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


 
                  OBAMACARE: WHY THE NEED FOR WAIVERS? 

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

                                HEARING

                               before the

                SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF
               COLUMBIA, CENSUS AND THE NATIONAL ARCHIVES

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 15, 2011

                               __________

                           Serial No. 112-13

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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                      http://www.house.gov/reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

   Subcommittee on Health Care, District of Columbia, Census and the 
                           National Archives

                  TREY GOWDY, South Carolina, Chairman
PAUL A. GOSAR, Arizona, Vice         DANNY K. DAVIS, Illinois, Ranking 
    Chairman                             Minority Member
DAN BURTON, Indiana                  ELEANOR HOLMES NORTON, District of 
JOHN L. MICA, Florida                    Columbia
PATRICK T. McHENRY, North Carolina   WM. LACY CLAY, Missouri
SCOTT DesJARLAIS, Tennessee          CHRISTOPHER S. MURPHY, Connecticut
JOE WALSH, Illinois























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 15, 2011...................................     1
Statement of:
    Larsen, Steven, deputy administrator and director, Center for 
      Consumer Information and Insurance Oversight, Centers for 
      Medicare and Medicaid Services; Edmund Haislmaier, senior 
      research fellow, Center for Health Policy Studies, the 
      Heritage Foundation; Scott Wold, shareholder, Hitesman and 
      Wolf; and Judith Feder, professor, Georgetown University 
      and senior fellow, Center for American Progress Action Fund    32
        Feder, Judith............................................    60
        Haislmaier, Edmund.......................................    44
        Larsen, Steven...........................................    32
        Wold, Scott..............................................    54
Letters, statements, etc., submitted for the record by:
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............    27
    Davis, Hon. Danny K., a Representative in Congress from the 
      State of Illinois, prepared statement of...................    11
    Feder, Judith, professor, Georgetown University and senior 
      fellow, Center for American Progress Action Fund, prepared 
      statement of...............................................    62
    Gowdy, Hon. Trey, a Representative in Congress from the State 
      of South Carolina:
    HHS guidance.................................................    15
    Prepared statement of........................................     4
    Haislmaier, Edmund, senior research fellow, Center for Health 
      Policy Studies, the Heritage Foundation, prepared statement 
      of.........................................................    46
    Larsen, Steven, deputy administrator and director, Center for 
      Consumer Information and Insurance Oversight, Centers for 
      Medicare and Medicaid Services, prepared statement of......    34
    Wold, Scott, shareholder, Hitesman and Wolf, prepared 
      statement of...............................................    56


                  OBAMACARE: WHY THE NEED FOR WAIVERS?

                              ----------                              


                        TUESDAY, MARCH 15, 2011

                  House of Representatives,
Subcommittee on Health Care, District of Columbia, 
                 Census, and The National Archives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1:35 p.m., in 
room 2247, Rayburn House Office Building, Hon. Trey Gowdy 
(chairman of the subcommittee) presiding.
    Present: Representatives Gowdy, Gosar, DesJarlais, Walsh, 
Norton, Clay, and Davis.
    Also present: Representatives Issa and Cummings.
    Staff present: Ali Ahmad, deputy press secretary; Molly 
Boyl, parliamentarian; Drew Colliatie, staff assistant; John 
Cuaderes, deputy staff director; Christopher Hixon, deputy 
chief counsel, oversight; Keven Corbin, minority staff 
assistant; Jill Crissman and William Miles, minority 
professional staff members; Carla Hultberg, minority chief 
clerk; Chris Knauer, minority senior investigator; Dave 
Rapallo, minority staff director; and Suzanne Sachsman Grooms, 
minority chief counsel.
    Mr. Gowdy. The committee will come to order.
    Let me thank everyone for their patience and indulgence. I 
apologize for the vicissitudes of our voting schedule. We are 
sorry for any inconvenience.
    I will start this hearing as we do all of our oversight 
hearings by reading the mission statement.
    We exist to secure two fundamental principles: First, 
Americans have a right to know that the money Washington takes 
from them is well spent, and second, Americans deserve an 
efficient, effective Government that works for them. Our duty 
on the Oversight and Government Reform Committee is to protect 
these rights. Our solemn responsibility is to hold Government 
accountable to taxpayers because taxpayers have a right to know 
what they get from their Government. We will work tirelessly in 
partnership with citizen watchdogs to deliver the facts to the 
American people and bring genuine reform to the Federal 
bureaucracy. This the mission of the Oversight and Government 
Reform Committee.
    If the witnesses would like, they can come to the table at 
this point. Thank you.
    I will recognize myself for an opening and then recognize 
the gentleman from Illinois.
    The purpose of the Oversight Committee is not necessarily 
to balance the relative merits or demerits of a law or proposed 
legislation. Other committees do that. Oversight is calculated 
to ensure trust and confidence in the institutions of 
Government, to investigate areas that demand transparency and 
accountability. Our duty is to ask fair questions with an 
expectation of an honest and complete answer on behalf of the 
people we represent. That is why we are here today.
    Many in this room, including myself, fundamentally oppose 
the health care legislation passed last year. We have serious 
concerns with Federal mandates on individual citizens and 
massive new government spending programs in such an austere 
fiscal environment, but those conversations are reserved for 
other forums.
    The current health care law was marketed to the American 
people as a means to provide high quality health coverage 
options to every citizen in our country while ensuring that 
those who like their current coverage can keep it. Over the 
past year, it has become abundantly clear that companies are 
having trouble complying with the new law. In order to escape 
the onerous burdens placed on businesses by this legislation, 
many of these companies have sought waivers from the Secretary 
for Health and Human Services, with varying levels of success.
    The necessity of these waivers arose because many companies 
employ a health coverage strategy that provides some employees 
with mini-med plans that run afoul of current Federal rules 
mandated by the new health care law that set a minimum annual 
dollar limit on essential benefits that health care plans must 
provide in 2011, 2012, and 2013. Thus, the myth that if you 
like your current health care you can keep it has been exposed 
for around three million employees.
    Through an amorphous process shrouded in ambiguity and 
understood by few, the administration has exempted over 1,000 
companies from certain requirements and at the same time has 
neglected to afford others the same accommodation.
    Our first question today is substantive: In light of over 
1,000 companies requesting waivers from the burdens of this 
law, what did the President mean when he said, ``If you like 
your health insurance, you can keep it,'' and what are the 
failings of this law that necessitate a waiver process to begin 
with?
    Further, the entire waivers process is predicated on the 
ability of the Secretary to grant waivers in the first 
instance. However, this seemingly fundamental step--the 
statutory basis for waiving compliance with the law--appears to 
have been wholly neglected by the plain language of the 
statute. What is the legal authority by which the Secretary can 
grant waivers? Where in the health care law does it 
specifically grant the Secretary the authority to waive 
compliance with the law?
    Congress all too often in recent memory has abdicated its 
law making responsibilities to employees or appointees in the 
executive branch who are not elected and are not accountable 
via popular election to the American people. It is not 
Congress' job to simply pass big ideas and leave the details to 
another entity. It is also not the job of agencies to invent 
statutory authority where none exists.
    However, the most important questions today concern the 
procedural aspects of this highly nebulous process. Initially, 
how were these waivers advertised before a link was placed on 
the HHS Web site? What was the process by which subsequent 
waivers were applied for, reviewed, accepted, denied, 
determined, and appealed?
    The American people expect open and honest answers to these 
legitimate questions. Waivers to the health care law have 
widespread implications, implications that demand transparency 
and accountability from the Federal Government.
    In order for companies to compete on a level playing field, 
as is the custom in our country, they must know their burden of 
proof--the standards their applications will be evaluated by. 
They must know why certain companies' applications were 
accepted and others were denied. There must be an identifiable 
process, not a labyrinthine morass of vague standards with no 
statutory definitions.
    The waivers process, such as it is, lends credence to the 
conventional wisdom surrounding enactment of this 
transformative law. People don't know what is in it or how 
specific provisions are affecting America's business and 
individuals. These are due process, equal protection, and 
fundamental fairness questions that are essential to be asked 
and also to be answered.
    [The prepared statement of Hon. Trey Gowdy follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Gowdy. I will now recognize the distinguished ranking 
member, Mr. Davis, for his opening statement.
    Mr. Davis. Thank you very much, Mr. Chairman.
    Let me just say that in the relatively short time that you 
have been chairman, you have selected two hearings that I think 
are very important. I thank you first for the one dealing with 
education and trying to make sure that all of our citizens have 
access, especially those in the city of Washington, DC. I also 
thank you for dealing with health care, which is what we are 
going to be discussing today. So I thank you for yielding.
    The subcommittee's first hearing was on the issue of 
improving access to quality public education. The second one we 
convened to discuss how best to ensure the public's access to 
quality health care coverage. Given the significance of these 
two issues for the American people, I think this subcommittee 
is off to a great start.
    However, I do want to point out that our colleagues on the 
Energy and Commerce Committee conducted a similar hearing on 
this topic less than a month ago that pretty much already 
answered the question as to why the waivers are needed during 
the 3-year implementation period. So it is my hope that today's 
hearing will actually provide us a chance to conduct oversight 
of HHS's mini-med waiver process with the intent of discussing 
how the process could be improved versus spending time debating 
whether such a process should even exist.
    With the 1-year anniversary of the enactment of the Patient 
Protection and Affordable Care Act just a little over a week 
away, today's hearing, entitled Obamacare: Why the Need for 
Waivers?, basically helps to show why passing health care 
reform and ensuring quality affordable coverage for all 
Americans was so important. The landmark legislation called for 
the end of low cost mini-med health plans which offer far too 
many hard working Americans inadequate benefits and a false 
sense of protection.
    While the elimination of lifetime and annual limits on the 
amount of coverage to be paid by a health insurance plan was a 
key aspect of health care reform, no one really expected this 
sweeping and monumental change to be fully implemented 
overnight. This is why the act envisioned a transition period 
between 2010 and 2014 to allow for the reasonable conversion of 
millions of people from poorly designed, limited benefit plans 
to plans that provide more comprehensive health care coverage.
    I understand that in order to get us to the point where all 
Americans have access to enhanced health care coverage, the 
Secretary of Health and Human Services is gradually phasing out 
these substandard plans in a manner that does not subject 
consumers to hefty premium increases or reduce overall access 
to coverage. Hence the issuance of 1 year waivers to businesses 
that have demonstrated their inability to meet new coverage 
limits this year.
    Despite claims to the contrary, HHS's Section 1001 waiver 
process has been transparent, as evidenced by the multiple 
publications of regulations governing process in the Federal 
Register and the wealth of information and guidance on the 
annual limit waiver application process available on HHS's Web 
site.
    In addition to transparency, the process has also been 
fair. More than 94 percent of applicants who applied for 
waivers received them. And let the record show that most of the 
waivers issued went to non-union plans.
    In fact, the waiver process we are discussing this 
afternoon may actually serve as a best practice example of good 
governance for other agencies to follow when engaging American 
public and business communities.
    Mr. Chairman, I am glad that today's hearing provides us an 
opportunity to discuss some of the benefits of the Affordable 
Care Act and its ultimate impact on improving access to high 
quality and affordable coverage for all Americans. I thank our 
witnesses for being here with us this afternoon and look 
forward to their testimony.
    [The prepared statement of Hon. Danny K. Davis follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Davis. Mr. Chairman, while I am closing, I know that 
there are a number of members of the Committee on Oversight and 
Government Reform who are not members of this subcommittee who 
may wish to participate this afternoon. I would ask unanimous 
consent that they be allowed to do so.
    Mr. Gowdy. Without objection, so ordered.
    Thank you, Mr. Davis.
    The Chair would recognize the gentleman from Arizona, Dr. 
Gosar, for his opening statement.
    Mr. Gosar. Chairman Gowdy, Ranking Member Davis, and our 
tireless committee staff, thank you for holding this important 
hearing today. I look forward to delving into the important 
issues at hand. Thank you also to our witnesses for sharing and 
appearing today on our behalf.
    Almost 1 year ago, the President signed into law what he 
and the House at the time called comprehensive health care 
reform. At the time, House Speaker Nancy Pelosi said, ``We have 
to pass a bill so we can find out what is in it.'' As we learn 
more about this immense piece of legislation, we find it gives 
unelected bureaucrats unprecedented ability to dictate the 
parameters of an individual's health care. It also dictates 
what type of coverage small business owners can offer their 
employees. Needless to say, there is much cause for concern.
    Specifically, Section 1001 of this onerous law eliminates 
lifetime and annual limits on the amount of coverage a health 
insurer is required to pay. It turns out that millions of 
Americans use these annual limit plans and are satisfied with 
them. So the Center for Consumer Information and Insurance 
Oversight, CCIIO, was instructed by the Secretary to grant 
waivers to this elimination and therefore allow businesses to 
continue offering annual limit plans.
    On March 14, 2011, CCIIO Director Steve Larsen, who is here 
with us today, said that for the first year we will set up this 
fairly straightforward, simple process and that we are now in 
the process of evaluating the plans out there and what is the 
best guidepath to 2014. I think that today we will discover 
that, indeed, the waiver process was not straightforward or 
simple at all.
    On March 23, 2010, the so-called Health Care Reform bill 
was signed into law. Only 3 months later on June 28th, Health 
and Human Services issued an interim regulation that created a 
Section 1001 waiver. On September 3rd, the Agency issued 
further guidance listing vague criteria through which 
individuals and employers could qualify for a waiver. On 
December 8th, HHS finally issued a waiver application.
    Yet even without this application, HHS granted over 300 
waivers. How? What day was the first waiver granted? To date, 
over 1,000 waivers have been granted to Section 1001, saving 
2.4 million Americans from being kicked off their health care 
coverage. I submit to you, ladies and gentlemen, that HHS has 
not whatsoever made this process straightforward or simple.
    Take, for example, HHS's Web site on the screen above. 
There is no provision on the homepage for a waiver application 
or even for OCIIO, which is now called CCIIO. Or is it EE-I-EE-
I-O? I feel like Old MacDonald Had a Farm with these acronyms.
    Let us assume that you are well acquainted with this 
arduous process to search for CCIIO. It turns out that CCIIO 
has a homepage. If you click to the bottom of that page--follow 
us along--and scroll all the way down to the bottom left, you 
will see Regulations and Guidance. This is far from clear to 
the average Joe, who turns out to need to click right here. 
Under Regulations and Guidance see Annual Limit Waivers. Under 
Annual Limit Waivers there are four, count them, four guidance 
regulations. Good luck combing through those.
    As you can all see from this demonstration, there is a long 
way to go and a lot to examine before we can claim to have a 
transparent, easy process for America's job creators to 
navigate this law.
    Add in the cost. Where did the money for CCIIO come from? 
Was it shifted from our priorities in HHS's or CMS's budgets 
like dialysis centers and others services for the needy and 
sick?
    How did these special waivers find their way into the 
earliest days of this timeline without a waiver process? Were 
special favors involved? Why wasn't a blanket waiver issued as 
with other flawed parts of this attempted Government takeover 
of health care?
    These are a mere sampling of questions I hope you are ready 
to answer. I know inquiring minds throughout America want and 
need to know.
    Thank you, Mr. Chairman.
    Mr. Gowdy. Thank you, Dr. Gosar.
    HHS produced to this committee guidance concerning standard 
operating procedures. I would ask unanimous consent to insert 
into the record the HHS guidance governing standard operating 
procedures.
    Hearing no objection, it is so ordered.
    [The information referred to follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Gowdy. I will now recognize the ranking member of the 
full committee, the gentleman from Maryland, Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman, to you and 
to our ranking member.
    Next week is the 1-year anniversary of the Patient 
Protection and Affordable Care Act. This landmark health care 
reform bill prevents insurance companies from denying children 
health insurance because of preexisting conditions, prevents 
insurance companies from dropping beneficiaries simply because 
they get sick, provides small businesses tax credits to extend 
coverage to their employees, and provides seniors with a 50 
percent discount on brand name drugs through Medicare Part D.
    Another significant improvement this law made was to direct 
the phaseout of so-called mini-med insurance plans that place 
restrictive limits on coverage. These plans provide meager 
benefits and often leave patients high and dry when they become 
ill or are involved in an accident.
    For example, a Wall Street Journal article in September 
2010 featured a prominent fast food chain that offers its 
hourly employees a limited benefit plan that caps annual 
benefits at only $2,000. This plan covers almost nothing when 
someone needs serious medical care. A single trip to the 
hospital could cost tens of thousands of dollars and leave 
beneficiaries without coverage or with extensive out of pocket 
costs.
    In July 2009, the New York Times featured a story about a 
man whose limited benefit health plan capped hospital services 
at $10,000. When he had to have a heart procedure, his 
insurance plan covered only a fraction of his $200,000 hospital 
bill. As a result, he and his wife were forced into bankruptcy, 
like many Americans, despite the fact that he was supposedly 
insured.
    Former health care executive Wendell Potter referred to 
these plans as essentially fake insurance. The reality is that 
people with mini-med plans often do not realize how terrible 
their health insurance is until they get sick or hurt and 
really need it.
    The Affordable Care Act directed the phaseout of these 
deficient plans, but it also gave the Secretary of HHS 
authority to create a waiver process. This is a temporary fix 
to help employers that offer mini-med plans whose premiums 
would increase in the short term with an abrupt transition to 
high or no annual limit plans. In 2014, waivers will not be 
necessary because consumers will have access to comprehensive 
coverage through State health care exchanges that reduce 
premiums by increasing competition and spreading risk.
    There have been allegations on the Republican side that the 
HHS waiver process has been neither transparent nor fair but 
the facts do not bear this out. According to Agency data, HHS 
has approved waiver applications for 1,040 plans and rejected 
only 65. The overall approval rate is 94 percent. Allegations 
that unions have received preferential treatment also appear 
unsubstantiated. According to the same data, HHS approved 85\1/
2\ percent of waiver applications from union plans or plans 
serving union members and 97.4 percent of non-union waiver 
applications.
    Unfortunately, today's hearing seems to be little more than 
a do over of a hearing held last month by the Energy and 
Commerce Committee--the same allegations, the same documents, 
and even the same HHS witness.
    At that hearing, Ranking Member Henry Waxman issued a 
memorandum analyzing 50,000 pages of documents provided by HHS 
that found no merit to these allegations. I would like to make 
that memo part of our official hearing record.
    The memo also pointed out that various industry applicants 
were in fact very happy with the waiver process, thanking HHS 
repeatedly for their prompt and courteous attention.
    Mr. Chairman, our committee can play a positive role in 
making sure the Affordable Care Act is implemented effectively. 
Rather than using the 1-year anniversary to criticize a process 
that has been incredibly flexible and favorable to the 
industry, let us work together to make sure that real health 
insurance coverage is extended to 32 million Americans who do 
not have it today.
    I am very pleased to see one of our witnesses, Steve 
Larsen, who played a major role when I was in the State 
legislature in Maryland for 15 years. He has served in many, 
many roles. I can say that of all the public servants I have 
worked with, he is one of the most honorable, honest, 
efficient, effective public servants I have ever met.
    With that, I yield back.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Gowdy. Thank you, Mr. Cummings.
    The Chair would now recognize the chairman of the full 
committee, the gentleman from California, Mr. Issa.
    Chairman Issa. Thank you, Mr. Chairman.
    As the ranking member said, another committee has looked 
into this problem. And it is a problem when over 1,000 waivers 
need to be granted, whether it is 94 percent, 85 percent, or 
100 percent. You ask is the Patient Protection and Affordable 
Care Act ready for prime time. The answer clearly is it is not. 
It was ill conceived run through in a manner that Speaker 
Pelosi ``wisely'' said let's pass it so we can find out what's 
in it. That, in fact, is the reason that these thousands of 
pages are only now being analyzed to find out that compliance 
is not available.
    And contrary to what the ranking member said, it is likely 
that a year from now waivers will continue to be granted, and a 
year from then and a year from then. Why? Because, as President 
Obama has admitted, it is hard to bend down the health curve. 
It is hard to do some of these things. In fact, many of the 
goals of the Affordable Care Act will not ever come to pass.
    Health care continues to spike and spiral up. What was 
considered to be a Cadillac plan based on dollars just a year 
ago would now be undoubtedly a Bentley plan today.
    As we look at this on every committee of jurisdiction, 
including ours, let us bear in mind that two million workers 
out of uniform and another million workers in uniform are part 
of a Government health care plan that we oversee. Additionally, 
Indian health care and plenty of other plans continue to have 
the problem of spikes in cost with no likelihood of abatement.
    Our committee has a responsibility to find ways to insure 
and protect Federal workers through an affordable health care 
plan. We additionally have an obligation to see that this law 
passed lives up to its goals or is rescinded.
    The committee must look at this in light of its post-
passage spike in cost and the admission by the President 
himself that the cost curve is, in fact, not being bent down. 
Sixteen million, not 32 million, uninsured Americans will be 
covered. They will be covered based on Medicare, one of the 
most inefficient delivery systems that we can find. So this 
committee is dedicated to being honest about what a law is or 
is not doing and seeing that, in fact, inefficiency in 
government goes away.
    As most members of this committee are becoming acutely 
aware, Medicaid is not the right way to provide health care 
coverage. Yet we continue to see waivers for conventional 
systems that were vilified during the legislation while we see 
an expansion of Medicaid, one of the least affordable--from a 
cost standpoint--ways to provide health care. It is in my State 
of California well known that Medicaid patients are actually 
more likely to show up at an emergency room than the uninsured 
overall.
    This and other factors tell us that we need to look at all 
aspects of this, not just the 1,040 applicants granted waivers. 
With that, Mr. Chairman, I thank you for doing our committee's 
work.
    I would reserve a point of order on the ranking member's 
request to put the work already in another committee into our 
record. I believe it is our practice to put in limited amounts. 
If there is a specific citing that the ranking member would 
like to limit to, I would remove mine. But to simply put Mr. 
Waxman's full activities in I think would be inappropriate. He 
left this committee. He is in another committee. It is in his 
record.
    With that, I yield back.
    Mr. Gowdy. Thank you, Mr. Chairman.
    The Chair would now recognize the gentleman from Missouri, 
Mr. Clay, for his opening statement.
    Mr. Clay. Thank you, Chairman Gowdy.
    When a party is in the minority, without the authority and 
responsibilities of the majority, some nuisance tactics are to 
be expected. But being in the majority changes things, or at 
least it should.
    Take, for instance, the title of this hearing. The use of 
the term Obamacare is not helpful in any way. I think it is 
purposefully provocative. We all know that using a negative 
catchy term for the President's signature domestic program, a 
program that affects each and every American in many positive 
ways and fundamentally reforms health care in this country for 
the better, is red meat for red States. We all know that.
    The Affordable Care Act protects sick people from being 
dropped by insurance companies because they get sick. If my 
Republican colleagues believe that insurance companies are to 
be allowed to drop sick people from coverage once they get 
sick, they ought to say it. The health care reform legislation 
protects people from being denied coverage by insurance 
companies because they have preexisting conditions. If someone 
really believes that insurance companies ought to be able to 
deny coverage to people with preexisting conditions, they 
should say so.
    Health care reform, an unfulfilled dream of both Republican 
and Democratic presidents for decades, means positive changes 
for virtually all Americans. If you want to roll back the 
progress that we finally achieved and leave Americans without 
health insurance, without health care, and without health, you 
should tell the American people that straight out.
    But clearly it is unhelpful to use misleading terms and 
slogans like death panels and Obamacare. Reducing the 
President's signature domestic program, one that benefits all 
Americans, to a misleading term detracts from real oversight. 
It is also unfair. It would be like Democrats reducing the 
previous administration's signature domestic program that 
benefited all Americans. Well, if someone could remind me what 
that was, it would be unfair to call that program a negative 
nickname, too.
    Mr. Chairman, I yield back.
    Mr. Gowdy. Thank you, Mr. Clay.
    I would point out that people within this very 
administration have called this piece of legislation Obamacare. 
I do not recall any moral outrage at the use of the terms Bush 
Tax Cuts, Bush Wars, Reganomics, or Carter Malaise.
    [Simultaneous conversations.]
    Mr. Gowdy. Anyone who doesn't want to use the phrase 
Obamacare does not have to use it.
    Mr. Clay. But it was paid for or implemented by tax reform. 
So what does it mean anyway?
    Mr. Gowdy. Mr. Clay, are you through?
    Mr. Clay. I am through.
    Mr. Gowdy. I would like to welcome the witnesses at this 
point. Let me also say this: Members may have 7 days to submit 
opening statements and extraneous material for the record.
    We will now welcome our panel of witnesses. We will start 
with Mr. Steve Larsen, who is the deputy administrator and 
director of the Center for Consumer Information and Insurance 
Oversight at the Centers for Medicare and Medicaid services. 
Previously he has served as the Director of Oversight at the 
Office for Consumer Information and Insurance Oversight when it 
was within the immediate Office of the Secretary of HHS.
    I ask a moment of your indulgence.
    [Pause.]
    Mr. Gowdy. With your indulgence, I will introduce everyone. 
Then we will start with you, Mr. Larsen, and go on if that is 
OK with our witnesses.
    I will apologize in advance. My South Carolina upbringing 
may not allow me to pronounce Haislmaier correctly. I am 
willing to get it right if you will correct me and tell me what 
it is.
    Mr. Haislmaier. It is Haislmaier but I even have relatives 
who call it Haislmaier.
    Mr. Gowdy. Well, Haislmaier. Ed Haislmaier is the senior 
research fellow at the Center for Health Policy Studies at the 
Heritage Foundation.
    Scott Wold is an attorney at Hitesman and Wolf, an employee 
benefits law firm located in Minneapolis, MN. Mr. Wold's 
practice focuses almost exclusively on employee benefits.
    Ms. Judy Feder is a professor at Georgetown University 
where she also served as dean of Georgetown's Public Policy 
Institute from 2000 to 2008. She is currently a fellow with the 
Center for American Progress.
    Welcome to all of you. Let me swear you first. I thought I 
was getting away from that when I left the DA's office. 
[Laughter.]
    Let me find the oath. I am going to get you to all rise. 
Raise your right hands.
    [Witnesses sworn.]
    Mr. Gowdy. Let the record reflect that all the witnesses 
answered in the affirmative.
    We will start, Mr. Larsen, with you. We will recognize you 
for your 5 minute opening statement and then we will move from 
my left to right, your right to left, and finish with Dr. 
Feder.

STATEMENTS OF STEVEN LARSEN, DEPUTY ADMINISTRATOR AND DIRECTOR, 
   CENTER FOR CONSUMER INFORMATION AND INSURANCE OVERSIGHT, 
CENTERS FOR MEDICARE AND MEDICAID SERVICES; EDMUND HAISLMAIER, 
 SENIOR RESEARCH FELLOW, CENTER FOR HEALTH POLICY STUDIES, THE 
  HERITAGE FOUNDATION; SCOTT WOLD, SHAREHOLDER, HITESMAN AND 
 WOLF; AND JUDITH FEDER, PROFESSOR, GEORGETOWN UNIVERSITY AND 
    SENIOR FELLOW, CENTER FOR AMERICAN PROGRESS ACTION FUND

                   STATEMENT OF STEVEN LARSEN

    Mr. Larsen. Thank you, Chairman Gowdy, Ranking Member 
Davis, and members of the subcommittee. Thank you for the 
chance to appear before you this afternoon.
    My full testimony has been submitted for the record.
    I serve, as was mentioned, as deputy administrator of CMS 
and director of the Center for Consumer Information and 
Insurance Oversight [CCIIO], within CMS. Since taking on this 
role I have been involved in implementing many of the 
provisions of the Affordable Care Act including overseeing 
private health insurance reforms, establishing the health 
insurance exchanges, and ensuring that consumers have access to 
information about their rights and coverage options.
    Prior to becoming director of CCIIO, I served as the 
director of the Office of Oversight, which worked with the 
States to implement the new insurance rules.
    As director of CCIIO, I am committed to improving the 
health insurance system so that it works for consumers and 
businesses, both now and in 2014 when consumers and businesses 
will have more quality health care options. As part of 
improving the current health insurance system, the Affordable 
Care Act ensures that consumers are provided meaningful and 
reliable coverage for their premium dollars by phasing in 
restrictions on the annual limits insurance policies between 
now and 2014, the subject you have asked me to discuss today.
    Right now, about 160 million Americans get their health 
insurance through an employer. However, not all coverage 
offered by employers is the same. A very small percentage of 
employees are offered policies with low annual limits--caps on 
the amount of benefits that are provided under the policy in a 
given year. Often these policies are provided by employers who 
hire lower wage, part-time, or seasonal workers.
    While having such limited coverage may be better than no 
coverage at all, this coverage unfortunately can fail those 
that need it most. These policies can have high deductibles and 
annual dollar caps as low as $2,500. Some are better with 
$5,000 or even $25,000 in coverage but in the case of a serious 
illness or accident, the coverage can be inadequate.
    In 2014 consumers will be able to purchase fuller health 
insurance coverage in State-based exchanges but, in the time 
between now and 2014, we need to maintain coverage for the 
small percentage of employees with these limited policies until 
better options are available for them in 2014. Immediate 
compliance with the new Affordable Care Act provisions on 
annual limits could cause disruption of this coverage.
    The Affordable Care Act specifically directs the Secretary 
to implement the restrictions on annual limits in a manner that 
ensures continued access to coverage. This is accomplished by 
phasing in the annual limit restrictions for most policies and, 
for this year, we established a waiver process. All employers 
and insurers that offer limited benefit plans may apply for a 
waiver if they demonstrate that there will be a significant 
increase in premiums or a significant decrease in access to 
coverage without a waiver. Applying for a waiver is simple and 
basic with only five elements that CCIIO has clearly published 
on our Web site.
    It is important to note that more than 30 percent of 
applicants have fewer than 100 enrollees. Small businesses are 
able to take advantage of this as well as large ones. We 
administer the process fairly without regard to the type of 
applicant or size of business.
    We have published our standards for reviewing the 
applications in the regulations implementing the law and again 
in the bulletins implementing the regulations.
    The vast majority of waivers, more than 94 percent, were 
granted to health plans that are employer-based. Of the waivers 
approved, 41 percent were to self-insured employer plans, 31 
percent to HRAs, 23 percent to Taft-Hartley plans--these are 
employer plans governed by collective bargaining agreements--
and 3 percent to issuers. Only 2 percent of waivers have been 
granted to union plans.
    The limited benefit plans for which waivers are allowed 
cover an extremely small portion of people who have employer-
sponsored coverage. Since setting up this waiver program, CCIIO 
has granted waivers to plans covering less than 2 percent of 
all covered people in the private insurance market.
    The vast majority of employers who applied for a waiver 
have also reacted to the application process positively. We 
have been open to feedback from applicants and, based on their 
input, we improved the application process so that it is timely 
and responsive to their needs.
    Thank you for the privilege of appearing before you. I 
would be happy to answer your questions.
    [The prepared statement of Mr. Larsen follows:]

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    Mr. Gowdy. Thank you, Mr. Larsen.
    Mr. Haislmaier.

                 STATEMENT OF EDMUND HAISLMAIER

    Mr. Haislmaier. Thank you, Mr. Chairman.
    In keeping with your opening remarks that the policy issues 
are for other committees, in particular the Energy and Commerce 
Committee, which would have jurisdiction, I am not going to 
address that. I will note that in my prepared remarks I did 
give a brief overview of the policy issues just to give the 
members of the committee some background.
    There has been some discussion of the policy issue here. In 
that connection, I would simply like to make one point that 
came up in some of the Members' statements. I think it is 
somewhat relevant here as a policy background.
    When you look at the statute, Congress' intent in this is 
unclear. To say that Congress intended to phaseout these plans 
is actually not true. There is no evidence that Congress 
intended to do that. This was not in the House bill. There were 
no hearings on this provision that I am aware of in the Senate 
bill. That may have been the intention, but there is no 
evidence. One can also say that there is no evidence of the 
other, too, that there was any intention to exempt or preserve 
these things. So Congress has presented a piece of statute here 
that is unclear. That is the first point.
    The second point is with regards to Mr. Larsen and others 
who discussed a phase out, it is important to understand that 
the phaseout that Mr. Larsen and others are discussing is, 
again, a construct that HHS comes up with. There is no 
requirement, suggestion, or any other element in the statute 
with respect to a phaseout.
    Now, what we get to in the end of my testimony and what is 
really at the heart of the question this committee, I think, is 
dealing with is whether this whole process is actually 
appropriate. I think that is a valid question.
    In looking through the statute and the regulation, I was 
able to find, in my view, no actual explicit justification for 
HHS taking the actions that they have in doing the waiver. So 
regardless of what one thinks about these particular plans or 
what one thinks about whether Congress intended to get rid of 
them, intended to keep them, intended to do it quickly or 
later, the question relevant to this committee is, does HHS 
have the authority to do it? It does not appear to me that they 
do, but I am open to hearing the arguments of people who maybe 
have more expertise in regulatory law than I do.
    The other question that occurred to me is, could a 
reasonable case be made by HHS that, whether it had authority 
or not, Congress had put it in an impossible situation in the 
statute and that the Agency or the Department could only 
resolve the statute through the waiver process. As I indicate 
in my testimony, again, I do not find that to be the case 
either.
    Congress seems to have simply asked HHS for one very simple 
thing: Fill in a number. Congress decided that instead of 
setting a dollar limit in the statute for the interim years, it 
would delegate that to HHS to come up with a number. That is 
what the statute plainly says. So, interestingly enough, HHS 
came up with three numbers.
    When I read the regulation, and I was just looking over it 
again here while I was waiting, I don't see in the regulation, 
maybe Mr. Larsen could point to me if I missed something, any 
explanation of how they arrived at the numbers $750,000 or $1.2 
million or $2 million. Indeed, in the table of data that they 
present, and I am not questioning the data, the breakouts 
aren't according to that. The breakout is half a million 
dollars to a million dollars. Well, how did you get $750,000, 
which is in the middle? There is nothing that tells me. There 
is no idea in here as to where these numbers came from or why 
they did a 3-year phaseout.
    All Congress asked them to do was set an interim--an, one 
interim--number. So clearly, in my view, the statute doesn't 
require this. HHS could have responded to the requirements of 
the statute by simply taking the analysis in the regulation and 
saying that, based on the foregoing analysis, the number prior 
to 2014 shall be, and set the number. Everyone would then have 
known what it was and could determine on their own whether they 
needed to comply or not.
    Finally, the question is a public policy question of 
whether this kind of waiver process is appropriate or desirable 
in public policy. I would argue for several grounds that it is 
not desirable for this particular kind of a waiver process in 
public policy. While there is no evidence I am aware of of 
corrupt practices, it certainly invites the temptation or the 
opportunity for favoritism. It certainly does provide for 
unequal application of the law. It furthermore creates the 
perception, and possibly the fact, that the regulatory process 
is being used or subordinated to political ends as opposed to 
simply enforcing the law that Congress wrote.
    So I think there are many reasons to question the 
suitability of the entire process.
    Thank you for your patience and your time, Mr. Chairman. I 
will be happy to answer questions from the committee.
    [The prepared statement of Mr. Haislmaier follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Gowdy. Thank you.
    Mr. Wold, we will recognize you for your 5 minute opening 
statement.

                    STATEMENT OF SCOTT WOLD

    Mr. Wold. Thank you, Mr. Chairman and members of the 
committee.
    As you mentioned, I am an employee benefits attorney. On a 
daily basis I work with employers both large and small with 
respect to their employee benefits plans. So in the last year 
since the Patient Protection and Affordable Care Act was 
passed, as you can imagine, we have spent a large amount of 
time working with this particular law as it applies to our 
clients and their plans. I am here today to talk about one 
particular aspect of that experience over the last year, that 
is with respect to the waivers from the annual limit 
restrictions.
    First I would like to note how as an attorney I became 
aware of this program or this process. We did review the 
legislation, at least the parts of the legislation that applied 
to employer benefit plans. And we did very closely monitor 
regulatory implementation. When the regulations came out, we 
took a close look at those. So the first time I learned of the 
possibility of a waiver program was in June when the 
regulations on the annual and lifetime limit restrictions were 
published.
    I noted in reviewing those regulations that there was 
authority given to the Department to issue or create a program 
providing waivers for certain types of plans.
    The regulations didn't contain a lot of detail and so we 
didn't really learn much about the program itself until later 
in September when the first piece of guidance was issued 
regarding the program itself.
    As an attorney we subscribe to a number of different 
benefits news publications, I guess I would call them. 
Typically they are online. So either daily or weekly we get 
informed of different developments that are occurring in the 
employee benefit area. It was through those processes that we 
learned about the guidance being issued with respect to the 
waiver program, and of course we went out and reviewed it. I am 
not aware whether it was publicized in any other way, but that 
is how I became aware of it and as an attorney we certainly 
monitor those types of things.
    One of the things that we then did was we worked with a 
number of employers in applying for the waivers. Most of our 
experience was not in the context of mini-med plans. There has 
been discussion of mini-med plans and how the waivers are 
applicable to them. We do have clients with mini-med plans and 
have applied for waivers for those plans. But a number of our 
clients and most of our experience in this area has to do with 
health reimbursement arrangements.
    Health reimbursement arrangements are not traditionally 
thought of as mini-med plans. They are typically used to 
supplement other group health plan coverage. They are an 
account-based, defined contribution health plan. The employers 
will make those available so that employees can have dollars to 
use to reimburse out of pocket expenses.
    HRAs have really been, I would say, largely ignored in this 
whole process. They are group health plans and they are subject 
to these rules in general. In the preamble to the interim 
regulations there was a specific exemption provided to certain 
health reimbursement arrangements, something called integrated 
HRAs. The problem was that there was no definition or any 
guidance provided as to what an integrated HRA is. So there has 
been a lack of clarity in the benefits community about which 
HRAs are subject to these annual limit restrictions and which 
are not.
    In addition, it was never clear, at least from the 
published guidance, whether HRAs could apply for waivers. The 
guidance talked about mini-med plans or limited benefit plans 
but there was no mention of HRAs. We did some investigation. We 
called the Department and informally got an answer that, yes, 
HRAs could apply for these. That is how we were able to go 
through that process with our clients who sponsor HRAs.
    The difficulties we experienced, especially with our 
clients who sponsor health reimbursement arrangements, suggest 
to me that the waiver process was not the best method to go 
about providing this relief. I won't take a position on whether 
the relief was actually needed or a good idea, but I think once 
it was decided that some of these plans would have time to 
continue to be maintained as they were, the waiver process 
created a number of challenges to employers. There may have 
been a better way to do that.
    Thank you.
    [The prepared statement of Mr. Wold follows:]

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    Mr. Gowdy. Thank you, Mr. Wold.
    Dr. Feder.

                   STATEMENT OF JUDITH FEDER

    Ms. Feder. Thank you, Chairman Gowdy, Ranking Member Davis, 
and members of the subcommittee and committee. I am glad to be 
with you today. I am happy to testify on the Affordable Care 
Act and its implementation.
    Because of its importance, an ever growing body of research 
tells us that assuring Americans affordable health care and 
affordable insurance matters enormously to their health and 
well-being. As you noted in the outset, almost exactly a year 
ago the Affordable Care Act [ACA], was enacted to provide that 
assurance. The law assures most, if not all, Americans 
essential health insurance coverage by building upon, not 
replacing, the current health insurance system, securing what 
works and fixing what doesn't.
    Today, about 170 million Americans get health insurance 
through employment. The Affordable Care Act strengthens job-
based health insurance through consumer protections like the 
prohibitions on annual or lifetime limits on benefits and 
through penalties on employers with more than 50 employees who 
use newly available tax credits to purchase insurance directly 
because their employers do not offer affordable coverage. 
According to the Congressional Budget Office, under the ACA, 
job-based coverage will remain in the future the primary source 
of health insurance coverage for working Americans that it is 
today.
    At the same time that the Affordable Care Act secures what 
works in providing health insurance, it fixes what is generally 
recognized as broken--the non-group health insurance market. 
Although in theory people who do not get coverage through their 
employers can buy it on their own, in practice the non-group 
market is not a safety net. On the contrary, insurers survive 
in this market by attracting and ensuring that they attract 
consumers when they are healthy and avoiding us when we are 
sick.
    To address this problem, the Affordable Care Act takes what 
is often referred to as a three-legged stool approach. You need 
all three legs to make the stool work. Unless we require health 
insurers to take us all, regardless of our health needs and 
without extra charges for preexisting conditions, people will 
be denied coverage they need. Insurers can only accept all 
comers if they can expect all of us to buy insurance when we 
are healthy and not to wait until we are sick. We can only 
expect everybody to buy health insurance if they get help to 
pay premiums if they can't afford them, help the ACA provides 
in the form of tax credits.
    The Congressional Budget Office estimates that with 
arrangements under the ACA, about 19 million people will be 
covered through health care exchanges and receive tax credits 
by 2019. Another 16 million people on top of coverage projected 
under pre-ACA law will be covered through Medicaid.
    This Medicaid expansion reflects another fix in the ACA. 
Today, the same low wage workers whose employers don't offer 
coverage have been denied Medicaid benefits as well, no matter 
how low their incomes. Fortunately, the ACA brings an end to 
this discrimination by extending Medicaid at full Federal 
expense to all individuals whose incomes fall below 133 percent 
of the Federal poverty level.
    Though sorely needed, changes in our health insurance 
system can't take place overnight. The ACA is designed to 
strengthen and extend the health insurance coverage Americans 
count on, not to disrupt it. The law recognizes that building 
new marketplaces will take time. Until the full set of new 
insurance rules and subsidies are in place, people who have 
inadequate coverage may want to hold onto it despite its 
limitations. Therefore, the administration has been willing to 
grant waivers from some of the law's early requirements which, 
if fully imposed, might leave some people with nothing.
    The aim of the law's early requirements and benefits is to 
make matters better without making them worse until the full 
law goes into effect in 2014. Far from indicating weaknesses in 
the Affordable Care Act, these waivers reflect its strength in 
matching requirements with capacity. It behooves administrators 
of the ACA to be sensitive to disruptions alongside 
improvements and to assure a balance that enhances people's 
protections as the law intends. It behooves overseers of the 
law's implementation to recognize the big picture, the enormous 
problems the Affordable Care Act was enacted to address.
    It is designed to strengthen what works, fix what is 
broken, and avoid unnecessary disruption. Its potential, when 
fully implemented, is to end discrimination based on 
preexisting conditions and assure most, if not all, Americans 
access to affordable health insurance coverage. All of us 
should be working to make sure that we move as quickly and as 
smoothly as possible to get us from here to there.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Feder follows:]

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    Mr. Gowdy. Thank you, Dr. Feder.
    Let me say this to our witnesses and to our guests in the 
audience: One thing that you will find total unanimity on in 
this subcommittee is our desire to be good stewards of your 
time as well as the time of the people who are gracious enough 
to be with us. I am informed that votes are imminent. What I 
would propose to Mr. Davis and to my colleagues is that we 
continue on until votes are called, that we adjourn long enough 
to go cast our votes, and then that we come back and that we do 
it as quickly as we can to be good stewards of your time.
    I will recognize myself for 5 minutes at this point.
    Mr. Larsen, I am not going to spend any time quarreling 
about the statutory authority for waivers. I am not even going 
to discuss the substantive aspects of the health care law. What 
I want to focus on is the waiver process.
    Can you tell me when the waiver process was first made 
public?
    Mr. Larsen. Yes, thank you, Congressman. I think, as was 
mentioned, the regulations that identified the phase in of the 
annual limits as well as the waiver process were published, the 
interim final rules, in June. Within 90 days of that, I think 
on September 3rd, we published the first bulletin that laid out 
the waiver process and what we think were very simple and 
straightforward provisions of the application process for the 
public.
    I think it was mentioned that there wasn't an application 
initially. In fact, in order to make the process very simple, 
we just laid out the types of information that an applicant 
could provide. Later on as we got more applications, to improve 
the process we did develop a form that people were to use 
online, a spreadsheet if you will.
    Mr. Gowdy. Let us assume it is September 3rd. Were there 
applications for waivers that were made prior to September 3rd?
    Mr. Larsen. Not to my knowledge.
    Mr. Gowdy. Were there waivers granted prior to September 
3rd?
    Mr. Larsen. Not to my knowledge. We didn't have the 
application process set up.
    Mr. Gowdy. That is my point.
    Mr. Larsen. Right.
    Mr. Gowdy. Are you sure there were no requests for waivers 
prior to September 3, 2010.
    Mr. Larsen. Requests for waivers?
    Mr. Gowdy. Requests. Applications or requests.
    Mr. Larsen. I have been advised that there were three.
    Mr. Gowdy. What process did you use, given the fact that 
there was no public process that had been promulgated at that 
point for those three?
    Mr. Larsen. I assume that they were held until we set the 
process up. That is my assumption.
    Mr. Gowdy. When you say process, are you referring to the 
regulation that used the words large and significant?
    Mr. Larsen. No, when I say we set up the process, I am 
referring to the bulletin that we issued in September. That was 
when we identified that there was a process in place. We issued 
the regulation and then we established the process through what 
we referred to as sub-regulatory guidance, which is the 
bulletin that we put out in September.
    Mr. Gowdy. So your testimony is that there were three 
applications, whether that is formal or informal, for waivers 
prior to September 2010?
    Mr. Larsen. That is my understanding, but I would like to 
confirm that for the committee.
    Mr. Gowdy. OK. So how did the companies know the process 
before you promulgated the regulations?
    Mr. Larsen. Well, again, the regulations were issued in 
June. I would say the regulations did two things among many 
others. This was part of a broader regulation. But with respect 
to the annual limits provisions, we established the tiered 
phase in for annual limits.
    After looking at what was happening in the marketplace and 
what types of annual limits were out there, we established for 
the first year the $750,000 restricted annual limit.
    Again, it is very important to note that the statute 
specifically contemplates that there will be no annual limits 
in 2014 but what it refers to as restricted annual limits----
    Mr. Gowdy. Well, I wasn't going to go to the statute but if 
you are going to bring it up, you will also have to concede 
nowhere does it grant the Secretary the express power to grant 
waivers.
    Mr. Larsen. I am not sure I would agree with that because 
the clear reading of what is there is that there will be a 
phase in of the annual limits provisions.
    Mr. Gowdy. Well, the word waiver does not appear anywhere 
in the statute. Would you agree with me there?
    Mr. Larsen. Well, I will agree that the word waiver does 
not appear in that particular section.
    Mr. Gowdy. OK, that is the one we are talking about.
    Mr. Larsen. But I don't think that is, as a lawyer at 
least, the normal test for whether it is reasonable to 
interpret a statute----
    Mr. Gowdy. Speaking like a lawyer, let me ask you----
    Mr. Larsen. I know you are a lawyer, sir.
    Mr. Gowdy. Not much of one, I was just a prosecutor. 
[Laughter.]
    Let me ask you this: If there is a denial, is there an 
appeals process. What burden of proof does an applicant have to 
make to be considered, rejected, and then considered again?
    Mr. Larsen. Actually, we do have a reconsideration process. 
Again, it is a very simple process. We consistently were guided 
by the principle of making this as easy and as simple as 
possible. We advise applicants that if they are denied, they 
can ask for reconsideration. We will work with them to collect 
whatever additional information we need to look at the 
application again.
    So there isn't a hard and fast burden of proof because our 
goal in implementing this provision was to ensure that 
employees could continue the coverage they had. We didn't want 
to make it burdensome. In fact, if we had to make a choice, our 
objective would be to err on the side of making sure that 
people could continue their coverage. We weren't out to deny 
people. We wanted to make sure that people could continue their 
coverage.
    Mr. Gowdy. I have run into the red light so I will now 
recognize my colleague from the State of Illinois, Mr. Davis.
    Mr. Davis. Thank you very much, Mr. Chairman.
    You know, I was just thinking I know people who swear at 
lawyers and I know others who swear by lawyers. So it just 
depends on who you are looking at.
    Mr. Larsen, the new health care law is intended to phaseout 
what we call mini-med plans. These plans provide low benefits 
and often leave consumers high and dry when it comes to 
actually using them to access medical care. We have heard many 
horror stories about people who rely on these plans thinking 
that they are insured, only to get sick or have an accident and 
be left with nothing.
    In July 2009, for example, the New York Times featured a 
story about a man whose limited benefit health plan capped 
hospital services at $10,000. He had to undergo a heart 
procedure and his hospital bill was $200,000. When it came time 
to pay, his plan provided next to nothing. He and his wife were 
forced to declare bankruptcy despite the fact that he was 
supposedly insured.
    Mr. Larsen, some might conclude that these plans should be 
prohibited immediately. Can you tell us, simply, why do we need 
these waivers at all? Why not just prohibit these horrible 
plans outright?
    Mr. Larsen. Yes, sir. What you describe, I think, is the 
dilemma with these plans. They provide some coverage for the 
employees that can purchase them but in too many cases they 
don't provide sufficient coverage or people don't understand 
that, in fact, they don't have coverage. So with a day or two 
in the hospital, they have reached their limits.
    These really are a bridge to 2014 when fuller, more 
comprehensive, and affordable coverage will be available. 
Although this is not great coverage, or good coverage in some 
cases, it is some coverage. We want to make sure that people 
can maintain access to that coverage through this process. So 
the waiver process permits individuals to continue that type of 
coverage until better coverage is available in 2014.
    Mr. Davis. Now let us take a look at the other side of this 
argument. There are those who have argued that since you are 
approving 94 percent of the waiver applications, that means the 
underlying health care law must be flawed. For example, my good 
friend, Representative Cliff Stearns, Chairman of the House 
Energy and Commerce Subcommittee on Oversight and Investigation 
puts it this way, ``If the law,'' that is the Affordable Care 
Act, ``is so good, why are so many waivers to the law being 
granted?''
    How do you answer or respond to that?
    Mr. Larsen. I would respond that the waiver provision that 
was contemplated in the statute shows that the law is, in fact, 
working because it allows employees to continue this coverage. 
Remember that it is a small percentage of employees, less than 
2 percent. Most people who have coverage have much more 
comprehensive coverage. This allows them to continue it.
    So I would argue or submit that it shows that the law is 
working. The majority of policies that can meet the annual 
limits with minimal impact on premiums will do so. And the 
statutory goal is to ensure that we are phasing out the annual 
limits in 2014.
    Mr. Davis. Then why won't the same employers that are 
seeking waivers today seek them in 2014?
    Mr. Larsen. At that point, we will be much farther along in 
the reform of this very broken health care system. It is 
important to keep in mind that these fixes are a result of a 
broken system where people are denied coverage for being sick, 
are having their policies rescinded, or have limited benefits. 
In 2014, more comprehensive, affordable coverage is available 
for employees of small businesses and individuals.
    Mr. Davis. Thank you very much, Mr. Larsen.
    It reminds me of when my father was explaining the 
differences between how people see things. If you ask is it 
fair for birds to eat worms, you get a different answer 
depending on who you ask. If you ask the bird, you get one 
answer. If you ask the worm, you get another answer. I guess 
they both feel that they are right.
    Mr. Larsen. I hope I am the bird. [Laughter.]
    Mr. Gowdy. Thank you, Mr. Davis.
    The Chair would recognize the gentleman from Arizona, Dr. 
Gosar.
    Mr. Gosar. Mr. Larsen, when did Health and Human Services 
first know about the two million Americans, when they would 
lose their health care coverage even if they liked it? When did 
you first know that two million Americans would lose their 
health care based upon this provision?
    Mr. Larsen. I am not sure I am following your question.
    Mr. Gosar. Well, let us go further. President Obama clearly 
said, ``If you like your health care plan, you can keep it.''
    While limited, mini-med plans provide some coverage to 
about two million people. True?
    [No response.]
    Mr. Gosar. About 1.8 million, to be exact. But the law as 
written and as understood, and we are talking about attorneys--
I am not an attorney, I am a dentist--of 7-11, Lowes, National 
Restaurant Association, National Retail Federation, and the US 
Chamber of Commerce, the bill as written eliminated this health 
care coverage, period. Is that true or not true?
    Mr. Larsen. Not true. As I described earlier, it does two 
things. It sets up a phase in of restricted annual limits 
leading to no annual limits in policies but preserves the 
ability for this small part of the market that has very, very 
low annual limits to continue until we get to 2014.
    Mr. Gosar. Did you know those groups met with the Secretary 
for Health and Human Services in June of last year about that 
very issue?
    Mr. Larsen. I don't think I did. We had meetings with 
groups as well to talk about the development of the waiver 
process. I don't know who met with the Secretary, specifically.
    Mr. Gosar. Who was involved in developing the waiver 
process?
    Mr. Larsen. We developed the waiver process, HHS.
    Mr. Gosar. On your own with no outside inference at all?
    Mr. Larsen. No, our staff developed it. We looked at the 
regulation. We met with stakeholders who had an interest in the 
process. We took their suggestions to heart, which were to keep 
it simple, to make it easy to apply, to make it prompt so that 
it didn't take too long.
    I think we did all of those things. We have a 30 day 
turnaround time. Again, we think it is simple to use. We have 
gotten a lot of positive feedback from a number of groups that, 
in fact, it is very straightforward.
    Mr. Gosar. Mr. Wold, the whole process of this waiver, 
would you call it cumbersome or straightforward?
    Mr. Wold. I would say somewhere in between, probably. In 
some cases, it worked very well for our clients. In other 
cases, it didn't.
    There were certainly issues with respect to identifying 
what information needed to be provided, at least for the early 
applications that we submitted before the application form was 
released. We developed our own template form that we used based 
on the guidance that was in existence. In some cases, that 
worked. In other cases our clients heard back that no, they 
need to provide some additional information or no, we have this 
form now and they need to provide that. So there were some 
cumbersome aspects to it.
    Mr. Gosar. If you were trying to help people along and 
trying to work with them, would you put the waiver form on the 
sixth page, hidden away in your Web-based application?
    Mr. Wold. No, I wouldn't. When we worked with our clients, 
we issued what we call a client alert to all of our clients 
notifying them of this waiver process. We had found the link, 
obviously, by that time and included the link. I would have 
made it more prominent, yes.
    Mr. Gosar. OK. So if you were from outside Washington, DC--
God forbid--and maybe back out in Arizona or California or 
whatever, this is an arduous process, is it not?
    Mr. Wold. I think it is for the average employer, yes. In 
part, that is why they come to benefits attorneys to help them 
with that process. But I think that if you didn't have the 
means to hire a benefits attorney or didn't have a third party 
who is an expert in the benefits field, for the average 
employer it would be arduous.
    Mr. Gosar. So Mr. Larsen, we spent some considerable effort 
upon this Web design. We spent a lot of time and energy trying 
to incorporate the waiver process, did we not? It came at quite 
an expense in time.
    Mr. Larsen. I am sorry?
    Mr. Gosar. To develop the waiver process and to put it on a 
Web-based system took some time?
    Mr. Larsen. You mean for HHS?
    Mr. Gosar. Yes.
    Mr. Larsen. No, I would not describe it as a large expense. 
We had a number of staff working on it. Again, we tried to keep 
it simple. We put it on the Web site. We put out a press 
release.
    Most small businesses even and larger businesses have their 
benefits administered by these third party administrators who, 
by all indications we got, were very familiar with this process 
and were aware of the process. I am not aware of feedback that 
we got that people were not aware of this or troubled by it. 
Even Mr. Wold found it. He spoke with HHS people. He got his 
questions answered, I think. I don't want to speak for him but 
I have read his testimony.
    Mr. Gosar. Thank you, Mr. Chairman.
    Mr. Gowdy. Thank you, Dr. Gosar.
    The Chair would recognize the gentleman from Maryland, Mr. 
Cummings, for his 5 minutes of questions.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Larsen, some of your critics have raised questions 
about the Secretary's authority to issue waivers that allow 
limited benefit plans to be extended and gradually phased out 
by 2014. For example, in a February 10, 2010 letter to you, 
Chairman Issa said that it was unclear which section of the 
Patient Protection and Affordable Care Act grants authority for 
HHS to waive the statutory provisions that end limited benefit 
plans.
    As I understand it, the Affordable Care Act added section 
2711 to the Public Health Service Act. There is a clear 
language in that section that states, ``The Secretary shall 
ensure that access to needed services is made available with a 
minimal impact on premiums.'' Is that right?
    Mr. Larsen. That is correct, sir.
    Mr. Cummings. That is where you get your authority?
    Mr. Larsen. We think that authority is clear in that 
provision.
    Mr. Cummings. As I understand it, this section gives the 
Secretary the authority to pursue a mechanism to phaseout 
limited benefit plans by 2014, but to do it in a way that has 
minimal impact on those plans.
    Under this provision, the Secretary issued an interim final 
rule that explains in detail that issuing short term waivers 
would help phaseout these plans with minimal impact. Is that 
right?
    Mr. Larsen. We did both phaseout annual limits and 
reference the waiver process for mini-meds, yes.
    Mr. Cummings. I thought about this a bit. You seem like you 
would be damned if you do and damned if you don't. If you don't 
give some people some leeway for these mini-med plans to 
continue, people will say you threw people out of their 
insurance. On the other hand, when you provide a waiver for 
them to continue it, they say that the program doesn't work, 
although it isn't supposed to be fully functioning until 2014. 
That is a bit of a dilemma there.
    Would you agree? You don't have to agree with what I just 
said. I am just wondering.
    Mr. Larsen. I think I have said previously that I think 
that had we not been granting waivers for this small number of 
low limit policies, people would be arguing that the law was 
ineffective. So we are, as the President suggested, allowing 
people to keep their coverage through 2014. It is not 
specifically contemplated in the statute and so it is being 
suggested that we are not following the law.
    Mr. Cummings. Your office was given responsibility to issue 
this guidance, address applicant questions, and review 
applications for suitability. Is that right? Is that part of 
your job?
    Mr. Larsen. Yes, sir.
    Mr. Cummings. The committee staff reviewed hundreds of 
pages of comments submitted by interested parties regarding the 
waiver process. They had trouble finding any submissions that 
indicated concern with the Secretary's authority to issue the 
waivers under this provision. Did you know that?
    Mr. Larsen. I am aware that, in fact, most if not all the 
comments are supportive of the waiver process.
    Mr. Cummings. Generally, I would assume that the industry 
supports the waiver process?
    Mr. Larsen. It does.
    Mr. Cummings. How do you know that? You haven't had any 
complaints from the industry? I am sure they didn't come 
running into your office saying, hallelujah, we love this.
    Mr. Larsen. Well, we have gotten comments on the interim 
final rule which were supportive of the waiver process. And in 
the course of administering the process as well, we have 
received positive feedback both from individual applicants and 
trade groups associated with businesses that need waivers.
    Mr. Cummings. Some critics have suggested that the process 
by which annual limit waivers have been issued is biased in 
favor of certain groups such as unions. For example, in the 
February 10, 2010 letter to the Secretary, Chairman Issa made 
this statement: ``The current process gives credence to the 
perception that bureaucrats are picking winners and losers in a 
politicized environment where the winners are favored 
constituencies of the administration.''
    Is that accurate?
    Mr. Larsen. That is not true. We do not favor any 
particular type of applicant or any applicant from a particular 
sector. We have applied the standards that we set out fairly 
across all the applicants.
    Mr. Cummings. Is political support for the Obama 
administration or health care reform a factor your Office uses 
in evaluating applications for annual limit waivers?
    Mr. Larsen. It is not.
    Mr. Cummings. You understand you are under oath?
    Mr. Larsen. I do, sir.
    Mr. Cummings. I think that will be it. I yield back.
    Mr. Gowdy. Thank you, Mr. Cummings.
    The Chair would recognize Dr. DesJarlais.
    Mr. DesJarlais. Thank you, Mr. Chairman.
    Dr. Feder, I guess we will start with you. I was listening 
to your testimony and you seemed pretty confident about the 
upcoming success of the Obamacare, or ACA as you call it. How 
would you rate the Government's management of the Medicare 
system right now?
    Ms. Feder. Of the Medicare system?
    Mr. DesJarlais. Yes.
    Ms. Feder. I know that the Medicare system is 
extraordinarily effective in assuring access to affordable 
health care for the Nation's seniors and those people with 
disabilities that it covers. It has been so for some years. 
That does not mean that it does everything right.
    One of the advantages of the Affordable Care Act is the new 
mechanisms it creates to reform payment mechanisms in Medicare 
to make it much more efficient.
    Mr. DesJarlais. Do you think Medicare is efficient and 
financially stable right now?
    Ms. Feder. I think that health costs are rising. Medicare's 
rate of growth in health care cost per capita has actually over 
the last multitude of years been slower than growth in the 
private sector.
    Mr. DesJarlais. Do you think health care costs are going to 
stop rising?
    Ms. Feder. I think we are going to have to do everything we 
can to make us get better value for the dollar in the system.
    Medicare has in the past been a leader in that effort. The 
private sector has followed when Medicare has been a leader and 
I think that is what we need again.
    Mr. DesJarlais. Do you think Medicaid is a good system and 
that it is financially stable?
    Ms. Feder. When you talk about payment, Medicaid is paying 
a very low rate.
    Mr. DesJarlais. Is it a broken system?
    Ms. Feder. No, it is not a broken system. It is the 
Nation's long term care safety net and enormously valued for 
covering those that it protects.
    Mr. DesJarlais. OK. So you think that the Federal-run 
programs right now, Medicare and Medicaid, are doing pretty 
good?
    Ms. Feder. What I said was I think that they are enormously 
valuable in terms of protecting people. Relative to the private 
sector, they are doing, if anything, better in terms of 
efficiency. But I think we need to improve everybody.
    Mr. DesJarlais. OK, that is a good point. You think it is 
doing better than the private sector.
    Ms. Feder. In terms of its per capita rates of health.
    Mr. DesJarlais. Do you know, prior to the implementation of 
Obamacare, approximately what percentage of Americans rated 
their health care as good or excellent?
    Ms. Feder. I would have to check.
    Mr. DesJarlais. It is about 75 percent.
    How many people was the Affordable Care Act or Obamacare 
supposed to cover? What was uncovered?
    Ms. Feder. The Congressional Budget Office says that it 
will expand coverage by over 30 million people.
    Mr. DesJarlais. OK. You said that 19 million would go in 
the exchange?
    Ms. Feder. Nineteen million in the exchanges receiving 
credit.
    Mr. DesJarlais. And another 16 million would go on 
Medicaid?
    Ms. Feder. Yes.
    Mr. DesJarlais. If you break that down, I guess my math is 
correct, that is about 35 million people that you are saying 
are uncovered right now?
    Ms. Feder. I am saying that the Congressional Budget Office 
says these will be additional people who will receive coverage, 
the expansion of coverage.
    Mr. DesJarlais. Well, the fact that we are having this 
hearing today about waivers makes me feel that maybe the health 
care act itself was flawed and now we are trying to find a way 
to make it look better.
    I guess I have grave concerns about the systems right now. 
In fact, we are about to go vote on a way to keep the country 
running because, as we all know, we are broke and our deficits 
are increasing at remarkable rates. Yet somehow we think that 
we are going to add people to a health care system, decrease 
cost, and increase quality.
    Do you really believe that with increasing health care 
costs?
    Ms. Feder. What I would say--only reiterating what the 
Congressional Budget Office found--is that the law is fully 
paid for, that it actually slows the growth in Medicare 
spending, and that it covers people at the same time. I think 
that is the right thing to do.
    Mr. DesJarlais. Mr. Haislmaier, you haven't had a chance to 
talk much here. Do you have an opinion on any of that?
    Mr. Haislmaier. All of the foregoing is not true, I 
suppose. Look, the hearing really is not about health policy 
but about this waiver process. I could debate with Dr. Feder 
some of her comments all day.
    I just want to make it really clear for the committee that 
there is no mention of a waiver in that portion of the law as 
Congressman Cummings cited. In fact, the preamble to the 
sentence, Congressman, is ``In defining the term restricted 
annual limit for purposes of the preceding sentence, the 
Secretary shall ensure that access to needed services is made 
available with a minimal impact on premiums.'' So the 
instruction to the Secretary in the statute is purely to define 
the term restricted annual limit. It doesn't even contemplate a 
phase-in.
    Mr. Larsen, Mr. Davis, and some of the other Members had 
made the comment that this was intended to phaseout. It may 
have been. If it was, we don't know. The reason we don't know 
is that there is nothing beyond the statute to give any 
indication of congressional intent. This was added later in the 
Senate version of the bill. There were no hearings on this. 
Whether it was or wasn't intended, there is no phaseout in 
here. There is no waiver.
    Finally, Mr. DesJarlais, I could direct your attention to 
one of my footnotes in my paper. I cited that, in contrast, I 
found 21 subsections of this legislation, PPACA, where there is 
explicit new, not existing, waiver authority. There are many 
more that refer to existing waiver authority, but explicit new 
waiver authority was deliberately granted by Congress to the 
Secretary of HHS. That is in 21 separate other sections. And 
there are more instances because in some sections waiver 
authority was granted in more than one place and there were 
also examples where waiver authority was granted to other 
departments outside HHS.
    My point is simply that if Congress had intended for this 
to be a phase in, it should have said so. If they intended for 
it to be a waiver, they should have said so. They did neither. 
HHS has exceeded its authority, regardless of what one thinks 
of the policy. I have offered how you could either abolish 
mini-meds tomorrow or you could wait until 2014. I point in my 
testimony that there are three different ways to do it.
    Thank you.
    Mr. Gowdy. Thank you.
    Given the fact that the bell is sounding, we will recess 
for votes and we will reconvene as quickly as we can all 
reassemble. Thank you.
    [Recess.]
    Mr. Gowdy. The committee will come to order.
    I thank everyone for their indulgence as we went to vote.
    At this point, the Chair will recognize the gentlelady from 
the District of Columbia, Ms. Holmes Norton, for her 5 minutes.
    Ms. Norton. Thank you, Mr. Chairman.
    Mr. Larsen, ladies and gentlemen, this hearing might have 
been called Damned if You Do and Damned if You Don't.
    I want to congratulate you on the 30-day turnaround period 
for the waivers.
    I was interested in the 94 percent acceptance of waivers. 
That seemed a high number. How can you explain that number?
    Mr. Larsen. We have a number of criteria by which we review 
the applications that come in. The vast majority of the 
applicants are able to satisfy the criteria that we have laid 
out in our regulations and our guidance.
    Again, I think it reflects a point I made earlier that the 
goal of the waiver process is to ensure that employees that 
have this type of coverage are able to maintain it.
    So the high approval rate reflects the criteria that we 
apply and the desire to maintain coverage.
    Ms. Norton. So we don't have people left without coverage 
as we convert from one system, or non-system, to another?
    Mr. Larsen. That is correct.
    Ms. Norton. The notion of transparency is a serious charge. 
So far, from what I have heard in this hearing, it strikes me 
that it is a bogus charge. But the way to show that would be to 
have you walk me through the process, so let us start when this 
bill was passed. We are coming upon the anniversary; I think it 
was March 23rd or something of that time.
    Now, under the APA, of course, there has to be notice and 
comment. So the test of transparency is what does the public 
know. What does the general public, including those who are 
most affected on either side, what does the general public 
know?
    You had to go into the Federal Register. When did you go 
into the Federal Register?
    Mr. Larsen. We issued an interim final rule with a request 
for comments in June 2010.
    Ms. Norton. So this bill is passed in March and within 3 
months you are in the Federal Register?
    Mr. Larsen. That is correct.
    Ms. Norton. So people have almost immediate notice that 
they can avoid gaps in coverage.
    Now, let us go further to test the charge of lack of 
transparency. Did you publish any guidance documents that would 
inform someone who wanted to apply of how to apply?
    Mr. Larsen. We did. We issued the first guidance in 
September. I think it was September 3rd or 4th, 2010, within 90 
days of the issuance of the interim final rule. Subsequent to 
that we issued guidance in November further clarifying the 
criteria that we had been applying. Then in December, we issued 
two additional guidance documents on issues relating to 
disclosure, the new sales of mini-meds, and the like.
    Ms. Norton. Did all interested parties have the opportunity 
to submit comments? Were there any complaints that you didn't 
keep the comment period open long enough?
    Mr. Larsen. In fact, the guidance that we issued were in 
many cases in response to comments and concerns that we 
received. We reacted to those and would issue guidance in 
response to the feedback we got from the public or employers.
    Ms. Norton. Did you make adjustments based upon the 
feedback? How would you characterize what effect the comments 
from the public had on the final regulation?
    Mr. Larsen. One example of that is that there is concern 
over whether people know for example, that their mini-med 
policies have annual limits when we grant a waiver. So, for 
example, some of the consumer groups wanted to make sure that 
people who had these policies were given notice that their 
policies had limited benefits. So, for example, in the guidance 
that we issued in the fall, we indicated that people who 
receive waivers should make sure that they are providing 
disclosure to people who are covered under these policies.
    That is a good example of how we got input about public 
disclosure of these and then we put guidance out reflecting 
that input.
    Ms. Norton. Thank you, Mr. Chairman.
    Mr. Chairman, I just want to say as I open my round of 
questioning I think that what the witness has just carried us 
through indicates that, whatever problems you have with the 
health care bill, it is a completely bogus charge to allege 
that there was no transparency in this process.
    I thank you.
    Mr. Gowdy. I thank the gentlelady.
    The Chair would now recognize the gentleman from Illinois, 
Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman.
    Mr. Haislmaier, I know I butchered your name and I 
apologize.
    Let me have at what my colleague on the other side just 
mentioned. This issue of transparency, is that a bogus charge 
as far as you are concerned?
    Mr. Haislmaier. I really can't speak as much to that issue. 
I think maybe some of the others on the panel, maybe Mr. Wold, 
could because I am not an applicant for a waiver. I haven't 
been through the process.
    Mr. Walsh. Thank you.
    Let me quickly go to you, Mr. Wold. Just opine. Is that a 
bogus charge, the transparency?
    Mr. Wold. That is a tough question. I think as a benefits 
attorney the transparency means something different to me than 
to maybe an employer who sponsors one of these plans, given the 
fact that I have access to information and have resources that 
aren't generally used by employers. So, from my perspective, we 
were able to follow the different pieces of guidance. Some of 
our clients had not heard anything about it until we informed 
them about it.
    Mr. Walsh. Mr. Larsen, according to the HHS Annual Limits 
Review and Evaluation Standard Operating Procedures, HHS 
employees must specifically look for whether applicants are 
unions. No similar consideration is made for small businesses. 
In fact, unions are provided two special criteria for 
flexibility, criteria not given to other hourly wage employer 
groups such as restaurants, the retail industry, or seasonal 
workers.
    Does Obamacare provide special consideration for unions and 
not for small businesses?
    Mr. Larsen. We, in implementing the waiver process, do not 
provide any special treatment for any particular type of 
applicant or applicants from a particular sector in 
administering the program.
    Mr. Walsh. Why were HHS employees instructed to 
specifically look for whether applicants are unions?
    Mr. Larsen. I don't recall that the standard operating 
procedures describe it in that way. It may just be because we 
categorize whether they are Taft-Hartley plans or whether they 
are self-insured plans.
    We categorize the type of applicant but if someone is 
categorized as Taft-Hartley, self-insured, or a union plan, 
they don't get any different treatment. There are no different 
criteria applied to them.
    Mr. Walsh. Mr. Haislmaier, do you have a thought on that 
issue?
    Mr. Haislmaier. Yes, it is a little far afield but it is an 
interesting question. Well, it is not far afield. It is 
tangential but it is an interesting question.
    This particular statute is part of what is known as Title 
27 of the Public Health Service Act, which was originally put 
in as part of the Health Insurance Portability and 
Accountability Act of 1996.
    There is the question of regulating insurers and the 
question of regulating employer plans. What is interesting 
about this is that under prior law, HIPAA, ERISA, COBRA, etc., 
this regulation of whether an employer plan passes muster would 
have been the Department of Labor. In fact, if you look at 
these regulations, they are jointly issued, as were the HIPAA 
regulations. Any of these Title 27s are because of the joint 
jurisdiction by HHS, Labor, and Treasury.
    The interesting question to me is how in that process the 
administration suddenly decides that now HHS is going to 
regulate employee benefit plans.
    Mr. Walsh. How do you think that----
    Mr. Haislmaier. I don't know, but it is an interesting kind 
of jurisdictional question that you might want to look into.
    I mean, I know the people at the Employee Benefits Security 
Administration over at Labor. I have worked with them in the 
past. That is traditionally where this kind of thing would go. 
Mr. Larsen's answer that you have these different kinds of 
plans--there is the multi-employer, Taft-Hartley, union, 
trust--these are things that agency at Labor deals with all the 
time.
    Somehow in this jointly issued regulation several things 
happened that are to me quite surprising. One, they took what 
was Congress' instruction to define a term, meaning to set a 
number, and they turned it into three numbers over 3 years, an 
escalation. Suddenly we are talking about a phaseout, which 
isn't in the statute. They then instituted a waiver process 
from that phaseout, which again, as I pointed out, is not 
authorized in the statute in spite of Congress' explicitly 
authorizing a waiver process in 21 other places in the statue. 
Now they have put the enforcement of the regulation not just on 
insurers but on employer plans with Mr. Larsen and HHS, which 
is just contrary to the normal practice that we have had in the 
past in this area of law.
    So I don't know why.
    Mr. Walsh. Thank you.
    Mr. Chairman, I yield back.
    Mr. Gowdy. Thank you, Mr. Walsh.
    The Chair would now recognize the chairman of the full 
committee, the gentleman from California, Mr. Issa.
    Chairman Issa. Thank you, Mr. Chairman.
    Mr. Larsen, I am still a little baffled about this 
question. If it doesn't matter if somebody is unionized or not, 
why would you put out an SOP to recognize whether they are 
covered under a union contract? What is the purpose?
    Mr. Larsen. The purpose in setting out the categories is 
that depending on the applicant, for example, if an insured 
plan applies, you have premiums that are associated with the 
coverage. If you have, for example, a self-insured plan or in 
some cases a collectively bargained plan, you will have premium 
equivalents.
    Chairman Issa. In Obamacare, as a matter of law, is that 
specified?
    Mr. Larsen. I am sorry, what is your question?
    Chairman Issa. Well, I hear all of that. But the fact is 
that if you put into a waiver authority the information, then 
we have to presume the information was seen. If the information 
was seen, it can have an effect on granting or not granting, 
right?
    Mr. Larsen. I wouldn't say that is true. In the case of 
unions----
    Chairman Issa. But the people who are approving waivers 
know who they are approving and they know what their category 
is, right?
    Mr. Larsen. They are aware of how the plans are categorized 
but it doesn't impact how they review the applications.
    Chairman Issa. Let me ask a broader question. With all due 
respect, aren't we disenfranchising smaller businesses by 
granting waivers, which inherently are to those who are smart 
enough and can afford to come and do it?
    Mr. Haislmaier, don't we inherently have in this very 
application process not only things which are extra or outside 
the legislation and therefore not lawful to be done by the 
administration, and if they need to do it they need to come 
back for the authority, which they haven't sought, but don't we 
also have a situation in which we are inherently 
disenfranchising the vast majority who do not have a financial 
capability of coming and asking for waivers because the cost of 
going through the waiver process would be greater than the 
savings?
    Mr. Haislmaier. Mr. Chairman, I did in my prepared 
testimony address that at the end. There is a legal question, 
as we both talked about, as to whether the Department actually 
has the authority.
    But yes, there is this policy question of this kind of a 
waiver process in this or other circumstances. Rather than 
drawing a line that anybody can look up to see which side of 
the line they are on, you are saying come ask us and maybe we 
will let you know. Yes, that will have at least the perception, 
if not the reality, of tending to favor those who are larger 
and better resourced than those who are smaller, less aware, 
and less resourced.
    Chairman Issa. Doesn't this committee and the Congress have 
an obligation under equal protection to find out who the 
disenfranchised are and see that they are given equal 
opportunity? That is what public service announcements are all 
about, trying to inform the public.
    Do any of you know of any effort by the administration to 
inform the employer public or the insurance public that they 
can receive these waivers and to make the cost of doing it de 
minimis? Is there any program of that sort?
    Mr. Larsen. As I testified earlier, we put out the 
bulletins.----
    Chairman Issa. A bulletin? I am an employer, where would I 
have read that bulletin?
    Mr. Larsen. What we found is that 30 percent of the 
applicants that we processed were small businesses. They had 
100 enrollees.
    Chairman Issa. Where did they find out about this?
    Mr. Larsen. We didn't ask them how. I would guess the point 
is that they were able----
    Chairman Issa. Oh, come on. You advertise and then you 
didn't ask how? I have never seen anyone come in that didn't 
ask how people found out about their program.
    So how do gauge the effectiveness of your advertising? Put 
in another way, how do you gauge the effectiveness of spending 
the taxpayers' money?
    Mr. Larsen. We are always open to suggestions for getting 
the word out.
    Chairman Issa. No, no. I am asking how do you do it.
    Mr. Larsen. How do we do what, sir?
    Chairman Issa. Look, Obamacare is an abysmal failure and 
people are being hurt out there by rising health costs. Then 
there is a waiver program that seems to select winners and 
losers fairly arbitrarily. How do you defend that process? More 
importantly, how do you know you are effectively reaching out 
to all of those who could be entitled to the lottery of opting 
out or not?
    Mr. Larsen. Well, it is a good process. We have 30 percent 
in small businesses that are approved. We are able to maintain 
coverage for over two million people.
    Chairman Issa. What percentage of the American public has 
been approved? These waivers, what do they represent in the 
percentage of insured America that is not waivered out?
    Mr. Larsen. I do know that these waivers account for about 
2 percent, a very small percentage, of those who have employer-
based coverage.
    Chairman Issa. OK, so is there anybody else here who sees a 
problem with 2 percent opting out on a program that, in fact, 
is not ready for prime time?
    [Speaker off mic.]
    Chairman Issa. That is a rhetorical question.
    I am astounded that we are having a hearing and every 
answer is we don't know, we will check into it, we think the 
process was fair, we don't have answers to that, or we don't 
think that is true.
    I simply have one closing question. If only 2 percent have 
it and if there is no affirmative plan to enable small 
businesses, of which I have some, to avail themselves of it, 
then how can we feel that it is being done fairly for the 2 
percent that are getting to opt out, a great many of which are, 
if you will, the already advantaged groups of society?
    Mr. Haislmaier. I would say that is exactly the kind of 
problem that this sort of situation creates. It is difficult 
for anyone, Mr. Larsen or anyone else enforcing this, to 
counter the perception that this is not the rule of law but 
that this is actually the rule of who you know. That is why the 
whole mechanism, no matter how fairly or how generously one 
attempts to administer it, the entire mechanism is suspect in 
my view because of that.
    Chairman Issa. Thank you.
    Mr. Chairman, thank you for shedding light on this problem 
of the 2 percent versus the rest of America.
    Mr. Gowdy. Thank you, Mr. Chairman.
    Members will have 5 legislative days to insert comments for 
the record.
    On behalf of everyone on the subcommittee and those who are 
not on the subcommittee but on the full committee that were 
gracious enough to join us, I want thank you for your time and 
your collegiality and professionalism in answering the 
questions.
    The committee stands adjourned.
    [Whereupon, at 4:05 p.m., the subcommittee was adjourned.]

                                 
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