforts and 
enrollment is going up.
    Ms. DeGette. So is your projection you are going to wildly 
exceed this $5 billion before the 2014?
    Mr. Larsen. I don't think we are prepared to say that yet.
    Ms. DeGette. OK, thank you. Well, that is what the chairman 
is implying, but you have spent less than $100 million.
    Mr. Larsen. We will work within the appropriation.
    Ms. DeGette. Thank you. Now, let me just ask you one 
question. I know the topic of this hearing is about the PCIP 
program, but let us talk about this early retirement 
reinstatement program for a minute. That was--what was 
happening was a lot of employers who had early retires, 
retirement programs, were cutting those healthcare problems 
when the economy turned down, right?
    Mr. Larsen. Correct.
    Mr. DeGette. So then what would happen would be people 
between the ages of 50 and 65 wouldn't have insurance and they 
would have to go out on the individual market, right?
    Mr. Larsen. Correct.
    Ms. DeGette. And so then those people couldn't get 
insurance, right?
    Mr. Larsen. Correct.
    Ms. DeGette. So that is what this is designed to help, is 
that correct?
    Mr. Larsen. Correct.
    Ms. DeGette. And that program is also going to phase out by 
2014, right?
    Mr. Larsen. Yes.
    Ms. DeGette. But at this moment, it is helping--Congress 
can't require these companies to continue these programs for 
their early retirees, can we? No. And so therefore the people 
that these programs are helping are those early retirees who 
have no other way to get insurance, right?
    Mr. Larsen. And there are millions of people who are 
conversed in the retiree programs that have been helped by this 
program.
    Ms. DeGette. Right, and it helps them get insurance.
    Mr. Larsen. It helps them keep their coverage.
    Ms. DeGette. Now, let us talk about the subject of this 
hearing, again the PCIP program.
    Before the healthcare bill became the law of the land. Let 
us say that somebody was diagnosed with cancer, and they wanted 
to by health insurance on the private insurance market. What 
sort of options would those people be offered?
    Mr. Larsen. Well, they are generally limited to the 
individual market, which they would be either offered 
exclusionary riders or denied coverage.
    Ms. DeGette. So you mean the individual market would say we 
are not going to cover you for your cancer because it was 
preexisting, right?
    Mr. Larsen. That is correct.
    Ms. DeGette. Let us say they wanted to get coverage for the 
cancer. How much will that cost them?
    Mr. Larsen. Well, I don't think they could get coverage for 
that, without going to a state higher risk pool.
    Ms. DeGette. OK, and let us talk about the state high risk 
pools. How many states had high risk pools?
    Mr. Larsen. I think there are about 35 that had state high 
risk pools.
    Ms. DeGette. OK, and where in those 35 states were they 
providing affordable coverage to anybody who needed it?
    Mr. Larsen. Well, the difference between the PCIP program 
and the state high risk pools is they often have a standard 
rate that is up to 150 percent or 200 percent of some----
    Ms. DeGette. The state program?
    Mr. Larsen. The state program, which is not the way the 
PCIP program is structured.
    Ms. DeGette. OK. How is the PCIP program----
    Mr. Larsen. The PCIP program has a cap of no more than 100 
percent of the standard market rate. So the state programs, 
although available, are often viewed as not affordable for some 
people.
    Ms. DeGette. OK. I just have one last question. What would 
happen to these PCIP plans if the Affordable Care Act was 
repealed?
    Mr. Larsen. You would have a lot of people that have no 
good option to get coverage, and these are the sickest of the 
sick, in many cases.
    Ms. DeGette. Their plans would be cancelled, right, and 
then they would have to go to these other options that you 
talked about, right?
    Mr. Larsen. That is correct.
    Ms. DeGette. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Stearns. Gentlelady yields back.
    Gentleman from Texas, Mr. Burgess, is recognized for 5 
minutes.
    Mr. Burgess. Thank you, Mr. Chairman.
    I don't want to spend too much time on this, but I feel 
obligated to answer the ranking member of the committee. It 
always seems that they want to paint Republicans as a friend of 
the insurance companies. Just a quick review by a simple 
country doctor on his iPhone app tells me that Cigna and Aetna 
have done extremely well in the year since the passage of the 
Patient Protection and Affordable Care Act. Apparently when 
people are required to buy insurance, the companies that sell 
insurance seem to be able to manage OK.
    Let us talk for just a minute, because you were giving 
Ranking Member DeGette some information about the amount of 
money you spend in the program. You said about $100 million, is 
that correct?
    Mr. Larsen. No, I said no more than that. The approximate 
number on her sleeve would be the program spending of about $33 
million, and then administrative costs of about $25, which 
includes a significant portion of startup costs that you incur 
anytime you start up a major program.
    Mr. Burgess. Yes, I will accept that, but that seems a 
little bit--$33 million in benefits, is that correct, did I 
understand----
    Mr. Larsen. Well remember, these are the amounts that are 
paid to the states or to fund the federal program beyond the 
premiums that are collected from the folks that are covered in 
the programs. But that is the level of federal spending for the 
program combined for both the state and federal.
    Mr. Burgess. So that is combined help for people against a 
backdrop of $25 million of administrative costs, is that 
correct?
    Mr. Larsen. Well again, the 25 million, there are at least 
10 million of kind of one time----
    Mr. Burgess. Yes. This would all be easier----
    Mr. Larsen [continuing]. Startup costs.
    Mr. Burgess. We talked about this before. Boy, if we had a 
breakdown of your budget, it would just be so helpful and you 
promised that to us, and I am having to ask these questions 
because I don't have that information yet.
    Mr. Larsen. It is my hope and expectation that you will 
have that next week.
    Mr. Burgess. Next week, OK. So we will mark the calendar 
and we are all anxiously awaiting that.
    Now you previously testified that you added 300 new jobs to 
implement the program, is that correct?
    Mr. Larsen. Not just this program, that is----
    Mr. Burgess. For all of society.
    Mr. Larsen. For all of society, yes, that is correct. Less 
than 300.
    Mr. Burgess. Do you know how much you spent on salaries for 
those 300 people?
    Mr. Larsen. I am sorry, could you repeat the question?
    Mr. Burgess. The amount you spent on salaries for those 300 
jobs?
    Mr. Larsen. I don't know off the top of my head.
    Mr. Burgess. Well, is that money coming out of the 
administrative or the non-administrative funds?
    Mr. Larsen. Oh, you mean the salaries that administer--that 
would be in the administrative portion. It is a very lean and 
small staff that administers the PCIP program.
    Mr. Burgess. Now on the issue that has come up, and 
unfortunately, we haven't had a lot of time to work though it 
because of the retiree program information that has come 
through this morning. But eight of the 17 companies had more 
than $10 billion in profit last year. I mean, are those not 
companies that could have afforded to do some of this on their 
own?
    Mr. Larsen. Well, I can't speak to their capability, I can 
only say that, as I mentioned earlier, when they receive funds 
through the ERRP program, they are required to devote those 
funds to either reducing their own costs or reducing the costs 
of the beneficiaries, and I think 80 percent direct the funds 
to directly lowering the costs of people that participate in 
the programs, so we think that is a success.
    Mr. Burgess. Yes, but you have got a big company whose 
initials I won't mention, but they haven't paid any taxes this 
past year, they post an enormous profit, and you are providing 
them $36 million. You know, the only problem with that--and I 
want to help people, too, but we are borrowing 42 cents of 
every dollar we spend, so was there perhaps a way to tighten 
this up and run it just a little bit leaner? You know, even 
Karl Marx said ``Each according to his disability, each 
according to his need.''
    That is a non-response response. It is very difficult for 
the recording clerk to record that.
    Let me just ask you one more question. Was it--I have no 
problem with risk pools. I think the state risk pools, although 
they were underfunded, certainly provided good help, and when I 
would do town halls and talks in my district, and even in 
talking to doctor groups around the State, someone would always 
come forward and say, you know, don't do anything to mess up 
what I have got with this risk pool. But at the same time, why 
was it necessary to reinvent the wheel? You already said that 
you have 35 of the states with something up there in a risk 
pool arrangement. You have additional states that have 
reassurance programs, so you are already getting to a pretty 
significant number of the states already. Now we come and 
overlay a federal program. Hailey Barbour, when he was here, 
actually testified that he had 3,600 people on his risk pools 
in the State of Mississippi, and with the infusion of--he did 
not participate at the federal level, but what the additional 
federal funds at a significant cost were able to provide 
additional benefits to 58 new people. That almost seems like we 
are not being smart about how we are spending this money.
    Mr. Larsen. I guess I have two responses. First, I would 
say that this is a compliment to the state pools because it has 
different design elements. For example, often the state pools 
have waiting periods before they start to cover----
    Mr. Burgess. Yours is 6 months.
    Mr. Larsen. Well, it is a little different for the federal 
program. That is you can't have been insured for 6 months, 
because we didn't want people migrating across pools. So in the 
state pools, you often have a waiting period, so that even if 
you come into the pool, you don't have coverage necessarily 
right away.
    Mr. Burgess. Six months seems like a waiting period.
    Mr. Larsen. And then as we discussed earlier, typically the 
standard rate for the state pools is 125 percent, 150 percent 
or higher, and so there are features of the federal program 
that complement what is going on at the state level.
    Mr. Burgess. I get that. It just seems like it would have 
been better to streamline those two together, rather than 
reinvent the wheel.
    Mr. Stearns. Gentleman's time has expired.
    The gentleman from Michigan, the emeritus of the committee, 
Mr. Dingell is recognized for 5 minutes.
    Mr. Dingell. Thank you. Thank you, Director Larsen----
    Mr. Stearns. I think you will have to pull the mic a 
little----
    Mr. Dingell [continuing]. For implementing the Affordable 
Care Act. You have a large task before you, including the 
critical patient bill of rights and State-based exchanges, as 
well as today's focus, the Preexisting Condition Insurance 
Plan. I appreciate the work that you have done in getting the 
pool up and running in Michigan, including the work you have 
done to make a difference in the lives of Michiganders like 
Jerry Garner, who you pointed out in your testimony.
    Now, as my colleagues on the other side of the aisle 
question the effectiveness of high risk pools, I think it would 
be useful to remind them of the strong support of these pools 
as a way to expand coverage. In fact, members of this committee 
offered their own legislation appropriating far more money than 
laid out in the--or expended in the Affordable Care Act to 
implement high risk pools nationwide.
    Now, Director Larsen, a few questions. Please answer yes or 
no.
    The PCIP was designed to be a temporary program to help the 
sickest of the sick and those most in need to have access to 
coverage until health insurance exchanges are up and running in 
2014. You point out that more than 12,400 individuals have 
enrolled in these programs across the country. In your 
experience, have the states been able to set up affordable 
premiums for individuals in need? Yes or no.
    Mr. Larsen. Have states been able to set up affordable 
programs? No, they have not completely.
    Mr. Dingell. They have not.
    You point out in your testimony that CCIIO recently 
adjusted the federal PCIP program to reduce premiums and to add 
two plan choices. You point out that the enrollment in PCIP 
programs has increased by 50 percent from November to January--
rather, November to February. In your opinion, will increased 
plan choices in the PCIP program encourage further enrollment? 
Yes or no.
    Mr. Larsen. Yes.
    Mr. Dingell. Now, you also discussed in your testimony the 
outreach efforts in CCIIO that have been used to encourage 
enrollment, working with Social Security Administration, 
American Cancer Society, Diabetes Association, and other 
agencies. It is my opinion it seems to be a very targeted 
approach in enrolling individuals. In your opinion, do you 
believe this targeted approach is working? Yes or no.
    Mr. Larsen. We think it is showing results and working, 
yes.
    Mr. Dingell. Now, how do you know that this targeted 
approach is working?
    Mr. Larsen. Well, as I mentioned and referenced, we have 
seen significant increases in the rate of enrollments in the 
period between November and February, in addition to the 
overall enrollment. There were several states in which the 
number of individuals in the program doubled, five or six 
states that doubled their enrollment in that period, so it is 
very encouraging.
    Mr. Dingell. Thank you.
    Now, is every PCIP program conducting a public campaign to 
recruit eligible individuals? Yes or no.
    Mr. Larsen. Yes.
    Mr. Dingell. Now, has CCIIO shared the best practices with 
the states who have lower enrollments than others to help them 
recruit eligible individuals they may be missing? Yes or no.
    Mr. Larsen. Yes, we are in constant contact with the 
States.
    Mr. Dingell. Is--in your opinion, has CCIIO learned some 
best practices in terms of enrolling eligible individuals that 
will help to ensure successful enrollment of individuals in the 
exchange beginning in 2014? Yes or no.
    Mr. Larsen. Yes.
    Mr. Dingell. Now, am I fair in observing that when the 
situation in 2014 when everybody is covered in the exchanges, 
am I assuming correctly that at that point it will no longer be 
necessary to have this high risk pool?
    Mr. Larsen. That is correct.
    Mr. Dingell. OK. Now, would you like to comment, if you 
please, sir, in the very brief time that we have on what are 
the best practices or any other comments that you might like to 
make with regard to the previous questions?
    Mr. Larsen. Well, as you mentioned we have learned that it 
really is a targeted outreach campaign. This is not necessarily 
mass marketing so that you work closely with high volume 
providers, hospital associations, medical associations. We have 
worked with the insurance companies that issue denial notices 
to take note of the availability of the PCIP program----
    Mr. Dingell. One very quick question. The companies that 
you have helped have had no responsibility, other than their 
contractual responsibilities to cover either their active 
employees or their retirees, is that correct?
    Mr. Larsen. Yes.
    Mr. Dingell. Thank you.
    Thank you, Mr. Chairman. One second left.
    Mr. Stearns. Thank the gentleman from Michigan.
    The gentlelady from Tennessee is recognized for 5 minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    Mr. Larsen, I am going to cut right into this. What are the 
standards on your application, and what does your application 
look like for these companies that apply for this many--for the 
early retiree process?
    Mr. Larsen. Well, first they have to submit an application 
to be a planned sponsor, requiring basic information about the 
plan, about the company and their retiree plan, and then in the 
process of submitting claims, then they have to submit claims 
information. As you may know----
    Mrs. Blackburn. OK. Let me--OK. They submit a claim to be--
they submit an application to be a planned sponsor, so do they 
need to show financial need when they submit an application to 
you, that they need this money, that they are short of money, 
that they are not going to be able to cover the cost of those 
that are enrolled in the plan that they are choosing to 
sponsor? Do they have to demonstrate that financial need?
    Mr. Larsen. The statute doesn't require a need----
    Mrs. Blackburn. How long is the application they submit?
    Mr. Larsen. It is not particularly long. I don't recall 
exactly.
    Mrs. Blackburn. OK, so they don't have to demonstrate any 
financial need, they just need to show that they want to set up 
a plan for their early retirees, is that correct?
    Mr. Larsen. They need to demonstrate that they have a 
current program to cover their early retirees.
    Mrs. Blackburn. So they have a current--that they have a 
current program.
    OK, let me ask you this. Some of these companies have early 
retirees that they may have incentivized to take early 
retirement. Do you ask them how they achieved their universe of 
early retirees? Did they incentivize these people, give them 
early parachutes--early retirement parachutes, give them extra 
benefits if they chose to retire? Did you ask them if they are 
doing that?
    Mr. Larsen. I don't believe that is part of the 
application.
    Mrs. Blackburn. It is not part of the application, so 
therefore, in order to make their bottom line look better, they 
could actually go to a universe of employees and say we are 
going to incentivize your early retirement, and then move them 
into this plan that they are going to submit an application to 
sponsor, then come to you with their hand down and say hey, we 
need your millions, Federal Government. Do you not see why the 
American people are so frustrated with what you all are pouring 
out of these bureaucracies every day on the American taxpayer? 
I mean, does this--is this lost on you?
    Mr. Larsen. Well first of all, I don't think we have seen--
--
    Mrs. Blackburn. You have spent $100 million in setting up a 
program we don't want for services we don't need, giving money 
to corporations that are profitable corporations, giving money 
to people like GE who are exporting their power job growth, 
giving money to people like GE who are no longer making light 
bulbs in the United States, but have shipped all those jobs to 
China, and you think this--you think we should be happy and 
pleased and applaud you for creating new federal jobs to take 
money out of the taxpayer's pocket?
    Let me ask you something else. Let me move to the PCIP. Let 
me move to the PCIP program. I don't want to run out of time. 
Did you have any existing program that you used for a model 
when you set up PCIP? Was there any program in existence that 
you went to? You already said you didn't think the states were 
doing a very good job with their high risk pools, so----
    Mr. Larsen. Well, I don't think that is quite what I said. 
I said that there are 35 state programs----
    Mrs. Blackburn. You said it was incomplete.
    Mr. Larsen. I am sorry?
    Mrs. Blackburn. I think you said they were incomplete.
    Mr. Larsen. No, they have different sets of standards, and 
the federal standard is different. So we certainly looked to 
the way that the high risk pools were administered.
    Mrs. Blackburn. Yes, yours has a different design element, 
were your exact words.
    Mr. Larsen. That is right.
    Mrs. Blackburn. OK. Is there any program that you have 
looked at that you think has been successful? When you have a 
State like Tennessee, and you and I have discussed Tennessee 
before, we have been down this road. We know public option 
healthcare does not work, that it breaks the bank, and we know 
where some of the pitfalls are, but you all are not willing to 
listen to some of that guidance. So, did you work from a model 
that has actually yielded a savings?
    Mr. Larsen. Well, high risk pools by definition will not 
yield savings. They----
    Mrs. Blackburn. They should reduce costs.
    Mr. Larsen. Well, here is the problem. When you are 
insuring sick people, you can't collect enough premiums to 
cover the costs, and so high risk pools are always subsidized 
in some way. Typically in States, it is subsidized through 
assessments on insurance companies or general revenue. In this 
case, it is subsidized through the PCIP program for the federal 
and State----
    Mrs. Blackburn. Do you think that putting a federal program 
along side a state program, even though it has, in your words, 
different design elements, is redundant?
    Mr. Larsen. No, I don't.
    Mrs. Blackburn. You don't?
    Mr. Larsen. I do not.
    Mrs. Blackburn. You don't see a problem with the 
duplications?
    Mr. Larsen. No, because I said I think we attracted a 
different element of the population that has preexisting 
conditions, so it is complimentary to the program.
    Mrs. Blackburn. So in other words, you think the Federal 
Government needs to pick these programs up and pull them to the 
federal level, not trust the states for oversight, and then 
turn around and out of your $5 billion, give it to corporations 
who don't need the money who are firing American workers and 
shipping the jobs overseas?
    I yield back.
    Mr. Stearns. Gentlelady yields back.
    The gentlelady Jan Schakowsky is recognized for 5 minutes.
    Ms. Schakowsky. Well, I am just loving this debate. I 
particularly appreciate Dr. Burgess quoting Karl Marx in his 
rationale on why this program really doesn't work, and I 
appreciate hearing the fury about companies that don't pay 
taxes and then outsource jobs. I would certainly endorse those 
concerns and would certainly welcome an opportunity to work 
with my colleagues across the aisle to address just that. The 
problem we have is that these greedy companies that legally 
don't pay any taxes also are not going--are not providing, are 
increasingly dropping early retirees from these healthcare 
programs. Is that not true, Mr. Larsen?
    Mr. Larsen. That is correct.
    Ms. Schakowsky. So we have seen that while all of this 
outrage may be going on with no solutions, you know, we could 
sit down and establish criteria for companies that, when they 
make a certain amount of money, must provide this kind of 
coverage for early retirees. I welcome that conversation.
    But in the meantime, are we going to sit here and say the 
burden, then, will be on the shoulders of those very retirees 
who, in many cases in the past, used to get help from their 
companies who aren't. And the problem is that these are, in 
fact, you know, expensive people to insure, these high risk 
people, and that is precisely why we passed the Affordable Care 
Act, and why, in 2014, we are going to prevent discrimination. 
Is this not a bridge program, Mr. Larsen?
    Mr. Larsen. That is exactly right.
    Ms. Schakowsky. And what would happen to those retirees if 
we did not provide that?
    Mr. Larsen. I think they would have great difficulty 
finding coverage in the individual market.
    Ms. Schakowsky. So if there is another solution that my 
Republican colleagues would like to find to require 
corporations to pay their fair share of taxes, to come up with 
a way to force them to cover their retirees, then why don't we 
talk about that? I haven't heard anything like that, except to 
criticism now in Marxian language of what these nasty, 
outsourcing corporations are doing.
    Would the Chairman----
    Mr. Stearns. I would be glad to, I think, repeal Obamacare 
and start anew and try to come up with a healthcare plan that 
every American would support.
    Ms. Schakowsky. And put every American at risk again, when 
we have a plan that we would be happy to look at various ways 
to make it better.
    In the meantime, Mr. Larsen, I congratulate you on this 
program to make sure that we aren't setting adrift the victims 
of some of these very corporations that the Republicans have 
supported.
    In the Medicare--let me find it--there was a loophole 
created in 2003 with the Medicare Modernization Act that 
allowed companies--this was a Republican initiative--to receive 
a 28 percent subsidy from taxpayers to help cover the cost of 
prescription drugs for retirees without counting the money as 
income. When they spent the money, then the companies were 
allowed to turn around and get a deduction for it on their 
taxes, even though the money was a gift from taxpayers. There 
was no outrage from the Republicans who wrote that provision 
into the legislation that the Obama Administration saw as a 
double subsidy from the taxpayers. But now at the very moment 
we are looking how to get these vulnerable employees to make it 
to 2014, now we are looking at these rich corporations and how 
are we letting them get away with it? Well, if there is a way 
that they suggest that we can get GE and AT&T to cover those, I 
welcome that, and until that point, we are not going to set 
those employees adrift with no healthcare coverage.
    I yield back.
    Mr. Stearns. Gentlelady yields back.
    Mr. Gingrey is recognized for 5 minutes.
    Mr. Gingrey. Mr. Chairman, thank you.
    Mr. Larsen, Ms. Blackburn was just trying to point out 
something to you in regard to a lot of these companies and one 
in particular, I won't name the company, but the initials are 
GE, in regard to these early retirement incentive packages that 
they give to their advantage to the advantage of their bottom 
line. That is the only reason why a company would do something 
like that. But what it amounted to was a lump sum early 
retirement bonus worth 75 percent of their annual pay, and her 
outrage, of course, was over the fact that when these companies 
do that and then they come to you, to the Federal Government 
with this ERRP program and say, oh, sign us up for the money to 
help us now pay these same people for their health retirement 
benefits. So that is where the outrage is coming from.
    CMS just released a new report yesterday announcing that 
this program, Early Retiree Reinsurance Program, ERRP, created 
under Obamacare, spent nearly $1.8 billion in reimbursements 
which have helped preserve the availability of health benefits 
for early retirees and reduce increases in plan participant 
costs. In deference to my limited time, I have a series of 
questions, and if you don't mind, please try to answer yes or 
no on these, Mr. Larsen.
    Number one, does the Center for Consumer Information 
Insurance Oversight oversee this Early Retiree Reinsurance 
Program for CMS?
    Mr. Larsen. Yes.
    Mr. Gingrey. And you are the deputy administrator and 
director of the Center for Consumer Information?
    Mr. Larsen. That is correct.
    Mr. Gingrey. Was the Early Retiree Program created in 
PPACA, otherwise known as Obamacare, was it created?
    Mr. Larsen. It was part of the what we call the Affordable 
Care Act.
    Mr. Gingrey. The answer is yes, thank you. Next question. 
The law appropriated $5 billion to pay the claims for early 
retirees, correct?
    Mr. Larsen. Yes.
    Mr. Gingrey. That is the same amount appropriated to the 
high risk pools for people who cannot obtain insurance. Is that 
correct?
    Mr. Larsen. Yes, there is a separate appropriation----
    Mr. Gingrey. It is essentially the same amount. CMS just 
released a report yesterday announcing that it has spent nearly 
$1.8 billion of the 5 billion appropriated to date, is that 
correct?
    Mr. Larsen. For the Early Retiree program?
    Mr. Gingrey. Yes.
    Mr. Larsen. That is correct.
    Mr. Gingrey. Next question. I would like you to go over 
some of the payments made in the $5 billion Early Retiree 
Program with you. My staff has presented you with a copy, and--
thank you, Robert--tabbed, numbered, highlighted. Again, a 
simple yes or no answer, please. Did AT&T receive $140 million 
from this retiree fund?
    Mr. Larsen. That is my recollection from----
    Mr. Gingrey. Are you aware that AT&T filed a billion-dollar 
loss with the SEC on March 26 of last year, and in papers 
accompanying the filing charged the losses stemmed from the 
passage of Obamacare?
    Mr. Larsen. I am not familiar with the reference.
    Mr. Gingrey. Well, the answer is yes, they did.
    Are you also aware that AT&T stated in its March 26 SEC 
filing that it would be forced to evaluate prospective changes 
to the active and retiree health plan benefits offered to their 
employees?
    Mr. Larsen. Again, what we focused on is trying to make 
sure that these companies that get this money continue to----
    Mr. Gingrey. Mr. Larsen----
    Mr. Larsen [continuing]. Provide it to retirees.
    Mr. Gingrey [continuing]. In the interest of my time, the 
answer to that question is yes, they did.
    Did Valero Energy Corporation receive over $1 million from 
this retiree fund? You have got the information in front of 
you.
    Mr. Larsen. If you want me to flip through the list, I can. 
I don't have all the recipients memorized.
    Mr. Gingrey. Well in the interest of time, I will answer 
that one for you, too. Yes, they did.
    Are you aware that Valero Energy Corporation filed a 15 to 
$20 million loss with SEC on the same day as AT&T, once again 
citing Obamacare as the reason? And the answer to that, since 
you are a little slow on it, is yes, they did.
    The whole point here of my line of questioning, Mr. Larsen, 
is this system, this ERRP, Early Retiree Reinsurance Program, 
to me is just a makeup for the money that was taken away from 
corporations that was given at the time of the Medicare Part D 
prescription plan was put in place to keep them from dropping 
their retiree health insurance plans. It is a kiss and make up, 
which is ridiculous. They should have left that program as it 
existed, but they had to have money to generate and a score 
from the CBO to pay for this whole new entitlement program. So 
that is the line of my questioning and the point of it.
    I am over time now, so unfortunately I will have to yield 
back.
    Mr. Stearns. Gentleman yields back.
    The gentleman from Texas, Mr. Green is recognized for 5 
minutes.
    Mr. Green. Thank you, Mr. Chairman, and I am glad my good 
friend from Georgia pointed out two Texas companies. Valero is 
headquartered in San Antonio and AT&T used to be San Antonio. 
Now they are Dallas, somewhere up there, but they got that 
assistance.
    I served on this committee in 2003 when we considered the 
prescription drug plan, and you know, it is almost like deja vu 
all over again because the same issues were brought up then, 
that a lot of companies has retiree prescription drug plans 
were all of a sudden benefiting from this. So I just want to 
point that out, but the shoe is on a different foot this time. 
I appreciate you being here, Mr. Larsen. Thank you for 
appearing.
    I am from the State of Texas, as I said, and we already 
have a high risk pool that has been operational since 1992 and 
covers 27,000 Texans. How many states currently operate their 
own separate pool from those established by the PPACA?
    Mr. Larsen. Right, I believe it is about 35 States.
    Mr. Green. OK. Were these states given the option to move 
the individuals currently in their high risk pool program over 
to the new high risk pool established by PPACA?
    Mr. Larsen. Because of the different rules between the 
state and the federal, it runs in parallel to the state pools, 
but states can set up a PCIP pool.
    Mr. Green. And if the states set up a PCIP pool, they would 
not have to have their own pool?
    Mr. Larsen. Well, they have their own pool which has one 
set of rules, and they have the federal--they have the PCIP 
pool that they run under a contract with HHS, and they design, 
subject to the standards in the ACA, the rates and the benefit 
design. So there are--there is a State-run pool and then a 
different type of insured, if you will, is eligible for this 
pool.
    Mr. Green. One of the concerns I have is the slowness in 
the number of people who are signing up for high risk plan, and 
I will give you my understanding what happens in the State of 
Texas.
    Texans are given the option to establish the high risk plan 
under health reform, and our governor declines, citing a 
financial burden on the amount of federal funds received and 
Texas continues to operate its own high risk program. Last 
year, a number of us sent a letter to Secretary Sebilius asking 
states who opt out of PPACA to establish high risk pools that 
we would have a similar to exchange in Texas. We would have an 
option for PPACA in Texas, and I will go into that in a few 
minutes on the benefit.
    In 2009, before we passed the Affordable Care Act, Texas 
received $10.5 million to run their current high risk through 
grant program funding through Congress. That is nearly 6 
million more than any other State to fund their program. What 
we found out under the state program, the average program for a 
Texan participating in the high risk program must be twice the 
average premiums for healthy individual in the market. Is that 
true with the other 29 States, if they have something like 
that?
    Mr. Larsen. Something like that. Not all of them are 200 
percent or twice as much, but they are generally substantially 
above the market rate, and that can create affordability 
issues.
    Mr. Green. And that is the problem we have. For example, 
the premium for a 40-year-old woman in Houston, where I 
represent, under the Texas high risk pool is about $750. Under 
the PPACA plan, that same woman would only pay $387 a month. 
Why would anybody sign up for a state plan when they can 
actually save almost 300 or $400 a month?
    Mr. Larsen. Yes, well there is one limitation that was in 
the ACA regarding the PCIP program, that is that you not have 
insurance for 6 months. So the people that are eligible for the 
PCIP program are people that have had nothing up until the 
implementation of the program.
    Mr. Green. So if somebody was under the state plan, they 
would have to wait 6 months before they could apply for PCIP?
    Mr. Larsen. That is correct.
    Mr. Green. How many states have that 6-month plan, do you 
know, in their current program and their separate program? Do 
you have to be without insurance for 6 months?
    Mr. Larsen. Well, every State that administers a PCIP pool 
has to abide by that same 6 months.
    Mr. Green. But what about their separate state plan? Do 
they have--do states have something comparable to that----
    Mr. Larsen. Typically it is more that there are waiting 
periods or exclusionary periods so that you can sign up right 
away, but you may not have coverage. That is to avoid people 
circulating in and out of the pool when they are sick, so there 
are waiting periods for coverage for your high risk condition.
    Mr. Green. Well, I understand, although, you know, I have 
folks on Social Security disability, once they receive 
disability they have to wait 24 months before they can get 
Medicare, so 6 months is a long time, but not near 24 months 
like we have under Medicare for disabled folks.
    Under the PCIP, Texas would have benefited by about 493 
million to run a high risk pool, is that true?
    Mr. Larsen. I am sorry----
    Mr. Green. Four hundred ninety-three million under the PCIP 
program, Texas, would have benefited by received about 493 
million to run a high risk pool from the Federal Government.
    Mr. Larsen. Well, that may be the allocation to Texas 
across the life of the program. I would have to go back and 
look at the numbers that you are referring to.
    Mr. Green. OK.
    Mr. Stearns. Gentleman's time has expired.
    Mr. Green. Thank you, Mr. Chairman. I was just asking some 
information because it is--so we can find out what we need to 
do to make sure our constituents get the cheapest program in 
the high risk pool. Thank you.
    Mr. Stearns. I advise all the members, we have a series of 
votes. We will reconvene right after the votes, probably 
between 12:00 and 12:15. Mr. Larsen, we are going to continue 
with another series of questions, and then we will reconvene--
recess and come back.
    Mr. Bilbray is recognized for 5 minutes.
    Mr. Bilbray. Thank you, Mr. Chairman. It was interesting, 
the reference you made right off, I think it was the second or 
third paragraph where you were pointing out that U.S. citizens 
or otherwise those who are legally residing in the United 
States, and I think you clarify that all U.S. citizens reside 
in the United States are legally present. But my question is 
about the verification.
    First of all, let me back up. You made a reference to the 
fact that there were how many states that were allowing you to 
administer their program?
    Mr. Larsen. Twenty-three states and the District of 
Columbia.
    Mr. Bilbray. OK. Do you realize that about 65 percent of 
those states are states that have basically told us to go to 
hell and are engaged in the blocking, so a lot of that 
participation, 65 percent of the participation, looks like it 
does not trust in the Federal Government to administer the 
program, but basically a position that they don't want to 
participate in the program in any form?
    Mr. Larsen. Well, I can't speak to their motives for not 
participating, but I know that we administer in 23 States.
    Mr. Bilbray. But 65 percent sounds----
    Mr. Larsen. Yes, I don't know.
    Mr. Bilbray. OK. The verification system, you made a 
statement that only those legally in the country are to 
participate in the system. Is there a reason why we didn't use 
the same verification that we use for all other programs--
benefit programs in this country?
    Mr. Larsen. I am not sure what your question is.
    Mr. Bilbray. My question is why aren't we using the 
verification systems for this benefit that we use in other 
benefits in the federal system?
    Mr. Larsen. I am not sure that we aren't.
    Mr. Bilbray. OK, let me double-back here. Do you require 
biometrics for identified foreign nationals to participate in 
the program?
    Mr. Larsen. I would have to get back to you on the details 
of the verification.
    Mr. Bilbray. OK, I would----
    Mr. Larsen. What we work through----
    Mr. Bilbray [continuing]. Question the fact that because we 
don't, you say no, there is no biometrics. Now, I understand 
that U.S. citizens or people who claim to be U.S. citizens just 
have to state their name, their Social Security number, and 
their date of birth, right?
    Mr. Larsen. I think we still verify that information.
    Mr. Bilbray. You verify them through which documents?
    Mr. Larsen. I will have to confirm with you exactly how 
we----
    Mr. Bilbray. OK. I am just saying that you don't use 
biometrics on the United States, but you do not use--are you 
aware you are not using biometrics for stated foreign nations 
to participate in this program?
    Mr. Larsen. I don't know the answer to that question.
    Mr. Bilbray. OK. Well let me just say for the record, there 
is no reason why anyone who says they are a foreign national of 
the United States that we should not have biometrics as a 
requirement, because every foreign national that I know of--and 
somebody correct me--but at least the overwhelming majority of 
foreign nationals in this country have biometric confirmable 
identification, and we are not using that technology right now. 
This is one of those issues of someone saying just because you 
say that somebody legally in the country is not participating, 
if you don't have appropriate verification, you can't sit here 
before this committee and make a statement like that with any 
degree of certainty. It is what you may think might happen or 
you hope may happen.
    But I think we need to clarify, without the verification 
systems, we are lying to the American people. I don't care who 
it is, the guy at the top or the guy at the bottom, to look at 
the American people and say that I can assure that people 
illegally in this country are not participating----
    Mr. Larsen. I will be happy to follow up with you on that.
    Mr. Bilbray. OK, I appreciate that.
    Mr. Chairman, I yield back.
    Mr. Stearns. OK. Will the gentleman allow me just to----
    Mr. Bilbray. To the gentleman.
    Mr. Stearns. We are going to recess, but I just have a 
question for Mr. Larsen. If it turns out a company gets--or a 
State gets a waiver from Obamacare, would you still give money 
to early retirees, even thought they got a waiver from all the 
healthcare provisions? Just yes or no.
    Mr. Larsen. Well, I don't--which waiver are----
    Mr. Stearns. Let us take----
    Mr. Larsen. There is only really one----
    Mr. Stearns. Like the State of New York got $47 million, so 
the question is, the State of New York is putting in for a 
waiver. Did they get their wavier yet, the State of New York?
    Mr. Larsen. You mean the waiver from their annual limits--
--
    Mr. Stearns. Yes.
    Mr. Larsen [continuing]. Requirement? I am not sure.
    Mr. Stearns. OK, but let us say hypothetically if the State 
of New York got the waiver, would you still go ahead and give 
money to early retirees who are----
    Mr. Larsen. Right, but the waiver that they get or a state 
can get on behalf of insurance carriers in the state is not a 
waiver from the provisions of the Affordable Care Act. It is a 
waiver from that one narrow provision----
    Mr. Stearns. OK, I understand.
    Mr. Larsen. So they wouldn't be ineligible, for example.
    Mr. Stearns. So the waiver does not apply then--extend to 
the requirement----
    Mr. Larsen. Yes, it is a very narrow provision.
    Mr. Stearns. Thank you for that clarification.
    With that, the subcommittee will recess and come right 
after the votes, which hopefully is between 12:00 and 12:15.
    [Recess.]
    Mr. Stearns. The subcommittee will reconvene, and if the 
witness will come to the table, I think our next member is Ms. 
Christensen. You are recognized for 5 minutes.
    Mrs. Christensen. Thank you, Mr. Chairman, and thank you, 
Mr. Larsen, for not only being here, but the work that you are 
doing to make sure that our--those who could not receive 
insurance otherwise are receiving it.
    I just want to say for the record, though, that I really 
regret that we were unable to include the Territories in this, 
because we are U.S. citizens and there are many of our 
constituents in the Territories who are unable to get insurance 
because of preexisting disease.
    Before they had even heard your testimony, the majority of 
this committee was already attacking the PCIP program for being 
too expensive, but the fact of the matter really is that it is 
going to run very efficiently, as I see it. In fact, it is my 
understanding that the administrative costs for the program are 
capped at 10 percent over the life of the program. Is that 
correct?
    Mr. Larsen. That is correct.
    Mrs. Christensen. And do you expect to stay within that 
cap?
    Mr. Larsen. We will stay within the cap, and we are 
ensuring that the states will stay within the cap as well.
    Mrs. Christensen. Thank you. There have also been some 
concerns that the startup costs have pushed the initial costs 
above projections. So can you give us some perspective on these 
startup costs and how they compare to startup costs for other 
programs, like Medicare Part D?
    Mr. Larsen. Well, first let me clarify that I am not 
concerned that the startup costs will push us over any 
projections, it is simply that they represent in the first 6 
months of a program a disproportionate amount, but over the 
life of the program, which is the statutory standard for the 10 
percent, we will be within the 10 percent.
    Mrs. Christensen. Thank you.
    Mr. Larsen. But the startup costs are things you might 
imagine programming, hiring people initially, getting the 
scripts ready for the call center, so there are a lot of one-
time things that you have to put into place.
    Mrs. Christensen. Can you compare them, your setup costs 
with the Medicare Part D program?
    Mr. Larsen. I am probably not in a position to do that 
because I am not as familiar with those startup costs.
    Mrs. Christensen. And how does a 10 percent administrative 
cost compare with what we would see in the private insurance 
market?
    Mr. Larsen. Well, in fact, under the medical loss ratio 
standard, we provided, you know, headroom, if you will, for a 
20 percent of administrative costs and 80 percent, so it is 
quite a bit tighter than what we are even requiring for the 
private insurance market.
    Mrs. Christensen. Right. So this sounds like an example of 
government-run healthcare working pretty well, and it is 
providing critical access to health insurance for people with 
preexisting conditions, and doing so in what I think is a lean 
and efficient way.
    There have been certain media accounts of the program, as 
well as some of the comments I have heard from across the aisle 
that suggest that at the current rate, the PCIP plans in some 
states will run through their funding before the program ends 
in 2014. Are you concerned about that happening?
    Mr. Larsen. I am not concerned about it. We have the 
ability to address the specific rates that states draw down on 
their initial allocation. Certainly, as I think we announced, 
New Hampshire was a State that was running ahead of 
projections, but we have other states that are running behind 
projections, and again, we have the ability to manage the funds 
within the allocations and within the 5 billion, so I am not 
concerned about the fact that there may be one state or a small 
number of states that are ahead of projections.
    Mrs. Christensen. So thank you, Mr. Larsen. It sounds to me 
like the program enrollees and the American people will be 
getting a substantial bang for their buck with this program.
    In your testimony, you talked about the thousands of 
Americans who were locked out of the accessible private 
insurance coverage before the Affordable Care Act, and then you 
talked about the difference in what they would have had to pay 
in the regular high risk pools versus what they pay for us. You 
talked about Mr. Garner, who was reported on in the New York 
Times and how his insurance might have cost, you know--been 
prohibitive, but this program helped him. Do you have any other 
examples that you would like to share with us?
    Mr. Larsen. Well, I don't have a specific example. I can 
only tell you that for people that have conditions like 
diabetes, heart conditions, heart diseases, cancer of course, 
that if coverage is available, and in some cases, it simply 
isn't other than through a State-run high risk pool, they are 
going to pay a lot either way, and that creates significant 
affordability issues for individuals. So they are really in a 
no-win situation, and that is why this program is so important.
    Mrs. Christensen. Thank you. Mr. Chairman, I yield back the 
balance of my time. Thank you for your quick answers.
    Mr. Stearns. Gentlelady yields back the balance of her 
time.
    Mr. Gardner is recognized from Colorado for 5 minutes.
    Mr. Gardner. Thank you, Mr. Chairman, and thank you, Mr. 
Larsen, for your time here today.
    I just wanted to talk a little bit more about this issue of 
the Early Retiree Reinsurance Program. You previously stated 
your position, and I just want to double check on that. Is it 
really your position that these corporations that you have 
listed on your Web site, who have billions of dollars in 
profits needed to get taxpayer money in order to fund their 
early retiree program?
    Mr. Larsen. My position is we want to make sure that 
companies that are currently providing early retiree benefits 
continue to do so, and this program helps ensure that they do 
that.
    Mr. Gardner. This is all programs in the United States, or 
just a few that you have listed on your Web site?
    Mr. Larsen. Well, these--this program helps the sponsors 
who come in for reimbursement requests to be able to continue 
their retiree program, so this helps cover the costs that they 
would otherwise incur.
    Mr. Gardner. So companies like Shell Oil Company that had a 
contractual obligation that they would otherwise incur were 
given $4.4 million too?
    Mr. Larsen. Well, ultimately the money is for the benefit 
of the retirees.
    Mr. Gardner. But it is money that taxpayers have that we 
are just giving to Shell Oil Company?
    Mr. Larsen. Well, we are helping make sure that Shell Oil 
and other companies continue their retiree program.
    Mr. Gardner. So other companies like General Electric, the 
Boeing Company, AT&T, Verizon, DuPont, Mars, those kinds of 
companies?
    Mr. Larsen. Well, there are many other smaller companies, I 
think if you look through the list, there are a large number of 
companies that got, you know, $1 million or less in 
reimbursements. So it is not all just big companies, and in 
fact, the biggest recipients are state and local government for 
this program.
    Mr. Gardner. Do you think they should have had to pay for 
their own?
    Mr. Larsen. I think that we want to make sure that retirees 
of the ages between 50 to 65 before Medicare have an option for 
coverage, because if they don't, they are in a very hard place 
in the marketplace.
    Mr. Gardner. Do you think it is the government's 
responsibility, then, to pick up the obligations of a 
privately-agreed to contract?
    Mr. Larsen. Well, I don't know in which cases there are 
specific obligations or not, but we, in any case, want to make 
sure that there are funds available to make sure that these 
programs are continued.
    Mr. Gardner. Was that part of the discussion, though, in 
who got this bailout, was which companies had an obligation or 
a contract to do that, or did it just--the money came because 
they asked?
    Mr. Larsen. No, the way the program is established under 
the ACA is they apply as a sponsor, we review it, and once 
approved as a sponsor, then they submit the claims for 
reimbursement.
    Mr. Gardner. So you would know which of these companies 
were contractually obligated to make these payments anyway?
    Mr. Larsen. That is not part of the, you know, the 
provisions of the ACA.
    Mr. Gardner. So you just gave this money without knowing 
whether or not they may be under contractual obligation? So the 
United Auto Workers, who got $207 million, weren't 
contractually obligated to pay for these healthcare costs?
    Mr. Larsen. Well, it is actually--and I think we have 
corrected that. It is the United Auto Workers Trust Fund, so 
the United Auto Workers didn't get the money, the trust fund 
that administers the early retiree benefits gets it. But 
whether or not they are contractually obligated to do it, it 
just provides benefits to the early retirees.
    Mr. Gardner. So what standards were many of these Fortune 
500 companies had in order to get this free money?
    Mr. Larsen. Well, they have to demonstrate that they have 
claims experienced between the threshold that is set up in the 
Affordable Care Act, so the ACA requires or provides that under 
this program, 80 percent of the costs for retirees between the 
$15,000 and $90,000 limit is reimbursed under the reimbursement 
program.
    Mr. Gardner. So pretty much anybody who applied was 
accepted in this program for free money?
    Mr. Larsen. Well, I wouldn't say that, although I think 
that the--most of the companies that applied were approved as 
sponsors. There were some that weren't.
    Mr. Gardner. So if--you issued the regulations for this 
program, correct?
    Mr. Larsen. CCIIO issued the regulations, yes.
    Mr. Gardner. Was there a need for more restrictive 
regulations, or----
    Mr. Larsen. Well, we issued the regulations that were 
called for under the language in the Affordable Care Act for 
the program.
    Mr. Gardner. Do you think they needed to be more 
restrictive?
    Mr. Larsen. I think the program is working well as it is. 
If Congress wanted to revisit the program, we would be happy to 
work with people to make sure that we continue to be able to 
provide ongoing retiree benefits.
    Mr. Gardner. I mean, do you think it is right, though, that 
the taxpayers gave free taxpayer money to GE, that is making 
billions of dollars, not paying any taxes, needed another $36 
million of Federal Government money?
    Mr. Larsen. Well, I think it is hard to look at this 
program in isolation. I mean, we have got a number of bridge 
programs in place. We have got the PCIP program, we have got 
ERRP, all of which help get us to 2014 that avoid uncompensated 
care, avoid the burden that some particularly sick or 
vulnerable populations may experience if they don't have 
coverage.
    Mr. Gardner. Now, you said get us to 2014, but you are 
ending the program soon, correct?
    Mr. Larsen. Well, not soon. It could--the money could run 
out in fiscal year 2012.
    Mr. Gardner. So the money is going to run out soon, and 
then what happens?
    Mr. Larsen. Well then that is the end of the program, 
unless Congress appropriates additional money to the program.
    Mr. Gardner. Is it your opinion that Congress ought to 
appropriate, and will you be asking for more money?
    Mr. Larsen. We would be happy to work with Congress, you 
know, should they choose to look at other options to extend the 
program.
    Mr. Gardner. But you think continuing these bailouts is the 
proper role for the Federal Government?
    Mr. Larsen. Well again, I think we disagree on the bailout 
terminology, but we think this is a good program.
    Mr. Gardner. Mr. Chairman, I yield back.
    Mr. Stearns. The gentleman's time has expired. Before I go 
to the next speaker, I just ask unanimous consent to put into 
the record the ERRP memos that are issued by CCIIO on March 2 
and March 31, our staff memo of March 23, the Chief Actuary 
report of April 22, HHS response to the committee on high risk 
pools February 28, and the New York Times article on GE. No 
objection, it is agreed upon.
    [The information appears at the conclusion of the hearing.]
    Mr. Stearns. And at this point, we recognize the 
gentlelady, Ms. Myrick, for 5 minutes.
    Mrs. Myrick. Thank you. I really have a lot of similar 
questions to what Mr. Gardner asked because of the same type of 
concerns that this $5 billion in money in the Early Retiree 
Reinsurance Program has gone to corporations and unions. Again, 
I just have a hard time understanding when companies like one 
of them that made $20 billion in profit can't afford to do 
their own programs. And if the healthcare plan wasn't there, 
that they can dump their employees on anyway if they chose to 
do that. I mean, all of this just doesn't make any sense to me, 
and so I guess how do you justify--you said and I heard you 
when you answered Mr. Gardner, that you say well, it is because 
you want them to continue to have coverage. But it just doesn't 
make any sense that we are using taxpayer money to fund their 
early retirement program so they are making huge profits. And 
he mentioned the United Auto Workers Trust Fund, which you 
clarified, but they reported assets last year of over $1 
billion, and only 4.5 million liabilities, so why was it 
necessary to give it to them?
    Mr. Larsen. Well, and as we have, I think, discussed 
earlier, history shows that the number of large employers that 
are even offering retiree benefits, health insurance coverage 
for their early retirees has dropped dramatically from, I 
think, two-thirds to about one-third. So I don't know whether 
those companies were profitable or not. I am sure many of them 
were, and yet, many of them continued to drop their retiree 
coverage. So this provision of the ACA is a way to ensure, as 
best we can, that that rate of dropping of retiree coverage 
does not continue.
    Mrs. Myrick. Well again, I just go back to the fact that I 
am willing to bet that people in my district who--our 
unemployment is 11.1%, and they are having a heck of a time 
making it today, and they are giving their tax money to the 
Federal Government and now that tax money has gone to these 
corporations to pay for their retirement programs. I don't 
think they think very highly of that, and it really aggravates 
me, too, quite frankly.
    Mr. Larsen. Well again, as I have said earlier, the benefit 
of this is for the retirees themselves and to ensure that they 
have continued coverage. The money can only be used to reduce 
the costs for the retirees, like coinsurance, or the cost of 
the company as it relates to the provision of the retiree 
benefits.
    Mrs. Myrick. But there really weren't any real specific 
guidelines they had to follow to apply for this program? I 
mean, pretty much most of them--you said a few of them didn't 
get it but most of them----
    Mr. Larsen. Well, they had to send in a list of how many 
people they covered, who their retirees were, so there's 
documentation certainly that goes along with becoming an 
approved sponsor in the program.
    Mrs. Myrick. To me, again, this program proves that the 
notion that healthcare reform--the law is going to lower the 
cost is just preposterous. You take $5 billion to allocate for 
what I think is a dubious program, because the Administration 
is just anxious to give it away, and it already looks like it 
won't last until, you said 2012. I thought it was 2014. There 
are commitments made to like 5,000 entities already, $1,8 
billion has been paid out, so how is that $5 billion going to 
be nearly enough for the corporations and the unions that you 
are giving it to?
    Mr. Larsen. Well, at the rate now, it is unlikely that it 
will last until 2014, certainly. I think we did announce 
yesterday that we would stop taking new applications for 
approved sponsors after--I think at the end of April, so we are 
going to stop the pipeline, if you will, of eligible companies 
and State and local governments that can apply.
    Mrs. Myrick. I know you have already talked and I am sorry 
I was unable to be here earlier. I was in another hearing about 
the high risk pools, but I did have a question particularly 
relating to North Carolina, because they have had a functional 
high risk insurance pool in operation prior to the passage of 
the health reform law, and when the new law went into effect, 
they were required to set up a new pool alongside the state 
pool they already have which is functioning. It is very 
confusing to consumers, but it just seems kind of odd that the 
federal program would essentially require the operation of 
these two separate pools, and why couldn't North Carolina just 
have had the option to take the federal money and expand the 
pool that was already working, because it has been working for 
them?
    Mr. Larsen. Well, there is certainly no requirement that 
they set up a separate pool. For the states that declined to do 
so, HHS through our contractors operates pools in 23 states and 
the District of Columbia, and the statutory provisions relating 
to the federal PCIP are different than the terms that apply 
under state law for the state high risk pools.
    Mrs. Myrick. Right.
    Mr. Larsen. So for example, there is no waiting period for 
coverage for a high cost condition in the federal program, so 
it really serves as a compliment to the existing state 
programs. And states have been able to leverage off their state 
pools in terms of advertising and knowledge about this pool as 
another alternative for individuals to be able to go into if 
they have been denied coverage for preexisting conditions.
    Mrs. Myrick. I am a little confused. What I was told in 
North Carolina, a person must go without insurance for 6 months 
before he is eligible for federal coverage----
    Mr. Larsen. Correct.
    Mrs. Myrick [continuing]. But the state pool doesn't have 
this requirement.
    Mr. Larsen. It is a little confusing, because they sound 
the same but they are different requirements. For the federal 
pool, you are not eligible if you have had insurance for the 
preceding 6 months. Typically in a state pool, there isn't a 
requirement like that, but there are often requirements that 
when you come into the pool that you may have coverage for your 
preexisting condition excluded or there is a ``waiting period'' 
for coverage for your condition. So they each have different 
provisions relating to waiting periods and insurance coverage.
    Mrs. Myrick. Yes, I----
    Mr. Stearns. I think the gentlelady's time has expired.
    Ms. DeGette. Mr. Chair, I move to strike the last word. I 
just have----
    Mr. Stearns. The gentlelady is recognized.
    Ms. DeGette. Thank you. I think that my colleague from 
North Carolina is onto something, but--and maybe we can work to 
figure this out. Here is the problem. She is absolutely 
correct, and Mr. Chairman, you are correct and everybody is 
correct. These large companies and unions that have very high 
assets and profits are taking advantage of this program. The 
problem is there is no legal requirement that these companies 
offer insurance to their early retirees, and so what is 
happening is as the economy went down, people took early 
retirement, then the companies discontinued their health 
insurance. And we can't make them offer health insurance, it is 
a contractual obligation that they have with their employees so 
if they don't have that, then they can't make their--we can't 
make them give their early retirees health insurance. So then 
they won't have health insurance. But I think maybe something 
we can work on, especially since this program is running out of 
money, is maybe we can find some other way to incentivize 
employers giving health insurance to their early retirees that 
doesn't consist of just simply subsidizing it.
    Short of that, what we would have to do is we would have to 
pass some kind of legal requirement that they offer insurance 
to early retirees, and I don't think that is going to be 
acceptable to Republicans or most Democrats. That is--I am just 
brainstorming, because I think we can probably modify the 
program so that we wouldn't just be paying out the money, but 
maybe some kind of incentive. I would love to work with----
    Mr. Stearns. Well, I am very glad the gentlelady, the 
ranking member is also as outraged as we are that taxpayers' 
money is being spent on large corporations who are very 
profitable who----
    Ms. DeGette. Mr. Chairman, you don't need to characterize 
what I just said.
    Mr. Stearns. Certainly I can characterize what you just 
said, so I am glad you agree with us that this is obscene. Let 
us see. The next--you mentioned before that companies were 
rejected from the ERRP program. Will you be kind enough to 
submit this list for us for the record?
    Mr. Larsen. For applications that weren't accepted?
    Mr. Stearns. Yes.
    Mr. Larsen. I will.
    Mr. Stearns. OK. We are going to Mr. Scalise, the gentleman 
from Louisiana, is recognized for 5 minutes.
    Mr. Scalise. I thank the chairman for yielding, and I thank 
the gentleman, Mr. Larsen, for coming before us to testify.
    One of the things, as I look through this list, back during 
the beginning of this whole debate, I think everybody 
recognized there were problems with the cost of healthcare and 
problems that needed to be fixed, like preexisting conditions 
being discriminated against, that those of us that supported 
alternative legislation addressed directly without these taxes 
and mandates that are creating all of these problems. In fact, 
our bill was scored to lower the cost of healthcare by 10 
percent. What we are seeing now, and I think one of the reasons 
you are seeing so many of these companies on this list come to 
the Federal Government saying give me taxpayer money so that I 
can fund early retiree programs is because what these companies 
are seeing is since Obamacare passed, the cost of healthcare 
has dramatically increased. It is something we have seen. There 
is a consolidation in the industry. We have already seen a 
number of other problems from it, but you, yourself, just 
testified earlier that some of these companies that got 
millions of dollars, tens of millions of dollars in some cases, 
could have just been giving early retirement to their employees 
that otherwise would have been still working for the company, 
but because of the high cost of healthcare and the things that 
they had to do to contract, they pushed some people into early 
retirement. I will ask you to clarify if I am incorrect, but 
you did say there is nothing you saw in the reports that you 
got, the requests for these companies, could they have done 
that? Could the companies have said because of the high cost of 
healthcare and these new burdens and mandates and taxes because 
of Obamacare, we are now going to have to squeeze some of our 
employees out into early retirement? And if they did that and 
they packaged those employees and put them into early 
retirement and asked for money from you from this program, they 
could have gotten the money. Is that correct?
    Mr. Larsen. What I said was that we didn't evaluate as part 
of the process----
    Mr. Scalise. So they could have done that, is that correct? 
Or did you prohibit them from doing that?
    Mr. Larsen. We didn't evaluate the process by which they 
have an early retiree program. If they have a program----
    Mr. Scalise. So if they did what I just said, if they moved 
some employees that would today be working but now were pushed 
into early retirement because the company couldn't afford the 
higher cost of healthcare because of Obamacare, and then they 
pushed them and sought State--federal taxpayer money for the 
ERRP program, they could have gotten it, and some probably did. 
Right?
    Mr. Larsen. Well, I don't know. If it cost money to provide 
them health insurance and as employer it is going to cost money 
to provide them early retiree health insurance----
    Mr. Scalise. You didn't even ask that question when they 
asked for the money. If they did what I just categorized, they 
could have gotten the money and you would have no way of 
knowing that. Is that correct?
    Mr. Larsen. If I am understanding what you are saying, we 
didn't evaluate the process by which they ended up with----
    Mr. Scalise. That is exactly right, so basically if a 
company said because of the higher cost of healthcare due to 
Obamacare, we have got to consolidate----
    Mr. Larsen. Well, that is where we part company.
    Mr. Scalise. Well, but I mean, the marketplace has shown 
that healthcare has gone up, and in fact, you are seeing 
consolidation of health insurance providers----
    Mr. Larsen. It has been going up for decades.
    Mr. Scalise [continuing]. Who are saying it happened 
specifically, but the consolidation that is occurring right now 
they will tell you is because of Obamacare. Talk to business 
owners, I mean, maybe you don't ask those questions when you 
review these forms. I talk to businesses every day. Small 
businesses will tell you, medium size and even large companies 
will tell you that the mandates and new taxes from Obamacare is 
one of the things that is pushing them to have to cut costs in 
other ways, including pushing people into early retirement.
    And so when I look at this list, first of all, the 
largest--unless you have got somebody higher, the largest 
recipient was 206 million to the United Auto Workers Trust 
Fund. Was there anybody that got more than that?
    Mr. Larsen. Well collectively state and local government 
was the largest recipient.
    Mr. Scalise. Well right, you bailed out the State of 
California to the tune of $57 million, you bailed out the State 
of New York for 47 million.
    You talked earlier in your testimony that you categorized 
this as a successful program. I mean, the program is going 
bankrupt because you are giving away so much money to bail out 
states and unions. I mean, did you really think it was going to 
be hard to give that money away? I mean, how was that a 
successful program when companies who were making big profits 
and corporations and unions and states took tens and hundreds 
of millions of dollars from you? How is that successful?
    Mr. Larsen. The program is not going bankrupt. Congress 
allocated $5 billion----
    Mr. Scalise. You said in the press yesterday that you have 
allocated $1.8 billion----
    Mr. Larsen. I don't think that is the word----
    Mr. Scalise [continuing]. Already and that you are going to 
have to close the enrollment period earlier than expected 
because you are going to run out of money.
    Mr. Larsen. Sure, but that is not a bankrupt program.
    Mr. Scalise. Well, it is a program that is running out of 
money.
    Let me ask you this. Do you know how much money we spend 
every day that is borrowed money?
    Mr. Larsen. I don't know the answer to your question.
    Mr. Scalise. OK. Forty-two cents--from the numbers I have 
seen, 42 cents of every dollar that the Federal Government 
spends is borrowed money, and when you look at this program, I 
don't know if you can appreciate how offended some of us are, 
that you are giving away $57 million to bail out a State like 
California. You are giving away $206 million to bail out United 
Auto Workers Trust Fund. I understand you gave $5 million of 
taxpayers' money to BP. Is that correct?
    Mr. Larsen. You can't lose sight of the millions of----
    Mr. Scalise. Did you give $5 million to BP?
    Mr. Larsen. If it is on the list, then we did.
    Mr. Scalise. I mean, my God, you wonder why people are 
offended by this program when they are seeing all of this money 
going out the window, money that we don't have, 42 cents of 
every dollar, and correct me if I am wrong on that number. But 
this shows that the program is broken and that the law itself 
has created more problems. We have already seen companies are 
dumping prescription drug programs because of the taxes in 
Obamacare where you increased taxes on them, so people are 
dumping their prescription drug programs because of the law.
    Mr. Larsen. This program will help----
    Mr. Scalise. And so again, you have got a program here----
    Mr. Larsen [continuing]. Them continue that for retirees. 
That is exactly right.
    Mr. Scalise. Right, and so now we are seeing that companies 
are pushing more people into early retirement because of the 
higher costs due to Obamacare, and now you are giving them 
taxpayer money, 42 cents of every dollar which we don't have. 
Maybe you don't understand why that offends some of us, but it 
is very offensive.
    I yield back.
    Mr. Stearns. Gentleman's time has expired.
    The gentleman from Virginia, Mr. Griffith, is recognized 
for 5 minutes.
    Mr. Griffith. I might be the last, I might not. Who knows. 
But hopefully it is.
    Let me ask you a question. You were talking earlier and you 
said you can't look at this in an isolated situation, that 
there are lots of things going on out there. That was in 
response to a question related to the money given to GE. Has GE 
gotten more money from you all under different programs?
    Mr. Larsen. No, no. I just meant that we have a number of 
bridge programs to get us from kind of the broken market, the 
preexistent healthcare to 2014. This is one of them. PCIP is 
one of them until we have full reform implemented in 2014.
    Mr. Griffith. All right. Here is my problem with this 
program as I have been listening to the testimony here today. 
It sounds like that as long as you provided employees with--
retirees with health insurance plan, you were eligible to get 
money. I am just wondering, you all set up the regulations for 
this. Why wasn't there a requirement that there at least be 
some indication that the company, following what you have said 
was the reason for it--that the company was not going to 
provide it? Because it sounds like to me from what I have heard 
that what you all have said is if they provide the benefits, 
they get the money, but we did it because we were afraid they 
were going to discontinue. So we may very well as taxpayers 
have given an awful lot of money to big companies like GE and 
AT&T and all of the other ones that have been mentioned here 
today who had no intentions. But like any good business, if the 
Federal Government is handing out candy for free, they are 
going to take it, and they have the people who are able to go 
out there and look for it, where we may have actually 
shortchanged--if this is what you were trying to do--some small 
businesses or micro-businesses even that might have been 
wanting to do this but had no clue there was a program like 
this.
    I am just wondering why you didn't have regulations that it 
would have at the very minimum required that the company state 
they were going to discontinue their program if they didn't 
receive assistance within 90 days?
    Mr. Larsen. Yes. Well, we tracked the statutory provisions 
when we put the regulations together, but I am not sure we 
would have been able to get those representations in advance of 
the program.
    Mr. Griffith. So we were so--in such a big hurry to get 
Obamacare on the books, to get Obamacare into place that we 
didn't bother to take a look at what was going to happen to the 
taxpayers? Is that what I just heard you tell me?
    Mr. Larsen. We----
    Mr. Griffith. We had to get the program started. We 
couldn't take time to make sure that we weren't just giving 
money to giant corporations who had no intentions of 
discontinuing their health insurance to retirees. That is what 
I heard your answer say.
    Mr. Larsen. Well, we had statutory deadlines under which we 
wanted to get the program operational, but that is not why we 
didn't do as you suggested. We implemented the program as it 
was set out in the provisions of the Affordable Care Act.
    Mr. Griffith. How much notice was there--you said that most 
of the beneficiaries were state and local governments, and I am 
just wondering, did the Virginia VRS get any of this money?
    Mr. Larsen. I can--I would have to go back and look at the 
list. I am not sure if they did.
    Mr. Griffith. I am just wondering, because, based on your 
criteria they would have qualified.
    Mr. Larsen. I think all----
    Mr. Griffith. That is all right. They will get me an answer 
later.
    Other than just looking at the bill itself--and I am glad 
you found yourself constrained by the bill, because we have had 
some other agencies in here that seem to think they can make up 
the rules as they go--but in that regard, you don't think you 
had the ability to create a regulation or rule that would say 
that you had to be getting ready to discontinue your benefits 
in order to hand out these checks?
    Mr. Larsen. I will confirm back to you, but I don't 
believe--and I wasn't here when we drafted those regulations--
but I don't believe that we saw the statute as creating the 
type of program that you just described.
    Mr. Griffith. OK.
    Mr. Larsen. But I will--we will confirm that with you.
    Mr. Griffith. And you just came in in what, December or 
January?
    Mr. Larsen. Well, as the head of the CCIIO. I was running 
oversight but not ERRP.
    Mr. Griffith. OK. So these regulations would have been the 
previous initialed name, which what was that, CCIIO before they 
changed the name?
    Mr. Larsen. OCCIIO.
    Mr. Griffith. OCCIIO, and so that would have been--the 
regulations would have been created by that administrator at 
that time?
    Mr. Larsen. Well, it was the same individual. I am just 
saying I wasn't personally involved in the regs at that point. 
I am just saying I believe that we did not conclude that we 
could have created a--kind of a needs-based program as you just 
described.
    Mr. Griffith. That would have been the same fellow who got 
hired 5 weeks before the bill passed but was hired under the 
authority of the bill that had not yet passed, would it not? 
You were here for that testimony earlier. I was too, so I am 
correct, am I not?
    Mr. Larsen. I think I know who you are referring to. I am 
not sure I agree with the characterization.
    Mr. Griffith. I am just repeating what he said.
    All right, Mr. Chairman, I yield back my time.
    Mr. Stearns. I thank you, and--my colleagues, we are going 
to go one more round here, so Mr. Larsen, I appreciate your 
patience staying until we voted.
    Following up with what Mr. Griffith just said, is there any 
way you can confirm that all these companies that my colleagues 
have talked about, that when they said that they are going to 
drop their coverage, do you have the ability to go back and 
certify what they say is correct?
    Mr. Larsen. Well under the current program, they did not--
they are not required to certify----
    Mr. Stearns. My question is GE comes to you and said that 
we cannot pay for all these employees that are doing an early 
retirement and we need 36 million. And you say OK, you look at 
it and you give them the money, but you certified that----
    Mr. Griffith. Mr. Chairman----
    Mr. Stearns [continuing]. All these people would lose--yes?
    Mr. Griffith. Mr. Chairman, if you would yield for just a 
second. My concern was and I think his testimony was was that 
they didn't even ask that question.
    Mr. Stearns. Right, so I am following up----
    Mr. Griffith. Oh, OK.
    Mr. Stearns. Not only did they not ask, the question is do 
you have anything in statute that says you should have 
certified this and you didn't? So my question is is there 
something in statute that says you have to certify that they 
will lose their coverage----
    Mr. Larsen. No.
    Mr. Stearns [continuing]. And did you do that?
    Mr. Larsen. There is nothing----
    Mr. Stearns. So there is nothing in statute that says you 
have to certify that they will indeed lose their----
    Mr. Larsen. No, the only thing--the CEO has an attestation 
that the information that they are providing in connection with 
the application----
    Mr. Stearns. So the CEO does this and that----
    Mr. Larsen. No, just to be clear, the CEO doesn't attest 
nor does the statute provide for a requirement----
    Mr. Stearns. Well how do you prevent somebody from telling 
you that these employees are going to lose it----
    Mr. Larsen. No, all they have to do is tell us that they 
have an early retiree program----
    Mr. Stearns. Right.
    Mr. Larsen [continuing]. And provide the documentation for 
the claims that satisfy the statutory threshold. They, of 
course, must continue the program----
    Mr. Stearns. Can an outside source or anybody that confirms 
in your office that what they provide in these papers is 
accurate?
    Mr. Larsen. Oh, yes, we audit and validate the claims data 
that they provide, but again, they are not representing to us 
nor does the statute require them to represent that if they 
don't get the money, they won't continue their program.
    Mr. Stearns. I mean, is it possible that a lot of companies 
will come in and say they need the money--after they see this 
list will come in and say I need the money, they will submit 
the papers to you, and they really have a profit that they can 
cover it themselves. How do you know that they can't cover it 
themselves is my question.
    Mr. Larsen. Well, the premise of the program is that the 
best way to ensure that these programs continue is to provide 
the assistance that is set out in the program, because again, 
we know that many companies have continued to drop this----
    Mr. Stearns. Let me interrupt you.
    Mr. Larsen. Probably many that were profitable----
    Mr. Stearns. Mr. Larsen, you told the press yesterday that 
you are closing enrollment for this program, and you just said 
it to Mr. Griffith and Mr. Scalise.
    Mr. Larsen. Right.
    Mr. Stearns. You reported that you have already spent $1.8 
billion, is that correct?
    Mr. Larsen. Right, that is correct.
    Mr. Stearns. OK. Is that all that is accounted for today, 
or are there additional claims that have not yet been included 
in that report?
    Mr. Larsen. You mean of the 1.8 billion?
    Mr. Stearns. No, no. OK, you have already spent that.
    Mr. Larsen. Right.
    Mr. Stearns. But are there other claims out there that have 
not been included in this report that you are going to approve 
and are going to make the list longer? Yes or no.
    Mr. Larsen. Yes.
    Mr. Stearns. OK.
    Mr. Larsen. But can I--may I----
    Mr. Stearns. Has all the $5 billion of the program already 
been obligated?
    Mr. Larsen. No.
    Mr. Stearns. And how much is left?
    Mr. Larsen. Well, that is what I am trying to say. So we--
--
    Mr. Stearns. Just approximately.
    Mr. Larsen. I am going to tell you.
    Mr. Stearns. OK.
    Mr. Larsen. We have gotten 1.8 billion in paid claims----
    Mr. Stearns. Right.
    Mr. Larsen. At any given point, we can tell you what has 
been paid, and then there are claims being processed that we 
know about but haven't yet been paid. They have to be verified. 
The decision that we made to close--it is not to enrollees, but 
it is to plan sponsors. So all of the companies that have been 
approved as plan sponsors--and sponsors just means you are 
eligible to----
    Mr. Stearns. Are you going to have enough money?
    Mr. Larsen. What is that?
    Mr. Stearns. Are you going to use up all the $5 billion?
    Mr. Larsen. Oh, I think we will use up the $5 billion.
    Mr. Stearns. OK.
    Mr. Larsen. But I think that will happen----
    Mr. Stearns. How many have not been verified and are 
waiting?
    Mr. Larsen. It is a small number. We have----
    Mr. Stearns. One hundred, 50, 10?
    Mr. Larsen. It could be.
    Mr. Stearns. One hundred? It could be 100?
    Mr. Larsen. It is not 100. I think it is----
    Mr. Stearns. It could be 1,000?
    Mr. Larsen. I don't think it is 1,000, no.
    Mr. Stearns. How much money is left or waiting to be 
verified?
    Mr. Larsen. I just want to be clear, when you say waiting 
to be verified, do you mean claims or applicants? Applicants to 
me is a company.
    Mr. Stearns. Claims.
    Mr. Larsen. Oh, it is not a large amount.
    Mr. Stearns. OK.
    Mr. Larsen. I mean, we can get that to you, but it is not 
like there is another billion dollars in claims that are out 
there. We have reported what claims are out the door. There is 
always going to be a small amount of claims that are in 
progress.
    Mr. Stearns. You are really in a position of being Santa 
Claus, and here we are at Easter. So I think a lot of us just 
find this unbelievable that you can just hand out this kind of 
money based upon a criteria that is not clear and based upon 
not certifying, except through your staff, their word of mouth 
that they cannot pay these early retirees.
    I think you said you are going to close this down, but 
refresh my memory. Wasn't this program supposed to go to 2014 
originally? Isn't that true?
    Mr. Larsen. Yes, ideally.
    Mr. Stearns. OK. So the fact is that you have run out of 
money, so that is why you are forced to close it. So I mean, 
isn't this a bad reflection on this program that the fact is 
that you are running out of money that is supposed to----
    Mr. Larsen. I think it is a reflection of the success of 
the program, because there are a lot of companies that have----
    Mr. Stearns. Well, can I tell you an honest----
    Mr. Larsen. Yes.
    Mr. Stearns [continuing]. Secret? Everybody takes free 
money. If you get free money--I think you and your friends and 
your neighbors would take the money if it is free, so you are 
going to always run out of money if it is free.
    With that, my time is expired. I will recognize the ranking 
member.
    Ms. DeGette. Thank you, Mr. Chairman.
    So the title of this hearing today is ``The PPACA's High 
Risk Pool Regime: High Cost, Low Participation.'' So really, 
the entirety of the questions on the other side have been about 
the Early Retiree Reinsurance Program, so I guess we can 
stipulate that the PPACA's high risk pool regime is in pretty 
good shape.
    So the first thing I want to do, Mr. Larsen, is thank you 
for answering all of these questions that I don't know how 
prepared you were to come and answer them, but I certainly had 
not been brief by the Majority staff that they would be 
focusing this hearing on this topic. So I think you have done 
an admirable job trying to answer these questions about this 
other program.
    I want to try to clarify some things for some of the 
members who perhaps don't understand the basic facts of the 
Early Retiree Reinsurance Program, and maybe even for my own 
edification, what is the purpose of the program, briefly, Mr. 
Larsen?
    Mr. Larsen. The purpose is to ensure the continued 
availability of health benefits for early retirees that are 
provided by the range of applicants that we see.
    Ms. DeGette. OK, and that is people between 50 and 65----
    Mr. Larsen. Typically, yes.
    Ms. DeGette [continuing]. Who have retired from their jobs?
    Mr. Larsen. That is right.
    Ms. DeGette. Many of them are employed by large 
corporations or--correct?
    Mr. Larsen. But many are not.
    Ms. DeGette. Many are not. About how many individuals have 
enrolled in this early retiree program?
    Mr. Larsen. Well to clarify, we don't enroll individuals, 
per se.
    Ms. DeGette. Right, you enroll the companies, but how----
    Mr. Larsen. There are about 5,000 plus, maybe 5,900 
sponsors.
    Ms. DeGette. And how many people--how many employees are 
involved in----
    Mr. Larsen. Well, I think at least four million early 
retirees are in programs that have benefited from ERRP.
    Ms. DeGette. Right, so by----
    Mr. Larsen. Millions of people.
    Ms. DeGette. The way the law was set up as this bridge 
program until 2014 is that the companies and the union trust 
funds and others could sign up for the program and then they 
would use that to insure the employees. So there is like four 
million people who might not have insurance right now who are 
getting insurance, right?
    Mr. Larsen. Yes.
    Ms. DeGette. And if those four million--and as far as you 
know, the companies are not obligated to offer insurance to 
those early retirees. You don't know one way or the other, 
right?
    Mr. Larsen. We don't know, but I also believe that even 
profitable companies are known to stop providing retiree 
benefits, health insurance benefits to their retirees.
    Ms. DeGette. Right. So you know, this program is modeled on 
the Part D Medicare drug benefit that Republicans passed last 
time they were in the Majority, which gave $70 billion to 
companies to provide drug benefits to seniors. Isn't that 
correct?
    Mr. Larsen. There can be parallels there, yes.
    Ms. DeGette. OK. Now, do you know that large firms who 
provide workers with retiree health coverage dropped from 66 
percent in 1988 to 29 percent in 2009?
    Mr. Larsen. Yes, it is a big problem.
    Ms. DeGette. It is a big problem because it leaves people 
between 50 and 65 who are not eligible for Medicare yet, but 
many of whom have preexisting conditions or health problems 
going out into the individual insurance market and trying to 
buy policies, right?
    Mr. Larsen. That is correct.
    Ms. DeGette. So if we hadn't have done some kind of a 
bridge like this, then that would have potentially left 
millions of Americans out there with--it would have added to 
the number of uninsured until 2014 when they can enroll in the 
exchanges and so on, right?
    Mr. Larsen. That is exactly right.
    Ms. DeGette. Now look, I am not sure that--even though 
maybe this is modeled on the Part D program which just gave $70 
billion to companies, maybe the way we have got it structured 
is not perfect. Maybe as we go forward, since it has been so 
popular, we should require employers to certify somehow that 
they are not going to be able to offer these benefits. But the 
bottom line is, the benefits ultimately inure to the employees, 
not to the employers, correct?
    Mr. Larsen. Correct.
    Ms. DeGette. And that is four million people that might not 
otherwise have health insurance, correct?
    Mr. Larsen. That is right.
    Ms. DeGette. Thank you.
    Thank you, Mr. Chairman, I yield back.
    Mr. Stearns. All right, gentlelady yields back.
    The gentleman from Virginia for the second round of 
questioning.
    Mr. Griffith. Thanks. Well, I thought I was going to be 
last, but we are going to do a couple more rounds, apparently.
    I think that in response to my colleague, I think that the 
reason you have gotten so many questions today is that the news 
didn't break until yesterday about the other program, and so a 
lot of folks were a little bit surprised that we were giving 
away the free money so to speak, and that was the concern that 
you have heard a lot today. But I do think that there are some 
concerns that overlap with the program that initially this 
hearing was about, and that--and what I am hearing in this is 
that you said that the program for the retirement money, you 
know, it will go until the 5 billion is used up and then it is 
over with. But for the high risk pools, however, it looks like 
you all are spending money on that to a point where it may 
actually--that 5 billion may not be able to survive, and I 
look----
    Mr. Larsen. Not able to survive, meaning run out?
    Mr. Griffith. Run out of the 5 billion before----
    Mr. Larsen. For the PCIP program?
    Mr. Griffith. For the PCIP program, because you have got--I 
mean, I am looking----
    Mr. Larsen. We are going to work within that, but we are 
off to a slower start than was projected. But we believe that 
we are going to continually increase the rate of enrollment.
    Mr. Griffith. Well, let us touch on that before we get back 
to the money issues.
    Mr. Larsen. OK.
    Mr. Griffith. You are off to a slower rate than 
anticipated, and in fact, wasn't it anticipated that there 
would be about 375,000 people who would be involved in that 
program in 2010 alone, but there were only 12,000? So isn't it, 
in fact, at least for 2010 and even into early 2011, isn't it, 
in fact, the program has been a failure?
    Mr. Larsen. No, I wouldn't at all characterize it that way.
    Mr. Griffith. Well, OK, I disagree but that is OK. That is 
what life is about.
    Now that being said, let us go back to the money issue 
because it appears, according to--and I am looking at some 
notes here that say Washington Post reported on December 27 
that New Hampshire has only about 80 members but they spent 
double the $650,000, and then HHS agreed to give New Hampshire 
more money and is basically taking it out of money that they 
anticipated that they would be spending in later years----
    Mr. Larsen. That is right.
    Mr. Griffith. California has indicated that they think they 
will spend over the life of the program $1 billion, and Alaska, 
while only anticipates having 132 enrollees, anticipates 
spending $7 million or $56,000 per--56,000 plus per enrollee. 
Looking at those numbers is why it looks like to me that even 
with the failed numbers coming into the high risk pools, that 
you are not possibly going to be able to do it on $5 billion. 
Isn't that a fair assessment?
    Mr. Larsen. I understand your point, but I don't agree and 
here is why.
    Mr. Griffith. You don't agree, but it is a fair assessment. 
Reasonable people can disagree, but you would agree it is a 
fair assessment coming from my philosophical position, would 
you not?
    Mr. Larsen. I would not.
    Mr. Griffith. All right, well go ahead with your position.
    Mr. Larsen. So it is very early in the program, and there 
are certainly some states that are running ahead of their 
projections. Every state had to provide within their allocation 
projections regarding the number of members and the costs, and 
that was part of the contract. There are certainly some states 
that are running ahead of projections, meaning like New 
Hampshire. The people that they have are much more costly than 
they projected, so they are running through their money faster. 
There are many other states that are not running ahead of 
projections, so we will continue to monitor exactly how they do 
with monthly reports that we get from the states each month 
where they are in terms of their costs and their enrollment, 
and we will work within the $5 billion appropriation through 
the cycle that we have.
    Mr. Griffith. So then doesn't that mean that if you are one 
of the states that is looking at this thing that you are much 
better to spend your money now and get your up front money, 
because at some point you are going to have to marshal the 
funds and not give as much to the states that might come in 
late?
    Mr. Larsen. Well----
    Mr. Griffith. Isn't that what you just said?
    Mr. Larsen. States can't run ahead and spend the money. It 
is a function of at what rate people come in to the program.
    Mr. Griffith. So if New Hampshire is spending more money 
than they were allocated in the first year and you allow them 
to have more money coming in, and if a few other states start 
doing that, isn't it possible that if enrollees in a state that 
is not doing that right now come in too late in the process, 
there may not be money there to take care of them? Isn't that 
accurate?
    Mr. Larsen. Not to be argumentative, I suppose it is 
theoretically possible. We don't envision that happening, 
though.
    Mr. Griffith. Yes, if you envisioned that happening, you 
would have put more money in the program.
    Mr. Larsen. We are limited to the 5 billion.
    Mr. Griffith. It is not only theoretical, but based on the 
early data it is possible.
    Mr. Larsen. I don't think it is likely.
    Mr. Griffith. All right. I yield back my time.
    Mr. Stearns. Gentleman yields back. I am going to ask some 
more questions, and certainly give the ranking member, if she 
wants additional questions.
    She brought up the fact that the hearing was really 
scheduled dealing with the high risk pools, and I think it is 
important also to recognize that we have been asking for all 
this information on the Early Retirement Reinsurance Program. 
We just got it, so--the breaking news on it, so we thought 
since you are here you could accommodate both. But I think her 
point is well taken that we are also here because of the high 
risk pool, so I have a few questions for you before you go.
    How many people are enrolled in the high risk pools today?
    Mr. Larsen. I believe that the number that we posted in 
March as of February 1 was 12,000 plus, and since that time 
there have been additional enrollments. Enrollment continues to 
grow at a pretty fast clip, so----
    Mr. Stearns. How many people enroll solely in the plan that 
is run by the Health and Human Services?
    Mr. Larsen. I think it is over 3,000 of the 12,000.
    Mr. Stearns. OK. Does HHS publicly disclose the number of 
individuals enrolled in each State's high risk pool? Do you 
publish that?
    Mr. Larsen. Yes.
    Mr. Stearns. OK, and is it easy to get access to find--go 
to each state and find----
    Mr. Larsen. I will confirm, but I believe that we do.
    Mr. Stearns. So I could go--I could find in the State of 
Florida----
    Mr. Larsen. Yes, actually, I am sorry. Of course we do, 
yes. We do. In the posting that we put up in November and the 
posting that we put up in March for February, it lists the 
state enrollments and then it lists the number for the federal 
PCIP enrollment. So you can go back and you can see what is 
happening in each State.
    Mr. Stearns. And towards that end, will HHS please submit a 
detailed breakdown of the number of individuals currently 
enrolled in each state pool and the federal high risk pool for 
the record?
    Mr. Larsen. We can, but I am pretty sure that is what 
posted on the Web site.
    Ms. DeGette. If the chairman will yield, healthcare.gov--I 
have got the listing right here and I would ask unanimous 
consent to put it in the record.
    Mr. Stearns. All right, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Stearns. Now we have been talking on this side, 
obviously, and you have admitted that you are going to run out 
of funds dealing with the Early Retirement Reinsurance Program, 
isn't that correct?
    Mr. Larsen. It is likely at the pace that we are going.
    Mr. Stearns. And in fact, you are going to--you indicate 
you are going to shut down the program?
    Mr. Larsen. No, just to be clear, we will----
    Mr. Stearns. I mean, if you run out of money you are going 
to shut down the program.
    Mr. Larsen. Well, if I can just clarify. We announced we 
would stop taking new applications for new sponsors.
    Mr. Stearns. Which is an indication you are slowing down or 
stopping the program.
    Mr. Larsen. But for existing sponsors we will continue to 
process claims until the $5 billion appropriation runs out.
    Mr. Stearns. OK. Dealing with the high risk pool program, 
you have about $5 billion in funding, is that correct?
    Mr. Larsen. Correct.
    Mr. Stearns. OK. To date, how much funding has been spent 
of this 5 billion?
    Mr. Larsen. I think that was the number that we were 
discussing earlier, which is the 33 million and roughly 25 
million minus the startup costs, so it is in the $60 million 
range total.
    Mr. Stearns. It is safe to say that this program is going 
to run out of money before 2014?
    Mr. Larsen. I don't think so. I don't think so.
    Mr. Stearns. But you are not sure?
    Mr. Larsen. Well, I don't think we are going to run out of 
money.
    Mr. Stearns. We have asked you for a number of documents 
related to creating a waiver process, and we have had previous 
hearings. Your response has been very slow in this process. 
Will you commit to getting these documents and e-mails to us 
next week? Is that--Mr. Larsen, can that be possible?
    Mr. Larsen. We are committed to continuing to produce the 
records that you have requested. We have continued to 
prioritize our production in response to requests from the 
committee. I know we have responded to many of them but not 
all. I will do my best to get them to you as soon as we can. I 
am not sure for those particular records I can commit under 
oath that I will have them next week.
    Mr. Stearns. Do you know it has been over 2 months since we 
requested them?
    Mr. Larsen. We have had many, many requests from you and 
others that we are really trying to work on. We respect the 
committee's ability to get this information and we will 
continue to push to get it to you.
    Mr. Stearns. We have also asked for Medicare fraud 
estimates. Is that in your----
    Mr. Larsen. I will take it back to my colleagues.
    Mr. Stearns. OK, you can ask them.
    OK. Let me say thank you for your attendance here, and 
ranking member, would you like to close with anything 
additional?
    Ms. DeGette. No, just thank Mr. Larsen for coming.
    Mr. Stearns. OK. We appreciate again your forbearance here 
as we went through our voting process, and again, it is very 
helpful for us to have you here to answer our questions.
    And so with that, nothing further, the subcommittee is 
adjourned.
    Mr. Larsen. Thank you.
    [Whereupon, at 1:52 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared Statement of Hon. Fred Upton

    Thank you, Chairman Stearns, for holding this hearing on 
the high risk pools included in last year's health care law. We 
all know the administration rushed to push the bill over the 
finish line with a very narrow margin of support. Apparently in 
that haste, there was not time to conduct studies on the 
economics of their plan. For this program and others, the 
numbers just don't add up.
     am troubled by how this program seems to have been vastly 
oversold. Shortly after passage of the health care law, the 
administration's own Chief Actuary for Medicare and Medicaid 
Services estimated that in the first year alone 375,000 
individuals would enroll in this program. Today, only 
approximately 12,000 have enrolled.
    This is a shocking difference from what was originally 
promised, and it raises a number of questions: Was the need for 
this program oversold, perhaps as a way to strong-arm moderate 
Democrats into voting for a trillion dollar expansion of the 
government? Or is the need for the program real, and it was the 
ability of the federal government to understand and administer 
such a system that was oversold?
    What should concern everyone in this room is that even 
though only four percent of those expected to enroll in this 
program have actually done so, it appears that this program 
will still have no problem spending the entirety of its $5 
billion budget between now and 2014. If we expected 375,000 
enrollees and only got 12,000-shouldn't we be getting some of 
that money back? I am interested in hearing whether our witness 
can explain this today.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
                              ----------                              


               Prepared Statement of Hon. John D. Dingell

    Today's hearing offers a great opportunity for this 
Subcommittee to learn more about how Director Larsen and the 
Center for Consumer Information and Insurance Oversight or 
CCIIO is implementing the temporary high-risk insurance pools 
created in the Affordable Care Act.
    These high-risk insurance pools are designed to help those 
most in need in our society--those with cancer, diabetes or 
asthma--who are routinely denied insurance in the private 
market. For those not denied in the private market, they often 
find that the cost of insurance still makes health coverage out 
of their reach.
    Starting in 2014 insurance companies will no longer be able 
to deny coverage to any individual with a pre-existing 
condition, but until then the Pre-Existing Condition Insurance 
Plan is serving as a temporary bridge to help those receive 
coverage until the Exchanges open in 2014.
    CCIIO faced an enormous task in front of them in setting up 
the PCIP programs, and I would commend Director Larsen and 
CCIIO for meeting the 90-day deadline and for aggressively 
working with the states to assist them in setting up PCIP 
programs.
    Enrollment in PCIP is now over 12,400 and has grown 50 
percent from November 2010 to February 2011. While this is an 
achievement, there is much more we need to do.
    I am pleased to see CCIIO conduct a unique and targeted 
outreach campaign to help enroll individuals most in need. The 
Center has reached out on the grassroots level through the 
American Cancer Society and the American Diabetes Society, and 
partnering with government agencies such as the Social Security 
Administration. In addition, the Center has offered webinars 
and has met with various stakeholders including providers, 
hospitals, and consumer groups, among others. These steps are 
necessary to target eligible individuals, and I believe these 
steps show CCIIO's commitment to bridging the gap for the 
sickest of the sick.
    Now I know some of my friends on the other side of the 
aisle are critical of PCIP. I would remind them that the 
creation of high risk pools was proposed by Congressional 
Republicans. In fact, Members of the Energy and Commerce 
Committee have offered their own legislation appropriating far 
more money than laid out in the Affordable Care Act to 
implement high risk pools nationwide.
    High risk pools and PCIP are designed to ensure that our 
constituents across the country suffering from chronic disease 
are not bankrupt due to their medical bills or forced to 
foreclose their home to pay for the medical bills that continue 
to stack up. This vulnerable population deserves our help.







                                 
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