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






     EXPANDING HEALTH CARE OPTIONS: ALLOWING AMERICANS TO PURCHASE 
                 AFFORDABLE COVERAGE ACROSS STATE LINES

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 25, 2011

                               __________

                           Serial No. 112-50









      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

                               _____

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                    COMMITTEE ON ENERGY AND COMMERCE

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

                                  (ii)
                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois               EDOLPHUS TOWNS, New York
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
PHIL GINGREY, Georgia                TAMMY BALDWIN, Wisconsin
ROBERT E. LATTA, Ohio                MIKE ROSS, Arkansas
CATHY McMORRIS RODGERS, Washington   ANTHONY D. WEINER, New York
LEONARD LANCE, New Jersey            HENRY A. WAXMAN, California (ex 
BILL CASSIDY, Louisiana                  officio)
BRETT GUTHRIE, Kentucky
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)


















                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     2
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     4
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     6
    Prepared statement...........................................     7
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     8
Hon. Leonard Lance, a Representative in Congress from the State 
  of New Jersey, prepared statement..............................    94
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................    94

                               Witnesses

Steve Larsen, Director, Center for Consumer Information and 
  Insurance Oversight, Centers for Medicare and Medicaid 
  Services, Department of Health and Human Services..............    10
    Prepared statement...........................................    14
Stephen Parente, Ph.D., Professor of Health Finance, University 
  of Minnesota...................................................    20
    Prepared statement...........................................    22
Christie Herrera, Director, Health and Human Services Task Force, 
  American Legislative Exchange Council..........................    27
    Prepared statement...........................................    29
Stephen Finan, Senior Director of Policy, American Cancer 
  Society, Cancer Action Network.................................    42
    Prepared statement...........................................    45
Paul Howard, Ph.D., Senior Fellow, Manhattan Institute...........    59
    Prepared statement...........................................    61

                           Submitted Material

Letter of April 28, 2011, from Janice K. Brewer, Governor of 
  Arizona, submitted by Mr. Pallone..............................    96
Article entitled, ``Consumer Response to a National Marketplace 
  for Individual Health Insurance,'' The Journal of Risk and 
  Insurance, 2010, submitted by Stephen Parente..................    97

 
     EXPANDING HEALTH CARE OPTIONS: ALLOWING AMERICANS TO PURCHASE 
                 AFFORDABLE COVERAGE ACROSS STATE LINES

                              ----------                              


                        WEDNESDAY, MAY 25, 2011

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:05 a.m., in 
room 2123, Rayburn House Office Building, Hon. Joseph R. Pitts, 
(chairman of the subcommittee) presiding.
    Present: Representatives Pitts, Whitfield, Shimkus, Myrick, 
Murphy, Blackburn, Gingrey, Latta, McMorris Rodgers, Cassidy, 
Guthrie, Barton, Upton (ex officio), Pallone, Dingell, Engel, 
Capps, Schakowsky, Gonzalez, Weiner, Waxman (ex officio), and 
Green.
    Staff Present: Clay Alspach, Counsel, Health; Andy 
Duberstein, Special Assistant to Chairman Upton; Debbee Keller, 
Press Secretary; Ryan Long, Chief Counsel, Health; Katie 
Novaria, Legislative Clerk; John O'Shea, Professional Staff 
Member, Health; Heidi Stirrup, Health Policy Coordinator; Phil 
Barnett, Minority Staff Director; Alli Corr, Minority Policy 
Analyst; Tim Gronniger, Minority Senior Professional Staff 
Member; Purvee Kempf, Minority Senior Counsel; Karen Lightfoot, 
Minority Communications Director and Senior Policy Advisor; 
Karen Nelson, Minority Deputy Committee Staff Director for 
Health; and Landsay Vidal, Minority Press Secretary.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Pitts. The subcommittee will come to order. The chair 
recognizes himself for 5 minutes for an opening statement.
    The topic of today's hearing is the purchase of health 
insurance across state lines. Across state line purchasing of 
health insurance allows health plans to be portable, to move 
with an individual from job to job and state to state and gives 
Americans a wider range of plans from which to choose the one 
that suits them and their families best. Every state has health 
insurance mandates; from Idaho with the fewest, 13 mandates, to 
Rhode Island, topping the list with 69 separate mandates. My 
home State of Pennsylvania has 57.
    Altogether, the Council for Affordable Health Insurance has 
identified a total of 2,156 mandates across the 50 states and 
the District of Columbia in 2010. These range from benefit 
mandates to provider mandates to groups of people who must 
recover. Each mandate makes the policies sold in that state 
more comprehensive. However, each mandate also increases the 
cost of those policies. Most mandates increase the cost of 
policies by less than 1 percent, which doesn't sound like much, 
but when a state has 30, 40, or 50 mandates, and some mandates 
can add 5 percent or even 10 percent more to a policy, you are 
quickly pricing many people out of the market completely. By 
some estimates, an average of 30 to 40 mandates can increase a 
total cost of a policy between 20 and 45 percent.
    States have begun to realize that, while well-intentioned, 
mandating important health benefits provider coverage for their 
citizens has backfired. At least 12 states now allow mandate-
free or mandate-like policies so that people can buy a plan 
that is more suited to their needs with fewer costly mandates.
    Additionally, nearly 30 states now require a cost estimate 
of a potential mandate before it can be enacted. This should be 
about consumer choice, not a one-size-fits-all state mandate 
package that may or may not address a particular individual's 
needs.
    This is about empowering people to make decisions for 
themselves, not assuming they need the government to protect 
them for themselves.
    If a Pennsylvania policy contained mandated benefits I 
determined that I did not need or want, why shouldn't I be able 
to by a policy from New Jersey or New Mexico? Why shouldn't I 
be able to shop among different states and buy the policy that 
is at the best price for me, and is the best tailored to my 
health needs and my situation. Furthermore, why shouldn't I 
expect that when states and plans have to compete for my 
business and not take it for granted, that costs will go down 
and quality will go up.
    So with those introductory remarks, I want to thank our 
witnesses, and I would like to yield the remaining time to the 
gentlelady from Tennessee, Ms. Blackburn.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    The Subcommittee will come to order.
    The Chair will recognize himself for an opening statement.
    The topic of today's hearing is the purchase of health 
insurance across state lines.
    Across state line purchasing of health insurance allows 
health plans to be portable--to move with an individual from 
job to job and state to state--and gives Americans a wider 
range of plans, from which to choose the one that suits them 
and their families best.
    Every state has health insurance mandates, from Idaho with 
the fewest--13 mandates--to Rhode Island, topping the list with 
69 separate mandates.
    My home State of Pennsylvania has 57.
    Altogether, the Council for Affordable Health Insurance has 
identified a total of 2,156 mandates across the 50 states and 
the District of Columbia in 2010. These range from benefit 
mandates, to provider mandates, to groups of people who must be 
covered.
    Each mandate makes the policies sold in that state more 
comprehensive; however, each mandate also increases the cost of 
those policies.
    Most mandates increase the cost of policies by less than 
1%, which doesn't sound like much. But, when a state has 30, 
40, or 50 mandates--and some mandates can add 5% or even 10% 
more to a policy--you are quickly pricing many people out of 
the market completely.
    By some estimates, an average of 30 to 40 mandates can 
increase the total cost of a policy between 20% and 45%.
    States have begun to realize that, while well-intentioned, 
mandating important health benefits and provider coverage for 
their citizens has backfired.
    At least 12 states now allow ``mandate-free'' or ``mandate-
lite'' policies, so that people can buy a plan that is more 
suited to their needs, with fewer costly mandates.
    Additionally, nearly 30 states now require a cost estimate 
of a potential mandate before it can be enacted.
    This should be about consumer choice, not a one-size-fits-
all state mandate package that may or may not address a 
particular individual's needs. This is about empowering people 
to make decisions for themselves, not assuming they need the 
government to protect them for themselves.
    If a Pennsylvania policy contained mandated benefits that I 
determined I did not need or want, why shouldn't I be able to 
buy a policy from New Jersey or New Mexico? Why shouldn't I be 
able to shop among different states and buy the policy that is 
at the best price for me and is the best tailored to my health 
needs and my situation? Furthermore, why shouldn't I expect 
that when states and plans have to compete for my business--and 
not take it for granted--that costs will go down and quality 
will go up?
    Thank you to our witnesses, and I yield the remaining time 
to Representative Blackburn.

    Mrs. Blackburn. Thank you, Mr. Chairman. And I thank you 
and Chairman Upton for holding the hearing today to discuss 
what I think is an innovative approach, and of course I believe 
this is important legislation for us to take up. Thank you to 
our witnesses for your preparation and your presence here 
today.
    You know, nearly 51 million Americans are lacking health 
insurance. Eighty-five percent of the uninsured workers cite 
unaffordability as the top reason for why they are uninsured. 
There is something we can do about this. The Health Care Choice 
Act, which is only 31 pages long, will harness market forces to 
lower the cost of health insurance and reduce the number of 
uninsured Americans by 12 million without any cost at all to 
the Federal Government. It is the right-type step.
    In 1965 there were only seven state benefit mandates. Today 
there are over 2,100 mandates on health insurance coverage. 
These mandates have increased health insurance premiums between 
10 and 50 percent for American families. For example, in a high 
mandate state like New York and Massachusetts, the average 
family premium is just over $13,000. Right across the river in 
a lower mandate state like Pennsylvania, the average is just 
about $6,000, which is about the same price as in my home State 
of Tennessee.
    This bill would give consumers the option of buying health 
insurance that meets their needs and is right for them and 
their family, even if that means buying a policy that is 
qualified in another state. And while I may prefer a plan that 
includes a chiropractor, that choice isn't going to be right 
for everyone. So let's give consumers the choice. As Speaker 
Hastert used to say, We shouldn't be forcing people to buy a 
Cadillac when all they need is a Chevy.
    This bill will lower health insurance costs across the 
country by cutting red tape. Insurance plans won't have to go 
through 50 different state certification process. The result 
will be significant savings, significant savings in the cost.
    And it is important to note that this bill will not 
decrease consumer protection or act as a race to the bottom. As 
I told President Obama when we did the health care forum at the 
Blair House, this bill will let the people out of their states 
and allow them to choose a product that is good for them.
    Thank you, Mr. Chairman, and I yield back the balance of my 
time.
    Mr. Pitts. The Chair thanks the gentlelady.
    And I now recognize the ranking member of the subcommittee, 
Mr. Pallone, for 5 minutes for an opening statement.

 OPENING STATEMENT OF HON. FRANK PALLONE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    Allowing Americans to purchase insurance coverage across 
state lines is not a new idea. In fact, it is an idea that has 
been promoted by Republicans for many years and one that was 
extensively debated by this committee in 2005. And I think many 
who sit here today remember those proceedings, so you all know 
very well that I am strongly opposed to such proposals. But 
what I am even more opposed to is the way Republicans purport 
this idea as a proposal that would give consumers choices and 
access to more affordable health insurance, because the truth 
is, it does nothing of the sort.
    The only choices offered by this proposal are for insurance 
companies. They are the only ones who gain. It gives the 
insurance industry the choice to do business in the states that 
have the most favorable business climate and weakest consumer 
protections. The result is a complete circumvention and it 
would end state legislation as we know it.
    Now, state regulation and patient protections are vital to 
protect those who reside in that state from unscrupulous 
actors. Regulation is needed to protect those who would 
otherwise have no protection. If H.R. 371, a bill introduced by 
Representative Blackburn, entitled the ``Health Care Choice 
Act'' or any other bill that attempts to allow an insurance 
company to license their product in one state and sell 
insurance in another state, if any of those bills were to 
become law, it would quickly result in a race to the bottom 
among health insurance plans, a race that would drag down 
patients in its wake.
    H.R. 371 allows insurance companies to choose to operate 
under laws of states with weaker consumer protection and risk 
pooling standards. By doing so, plans will be allowed to 
cherry-pick the best risk, leaving older, sicker individuals 
isolated in pools without healthier individuals to offset their 
medical costs. And the result would be insurance markets in 
disarray, without any real pooling of risk.
    Furthermore, state regulators would be unable to provide 
assistance to individuals in their own states who opt to 
purchase coverage from a carrier selling under a second state's 
law. In my home State of New Jersey, we have enacted extensive 
reforms that go beyond what many other states offer. And thanks 
to these consumer protections, New Jersey is able to ensure 
that its residents have access to quality individual insurance 
products. But in order for New Jersey to guarantee access to 
this kind of insurance, it must be able to spread risk 
throughout the market and that means pooling low and high risk 
together.
    If H.R. 371 were enacted, it would completely dismantle New 
Jersey's existing risk pool. Younger and healthier consumers 
would flee New Jersey's market in order to obtain cheaper 
policies that provide less coverage, leaving only high-risk 
consumers in the market.
    Now I don't think we can move back to a system with zero 
patient protections, putting insurance companies back in 
charge. This is the very thing that Democrats were trying to 
reverse when we passed the Affordable Care Act. We don't want 
to empower insurance companies. So I can't conclude without 
pointing out that H.R. 371 also reveals the very popular and 
critical patient bill of rights provisions of the Affordable 
Care Act. That is no surprise. The insurance companies didn't 
like those things either because they want to discriminate.
    So the protections that would be repealed include, among 
others, prohibiting gender rating, prohibiting the denial of 
people and children with preexisting conditions insurance, 
outlawing rescissions and prohibiting annual and lifetime 
limits on insurance. These are the antidiscriminatory practices 
that are already in effect under the health care reform and 
which my constituents say they very much like. These are all 
gone, all for the purpose of helping out the insurance 
companies because the Republicans simply want to be with the 
big insurance company.
    The Affordable Care Act also created state-based health 
insurance exchanges which would allow other insurance carriers 
to come into states, thereby increasing competition and 
lowering premiums. But the stark difference, of course, from 
the Republicans is that the insurance companies would have to 
comply with Federal and State mandates for coverage under the 
Affordable Care Act.
    I will also point out that the Affordable Care Act includes 
a provision known as health care choice compacts that allows 
insurers to sell insurance across state lines and only be 
subject to laws in the issuing state, but it includes 
protections for states and consumers. And, again, the 
difference: The Affordable Care Act put a decision to allow the 
insurer to sell across the line in the hands of the state where 
their product will be sold, not in the hands of insurance 
companies.
    My whole point here is, look, I understand you are talking 
about selling insurance across state lines; that can be done, 
but it can't be done in a way that simply gets rid of the state 
protections, eliminates the risk pools and puts all the choices 
in the hands of the insurance companies.
    That is what you are doing with Ms. Blackburn's bill and 
others that might be like it. And that is exactly what we don't 
need. It is not a problem to be able to sell across state 
lines, it is the patient protections that need to be in place.
    Again, I guess this is one case, Mr. Chairman, where the 
Republicans actually do have a replace plan, but I think that 
this replace plan is not one that is good for American 
consumers, and I think it puts the country's health system in a 
lot of trouble. So thank you for giving me a replace plan, but 
it is not one that I think we should enact into law.
    I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the full committee chairman, Mr. Upton, for 5 
minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Chairman Pitts, for holding this 
hearing. Two weeks ago the committee reported out legislation 
that will help lower health care costs by enacting real medical 
liability reform. Today we will continue to examine ways that 
we can replace last year's health care law with commonsense 
solutions that actually do lower costs.
    You heard our side talk about repeal and replace, and I do 
believe that this is one of those replacement planks and 
commend my colleague, Mrs. Blackburn, for leading the charge on 
this issue.
    Allowing Americans to purchase coverage across state lines 
is an idea that has been gaining momentum for good reason. 
Individuals do use and shop for products every day that are 
made in other states. Yet, in health care individuals are 
prohibited from purchasing coverage across state lines.
    This policy has major implications for families across the 
country looking for affordable health care plans. states have 
imposed over 2,100 benefit mandates on health coverage. 
Estimates show that these requirements increase premiums 
anywhere from 10 to 50 percent. Consumers are forced to buy a 
Cadillac health care plan. They are not even given the option 
of something that might better fit their needs. As a result, 
many individuals choose to go without any health care coverage 
because of the costly mandates. states are realizing benefit 
mandates are a problem that have to be dealt with. Fifteen 
states are now considering legislation to allow individuals to 
purchase coverage across state lines.
    Two states with very different political backgrounds, 
Georgia and Maine, have already recently enacted laws to 
promote interstate purchase. Even our Democratic colleagues 
demonstrated that they understood the problem at some level.
    Section 1311(d)(3) of PPACA requires states to assume the 
cost of mandates to make payments to individuals or health care 
plans to defray the costs of added premiums. I may disagree 
that this is the best solution, but at least they admitted that 
we have a problem.
    This hearing is about promoting flexibility and reducing 
cost. It is a stark contrast with PPACA which doubles down on 
Washington control of health care.
    HHS will design the health plan that every American must 
buy under the threat of a fine from the IRS. Empowering 
consumers is the key to controlling costs. American families 
know the value of their dollar. If given the chance, they will 
demand health plans that provide better quality, lower cost, 
something the Federal Government has consistently failed to do. 
The question is: Will Congress and the President give the 
people the freedom?
    I look forward to hearing testimony from today's witnesses 
and would yield to my friend the chairman emeritus of the full 
committee, Mr. Barton.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Chairman Pitts, thank you for holding this hearing. Two 
weeks ago, the committee reported out legislation that will 
help lower health care costs by enacting real medical liability 
reform. Today, we will continue to examine ways we can replace 
last year's health care law with common-sense solutions that 
actually lower costs. Allowing Americans to purchase coverage 
across state lines is an idea that has been gaining momentum 
for good reason. Individuals use and shop for products every 
day that are made in other states.
    Yet in health care, individuals are prohibited from 
purchasing coverage across state lines. This policy has major 
implications for families across the country looking for 
affordable health plans. states have imposed over 2,100 benefit 
mandates on health coverage. Estimates show that these 
requirements increase premiums anywhere from 10 to 50 percent.
    Consumers are forced to buy a Cadillac health plan; they 
aren't even given the option of something that better fits 
their needs. As a result, many individuals choose to go without 
any health coverage because of these costly mandates.
    States are realizing benefit mandates are a problem that 
must be dealt with. Fifteen states are now considering 
legislation to allow individuals to purchase coverage across 
state lines. Two states with very different political 
backgrounds, Georgia and Maine, have recently enacted laws to 
promote interstate purchase.
    Even my Democrat colleagues demonstrated they understood 
this problem at some level. Section 1311(d)(3) of PPACA 
requires states to assume the cost of mandates and make 
payments to individuals or health plans to defray the cost of 
added premiums. I may disagree that this is the best solution, 
but at least they admitted we have a problem.
    This hearing is about promoting flexibility and reducing 
costs. It is a stark contrast with PPACA, which doubles down on 
Washington control of health care. HHS will design the health 
plan that every American must buy under the threat of a fine 
from the IRS.
    Empowering consumers is the key to controlling costs. 
American families know the value of their dollar. If given the 
chance, they will demand health plans that provide better 
quality at lower costs--something the federal government has 
consistently failed to do. The question is, will Congress and 
the President give the people that freedom? I look forward to 
hearing testimony from today's witnesses.

    Mr. Barton. Thank you, Chairman Upton.
    In a prior Congress we passed a bill very similar to this 
bill out of committee. It was a priority of then-Speaker Denny 
Hastert and our former member John Shadegg. There are over 
2,000 state mandates in the various states, and the premiums 
vary from about 5,000 to about 13,000. So it is obvious if you 
allow plans that are covered in one state, that are approved in 
one state, to be offered across the state line, it is going to 
promote competition and should lower costs.
    So I am very happy that Chairman Upton and subcommittee 
Chairman Pitts are holding this hearing, and I would yield the 
balance of Chairman Upton's time to Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman.
    I would just want to add that insurance products aren't 
bad. In the era of multiple natural disasters, we will see that 
many people get recovery because of insurance product. They 
will get recovery for their automobile, they will get recovery 
of their home. And this attack on a sector that really helps 
people recover from disasters is always a little frustrating.
    All we are trying to say in this debate is those types of 
policies can be used in the health care industry; it is just 
some state mandates get in the way of really having a 
competitive product. I will give you one example. state Senator 
in my State of Illinois said that the largest increase in a 
health insurance policy was when the state mandated 
contraceptive coverage.
    Now, should you be forced to buy an individual package that 
has contraceptive coverage and raise your rate? Many of us 
would argue, no, you should not. Should there be minimum 
coverage for things that an insurance commissioner would want 
to get involved and engaged in and help resolve disputes? Yes.
    So I think there is a middle ground here that we could 
reach, and I will end on saying I do think this is one of many 
steps that we will have to address the replace aspects of 
ObamaCare as we move forward.
    I yield back the balance of my time.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the ranking member of the full committee, Mr. Waxman, for 5 
minutes.

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

    Mr. Waxman. Mr. Chairman, up until today this committee 
only acted to repeal provisions of the Affordable Care Act. 
Today for the first time we see what the replacement is. 
However, this replacement clearly fails to keep the promises 
made in the Republican resolution to replace the Affordable 
Care Act, and it would be a step backward for the American 
people.
    The Republicans promised to increase the number of insured 
Americans and to lower health care premiums. For people who are 
sick, where insurance is a lifeline, this proposal of allowing 
insurance companies to sell their product across state lines 
does just the opposite.
    The Congressional Budget Office analyzed the legislation 
introduced by Representative Blackburn in 2005 when it was 
supported by Mr. Shadegg. In its letter, CBO said there would 
be very little effect on the rate of uninsurance; that this 
proposal would cause families to lose employer-sponsored 
insurance; and those needing health care, to lose insurance in 
the individual market. That is a far cry from the Republican 
claims that this bill will cover millions of the uninsured. CBO 
also noted that the bill would increase the price of coverage 
for those expected to have relatively high health care costs.
    How is increasing premiums for the sick, who already spent 
dollars on health care at the expense of rent and food, a step 
forward in providing quality health care? This bill basically 
asked someone with diabetes or breast cancer to pay more or go 
without health insurance so that someone else can pay less. In 
other words, they are supposed to buy a lower-priced car. Well, 
I don't think they are going to be able to buy anything, 
because they still can be excluded for preexisting conditions.
    The goal of the Affordable Care Act is to make affordable 
coverage available to everyone, sick and healthy alike, not to 
help one group of people at the expense of another. Let's be 
clear: states have long had the ability to allow sales of 
insurance across state lines, but they could control how it 
happens and when it happens, and the Affordable Care Act 
affirmed that policy.
    Today Maine, Georgia, and Wyoming have passed laws to allow 
purchasing across state lines. Maine and Wyoming decided to 
allow this with a limited number of states, but the Federal 
preemption of their laws by the Blackburn bill would require 
they open their borders up to every state in the country.
    Numerous other states are debating pending bills and any 
legislation is merely preempting the states' prerogative to do 
it their way. That is an amazing thing for the Republicans, who 
say that states ought to be able to act on their own. All 
wisdom is not here in Washington. Instead, here in Washington 
we would tell the states you can't do it your way, you have got 
to do it our way.
    Well, Governor Jan Brewer of Arizona last month vetoed a 
bill that allowed selling insurance across state lines, saying 
that this, ``provision would change Arizona's benefit 
requirements based on legislative decisions in other states.'' 
She also said she is concerned about other risks to our 
citizens who may be subject to other states' regulatory 
procedures that can leave them with little recourse in the 
event of mistreatment.
    The proposal before us today would not allow states to 
permit the selling of insurance across state lines; it would 
require it to be done the way the Federal Government insists.
    This bill is unlike the Affordable Care Act, which 
regulates insurance to set a Federal minimum standard but 
permits states to go further to protect their state's 
residents.
    Republicans claim to support the authority of states to 
govern themselves as they see fit, but this is not what they 
stand for when it comes to legislation. The people with breast 
cancer, diabetes, and newborns, have been guaranteed coverage 
for their services by most but not all states. So when the 
Federal Government comes in and preempts those state laws, 
patients with breast cancer and diabetes may not be able to 
find insurance that covers their treatments and testing. If it 
is covered in another state doesn't mean the insurance company 
is offering a bare-bones package and is going to offer it in 
every state. We don't mandate the insurance companies to do 
anything. We only mandate that states allow those insurance 
companies who think they can make a buck come in and sell it if 
they are allowed to sell it anywhere else.
    Critics claim the state benefit requirement adds as much as 
50 percent to health insurance premiums, according--if I might, 
Mr. Chairman, according to a more impartial source, the 
National Association of Insurance Commissioners, it was less 
than 5 percent. This proposal was a bad idea on its own terms 
as a replacement for the Affordable Care Act. It is disastrous.
    Thank you Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman.
    I would like again to thank the witnesses for agreeing to 
appear before the committee this morning. Your willingness to 
take time out of your busy schedules underscores just how 
important this issue is to all of you, as it is to all of us.
    Our first witness, Mr. Steve Larsen, is the director of the 
Center for Consumer Information and Insurance Oversight at the 
Centers for Medicare and Medicaid Services.
    Our next witness is Dr. Stephen Parente who is the 
Minnesota insurance industry professor of health finance and 
insurance in the Department of Finance in the Carlson School of 
Management at the University of Minnesota.
    Christie Herrera is the director of the American 
Legislative Exchange Council's Health and Human Services Task 
Force.
    Stephen Finan is the senior director of policy for the 
American Cancer Society's Cancer Action Network.
    And lastly, Dr. Paul Howard is a senior fellow at the 
Manhattan Institute.
    Your written testimony will be entered into the record. We 
ask you to summarize in 5 minutes, each of you.

   STATEMENTS OF STEVE LARSEN, DIRECTOR, CENTER FOR CONSUMER 
 INFORMATION AND INSURANCE OVERSIGHT, CENTERS FOR MEDICARE AND 
MEDICAID SERVICES; STEPHEN PARENTE, PH.D., PROFESSOR OF HEALTH 
 FINANCE, UNIVERSITY OF MINNESOTA; CHRISTIE HERRERA, DIRECTOR, 
  HEALTH AND HUMAN SERVICES TASK FORCE, AMERICAN LEGISLATIVE 
  EXCHANGE COUNCIL; STEPHEN FINAN, SENIOR DIRECTOR OF POLICY, 
   AMERICAN CANCER SOCIETY, CANCER ACTION NETWORK; AND PAUL 
       HOWARD, PH.D., SENIOR FELLOW, MANHATTAN INSTITUTE

    Mr. Pitts. Mr. Larsen, you may begin your statement.

                   STATEMENT OF STEVE LARSEN

    Mr. Larsen. Good morning, Chairman Pitts, Ranking Member 
Pallone, members of the subcommittee.
    Mr. Pitts. Is the mic on?
    Mr. Larsen. Can you hear? OK.
    Thanks for the opportunity to appear here today. I have 
submitted my full testimony for the record. I am pleased to be 
here and have the opportunity to comment on the issues related 
to the sale of insurance across state lines.
    I know we all share the same goal, of assuring affordable 
and comprehensive insurance options for individuals and 
families. And I believe we also agree that healthy competition 
among private insurers can help drive costs down and provide 
more consumer choice. But in our view, the Affordable Care Act 
accomplishes these goals in the best possible way.
    First, in 2014, state exchanges will foster competition 
among insurers by having insurers compete on the basis of price 
and quality rather than on their ability to underwrite those 
who need insurance the most: people with preexisting health 
conditions.
    The Affordable Care Act also creates transparency, a key 
component of a healthy competitive market. state health 
insurance exchanges provide transparency to consumers who can 
make apples-to-apples comparisons of coverage options and allow 
people to understand in plain English what they are buying and 
how it will protect their families.
    The Affordable Care Act ensures that consumers get the 
benefit of a core set of consumer protections, protections that 
are critical to a well-functioning market. In 2014 insurers 
will be barred from denying coverage on the basis of health 
status and consumers will have high-quality coverage.
    The Affordable Care Act also provides key protections and 
benefits that have already taken effect, such as the 
prohibition on rescissions and bans on lifetime limits on 
insurance coverage. We also expanded access to care for young 
people by providing coverage for dependents up to age 26 on 
their parents' policies, a benefit to over 600,000 young adults 
already.
    In addition to the provisions of the Affordable Care Act, 
many states also have basic consumer protections, including 
reasonable rating bands or corridors, and restrictions on 
underwriting. These ensure that people with medical conditions 
are not excluded from insurance coverage.
    Many states also have laws to ensure consumers have access 
to an adequate network of specialists and other health care 
providers, and many have mechanisms to deal with complaints 
consumers might have in dealing with their insurance company. 
The Affordable Care Act allows consumers to continue utilizing 
the staff of these state insurance commissioners when they have 
issues, concerns, or questions.
    Speaking from my firsthand experience as a state insurance 
commissioner for 6 years and also director of CCIIO, the 
proposition of allowing interstate sales of insurance in a way 
that eliminates or overrides a state's own authority to protect 
or assist insurance consumers in their market is, while well-
intentioned, a step backward in the effort to provide 
accessible, affordable, and fair health insurance coverage to 
all citizens.
    Allowing insurers to pick the state they want to be 
regulated in provides the insurers the choice of which state 
laws they have to comply with. Insurers can then issue policies 
with fewer benefits or protections in other states that 
otherwise would not allow such policies. The laws of the 
issuing state become a ceiling or a cap for other states. This 
will likely lead to cherry-picking of healthy groups and 
individuals. And we know from experience that when we segregate 
risk pools by selectively selling policies with thinner or 
fewer benefits, we drive premiums up for the rest of the 
population. state insurance regulators, legislators, and 
governors would be powerless to try and fix this, because they 
would have no jurisdiction over these policies.
    In addition, proposals that preempt state insurance laws in 
one state with those of another leave consumers at a 
disadvantage. state insurance regulators often provide key 
consumer assistance to residents of their states. The state 
regulators were no longer able to provide these services to 
purchasers of interstate policies. Consumers in one part of the 
country would be dependent on the time and resources of a state 
regulator thousands of miles away. It is likely many consumer 
complaints or problems would be unaddressed.
    Insurers can already sell insurance across state lines so 
long as they comply with state laws. Many companies today 
operate and provide insurance in multiple states.
    In summary, the Affordable Care Act has increased consumer 
protections and will lead to more affordable comprehensive 
insurance options. Interstate sales where the laws of one state 
preempt those of another would leave many consumers with less 
affordable coverage and no one to turn to if any needed help 
navigating the market. Thank you.
    Mr. Pitts. The chair thanks the gentleman.
    [The prepared statement of Mr. Larsen follows:]



    Mr. Pitts. Dr. Parente, you are recognized for 5 minutes 
for your statement.

                  STATEMENT OF STEPHEN PARENTE

    Mr. Parente. Thank you, Congressman Pitts and members of 
the committee, for this opportunity to speak to you today. My 
name is Steve Parente. I hold the Minnesota Insurance Industry 
Chair in health finance at the University of Minnesota. I am 
there to serve as a professor in the finance department as well 
as running a medical industry MBA program.
    My areas of expertise are health economics, health 
insurance, and medical technology evaluation. Most recently I 
and my colleagues Roger Feldman, Jean Abraham, and Wendy Xu at 
Minnesota completed a study on the impact of allowing consumers 
to purchase health insurance across state lines. This peer-
reviewed study was accepted for publication last winter and is 
forthcoming in the Journal of Risk and Insurance.
    And on a side note, I must say that the deliberations of 
this committee 5 years ago were the inspiration for that 
publication. I have provided a copy of that publication with my 
remarks for your consideration.
    In this study we find evidence of a significant opportunity 
to reduce the number of uninsured under a proposal to allow the 
purchase of individual health insurance across state lines, 
using three different policy scenarios.
    First, the best scenario to reduce the uninsured 
numerically is competition among all 50 states where one or 
more states emerge as dominant players. This scenario would 
yield a reduction in the uninsured by 8.1 million people.
    With all due respect to Congressman Waxman, insurers don't 
like this because it puts them at civil war with each other. 
That is one reason this has not moved forwa rd. This idea is 
not without precedent outside health care delivery, where 
Delaware has become the most favored state for incorporating a 
firm.
    Second, the most pragmatic scenario with a good impact is 
one state dominating each regional market. In this case the 
uninsured will be reduced by 7.4 million. This is a compromise, 
since the U.S. health insurance industry is only at halfway 
national, through national employers contracting with insurers 
through ERISA. This could provide a practical more politically 
palatable approach to getting coverage.
    Third, the five largest states scenario is the least 
effective policy for increasing the number of insured people. 
This is likely due to the fact that only one state of the five, 
Texas, has a combined regulatory burden that is less than the 
50 percentile of all states. The estimated reduction from the 
five large state scenario is 4.4 million individuals.
    It is important to note that these reductions in the 
uninsured could be achieved without the premium subsidies or 
Medicaid expansion policies prescribed in ACA. In the paper we 
did model the impact of combining interstate purchase of 
insurance with subsidies for private insurance, and found 
additional reductions in the uninsured were possible, in many 
cases doubling the reductions, albeit this could happen at 
considerable cost, though.
    The changes we found also took into consideration the 
different market prices between communities for medical care. 
For example, cost of living for nurses in Manhattan are higher 
than those living in Missouri. These differences were factored 
out.
    As a result, the impact is almost entirely due to the 
differences in the regulatory burden and mandates between the 
states. In one of the most telling illustrations, we found 
premium quotes for the same family, from the same insurance 
company, for the same insurance benefit, to be twice as 
expensive in a Jersey town, Lambertville, compared to New Hope, 
Pennsylvania. These two towns are separated by a quarter mile 
of Delaware River, but their citizens are likely to use many of 
the same doctors and hospitals.
    It is understood that policy simulation simplify many 
political barriers, but the opportunity costs of not allowing 
interstate sales might motivate the development of legislative 
contractual agreements to provide regulatory powers between 
primary and secondary states. This could be consistent with the 
exchange policy as well. Of course adequate disclosure to 
consumers of the primary and secondary states' obligations 
would be paramount for this to work.
    One possible outcome is that consumers who buy insurance in 
one state but live in another could have two insurance 
regulators looking out for them rather than just one. This 
would address a substantial concern that de-mandating the 
market could leave consumers without adequate consumer 
protection. At the same time, with the effect of mandates on 
premiums substantially reduces the probability that someone 
would buy insurance. One must ask, which is the worst outcome; 
lack of coverage for a given service, or no coverage at all due 
to higher premiums from mandates?
    Although we modeled the personal level impact of a national 
market on coverage, we are unable to assess the impact of such 
a migration on provider access as well as quality. 
Nevertheless, a national market could lead to substantially 
more health insurance, even those with chronic conditions and 
preexisting conditions. In addition, the development of a 
national market requires no additional Federal resources, other 
than the support for the legislation, to permit the development 
of such a change.
    In closing I hope these new findings will be considered by 
the Congressional Budget Office if and when this topic is 
considered formally. CBO frequently uses peer-reviewed studies 
as a basis for policy impact. I hope this new study will be 
considered and that any opportunity with such potential to 
reduce the uninsured gets serious consideration amidst the 
fiscal constraints that can handicap so many of the other 
coming health reforms to be implemented under the Affordable 
Care Act in 2014. Thank you.
    Mr. Pitts. The chair thanks the gentleman.
    [The prepared statement of Mr. Parente follows:]



    
    Mr. Pitts. I recognize Ms. Herrera for 5 minutes for an 
opening statement.

                 STATEMENT OF CHRISTIE HERRERA

    Ms. Herrera. Thank you, Mr. Chairman. It is a pleasure to 
be before the subcommittee today, I am Christie Herrera. I am 
director of the Health and Human Services Task Force at the 
American Legislative Exchange Council, or ALEC. ALEC is a 
nationwide nonpartisan organization of state lawmakers. We have 
nearly 2,000 legislator members across the country, about a 
third of all legislators nationwide.
    Today I will briefly address how an interstate market could 
bring about affordability, innovation, and choice. And I will 
also discuss some nascent state proposals that have already 
been mentioned here: Wyoming, Georgia, Maine, Arizona, and 
Oklahoma.
    Simply put, our Nation faces a crisis of the uninsured. One 
in six Americans lacks health coverage and increasing numbers 
either can't afford it or choose not to purchase it at all. 
Many states are considering legislation to allow the purchase 
of health insurance across state lines. ALEC believes that 
these are promising proposals that could bring about 
affordability, innovation, and choice.
    First, affordability. Many Americans live in states where 
high-cost health insurance is the only option and where more 
affordable plans can be found just across the state line.
    Innovation. When we open up these coverage options, 
individuals could benefit from innovative plans in other 
states, and state lawmakers could benefit from new ideas in 
other states while maintaining core consumer protections in 
their own state.
    Choice,, people could choose more customized health plans 
that meet their health needs. As has been mentioned, each state 
imposes mandates that require individuals to purchase coverage 
for specific benefits, procedures, or providers in order to 
purchase health insurance coverage at all.
    While mandates may make more coverage more comprehensive, 
they also make it more expensive, and it can price people out 
of the market altogether. An interstate market could allow 
people to purchase out-of-state coverage with fewer mandates or 
allow people to top-up for richer coverage in another state.
    ALEC is generally supportive of any proposal to allow the 
purchase of health insurance across state lines. However, ALEC 
believes that it is the states that are best equipped to 
develop and implement this kind of targeted health reform 
solution. First, the states are both constitutionally and 
statutorily authorized to have primary regulatory authority 
over health insurance; but more importantly, we believe that 
states can develop their own policies that reflect their own 
unique circumstances and this kind of pluralistic state 
approach can yield best practices with implementation.
    We began tracking state-level legislative activity in 2007 
when our legislators adopted Model Health Care Choice Act for 
states. This is state-based model legislation that vests 
authority in the state's insurance commissioner to allow the 
sale of health insurance across state lines. In 2011, 15 states 
considered this legislation.
    Last year Wyoming became the first state to enact this kind 
of legislation. Wyoming's law would establish a multistate 
consortium that would establish reciprocity agreements for the 
approval, sale, offer and structure of health insurance plans. 
This month Georgia and Maine became the second and third states 
to allow cross-border purchasing of health insurance. In both 
states, individuals who apply for an out-of-state policy will 
receive a disclaimer noting which state's laws govern benefits 
in underwriting. Georgia's law gives wide latitude to a state's 
insurance commissioner to qualify the sale of out-of-state 
plans. And it also allows Georgia's own insurers to sell 
products that are similar to those out-of-state plans.
    Maine's law establishes what are called regional insurers, 
headquartered in Connecticut, Massachusetts, New Hampshire or 
Rhode Island, and it allows these regional insurers to sell 
insurance policies in Maine. These out-of-state plans must 
comply with the individual health insurance laws of its home 
state and also comply with Maine's consumer protections.
    Also of note are the Arizona and Oklahoma approaches that 
would respectively open Arizona to a 50-state market for health 
insurance and allow Oklahoma's Governor to negotiate interstate 
compacts in this area.
    In conclusion, ALEC believes in the promise of these state-
based initiatives because they can help many Americans choose 
affordable, innovative, and customized health insurance 
coverage across state lines. These state-level reforms have 
only just begun, and now is the time for the states to develop 
these proposals, to glean best practices for implementation, 
and hopefully to demonstrate success. Thank you.
    Mr. Pitts. The Chair thanks the gentlelady.
    [The prepared statement of Ms. Herrera follows:]



    Mr. Pitt. I now recognize the gentleman Mr. Finan for 5 
minutes for an opening statement.

                   STATEMENT OF STEPHEN FINAN

    Mr. Finan. Good morning, Mr. Chairman, Ranking Member 
Pallone, and distinguished members of the committee. I am 
Stephen Finan, Senior Director of Policy at the American Cancer 
Society, Cancer Action Network, which is the advocacy affiliate 
of the American Cancer Society.
    ACS CAN is grateful for the committee's invitation to speak 
to the issue of interstate sales of health insurance and its 
potential impact on consumers. Insurance issues are inherently 
complex and often dense, so I would like to explain the issue 
through the cancer lens: how the concept might ultimately 
affect cancer patients and survivors.
    Cancer death rates have decreased by 21 percent among men 
and 12 percent among women since the early 1990s. Despite the 
significant progress, the American Cancer Society concluded 
that its long-term goals of significantly reducing the 
incidence and mortality of cancer cannot be achieved unless the 
significant coverage gaps that exist within the current health 
care system are addressed.
    Although major advances have been achieved through research 
in the fight against cancer, too many advances are not being 
realized by actual patients because of major shortcomings in 
our Nation's health delivery system. For example, we know that 
the lack of insurance coverage means later diagnosis, worse 
outcomes, and thus often higher costs among cancer patients. 
Even among those with private insurance, many cancer patients 
are underinsured, meaning their coverage did not provide for 
all the necessary and appropriate medical treatment.
    Many underinsured are left with the extraordinary dilemma 
of either incurring serious and potentially ruinous out-of-
pocket financial expenses to obtain necessary treatment or 
curtailing essential treatment, thereby putting their health 
and possibly their lives in jeopardy. The problem of paying 
costly medical bills directly affects middle-class families, 
particularly those with chronic diseases.
    The overriding purpose of any insurance reform must be--the 
overriding purpose of any reform must be to improve the 
Nation's health for all its citizens. From a consumer 
perspective, interstate sales offer the theoretical potential 
of greater choice and lower prices. In fact, this potential 
will be real under the Affordable Care Act if states choose to 
participate in multistate exchanges or interstate compacts. 
However, the work-in-practice interstate sales must be built on 
a foundation that prevents predatory practices and unfair 
predatory practices, with strong consumer rights and 
enforcement protections firmly in place.
    The ACA fundamentally alters the rules of the health 
insurance market to work for consumers and, by extension, the 
Nation's health and well-being. Moreover, the Affordable Care 
Act changes the insurance market rules in a manner that 
significantly enhances its competition by creating a level 
playing field. Among the most important changes, all insurers 
must provide access to coverage regardless of health status.
    All plans must include benefits to help cover adequately a 
serious medical condition like cancer. Evidence-based 
prevention services must be included in all health plans. 
Financial assistance to purchase health insurance is essential 
for many Americans because without it, directly or indirectly, 
the taxpayer winds up paying the remaining costs.
    The administrative process of insurance needs to be 
simplified and standardized. To have a truly consumer-driven, 
competitive market, people must have easy and essentially free 
access to comprehensible information so that they can make 
informed decisions. These conditions exist today for virtually 
every consumer product, but they don't exist for one of the 
most important products in our lives: health insurance.
    Risk adjustment must be an inherent part of any private 
health insurance. A great good risk adjustment system will 
reward insurers for finding efficient ways to provide quality 
care to all health risks, rather than trying to avoid risk. 
This is the proper way to harness competition to the benefit of 
the consumers and our Nation.
    And finally, last but not least, interstate sales, that are 
currently built on a state-based system, you must change the 
foundations. The consumer protections do exist across state 
lines and there is adequate means of enforcement and redress.
    The general concept of interstate sales of health insurance 
is consistent with the overall trending consumer products in 
recent years, especially with the growth of the Internet. 
Competition across state lines in many consumer product areas 
often benefit the consumers through greater choice and lower 
prices.
    So the question is, why wouldn't the same be true for 
health insurance? Unlike other health consumer products, many 
insurers don't always want to sell their product to any 
consumer. Their business model is built around not selling to 
all applicants. The strategy is very simple and clear.
    Health claims highly skewed. Roughly 20 percent of the 
people pay for 80 percent of cost. If an insurer can avoid that 
20 percent they would still have a huge market, but they 
avoided virtually all the costs. This in turn would allow them 
to provide the opportunity to sell insurance relatively cheaply 
to a large market of healthy people. The side effect would be 
that high-risk people like cancer patients are left out, are 
left in pools with extraordinarily high costs. The competitive 
pressures of unregulated interstate sales would almost 
certainly force insurers to embrace the highly discriminatory 
tactics of cherry-picking. If some insurers cherry-pick the 
lower costs of the market, the remaining insurers are left with 
pools that are at a disproportionately high risk compared to 
competitors.
    Let me just conclude by saying it is imperative that we not 
jump to the conclusion that the high cost of health insurance 
today is simply a function of too little competition or too 
much regulation. Interstate sales of health insurance could 
nominally increase competition at lower price. However, a 
highly competitive market without good, uniform rules will 
simply become a faster race to the bottom. The relatively young 
and healthy pool benefit, but the consequence would be 
foreclosure of access to or affordability of coverage for those 
with serious medical conditions like cancer. We do not believe 
that this is the intent of the law or the idea, but it could 
happen and that clearly would be an unacceptable outcome.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman.
    [The prepared statement of Mr. Finan follows:]



    Mr. Pitts. The chair recognizes Dr. Howard for 5 minutes 
for an opening statement.

                    STATEMENT OF PAUL HOWARD

    Mr. Howard. First I would like to thank Chairman Pitts and 
Ranking Member Pallone for holding the hearing today on the 
important topic of interstate insurance competition. I am 
speaking today in my capacity as director and senior fellow at 
the Manhattan Institute's Center for Medical Progress, from my 
experience writing and researching on health care policy 
issues, and from speaking to health insurance stakeholders, 
including large and small employers, insurers, and consumers 
about the challenges facing the market today.
    There is no doubt that the single most important issue 
facing American health care is the high and rapidly rising cost 
of that care; and, directly related to it, the high cost of 
health insurance. The high cost of care is the primary reason 
why many Americans lack health insurance since they cannot find 
affordable coverage that meets their needs, and why more 
employers are dropping coverage in the face of unsustainable 
cost increases.
    The forces driving health care inflation are not the 
villains we hear of on the campaign trail. Bad incentives, not 
greedy corporations, are primarily to blame; namely, the 
unlimited tax deduction for employer-provided health insurance; 
the dominance of fee-for-service reimbursement system; and, 
most importantly for our discussion this morning, government 
regulations of insurance around health care markets that 
actively deter competition that might offer lower cost but 
still high-quality products to consumers.
    State insurance regulations often mimic the coverage of 
provider services or insurance benefits in the name of consumer 
protection, when in reality what such mandates provide is 
provider protection, or, I should say, provider income 
protection.
    Legislators often justify additional mandates by pointing 
to anecdotes for coverage of a particular service or provider 
that appear, at least after the fact, to be critical to the 
health and well-being of a particular policyholder. But 
legislation via anecdote is not a justification for adding 
additional costs to standard insurance packages, particularly 
when increasing the cost of those packages inevitably prices 
some consumers out of the market because they can not afford to 
buy the Cadillac coverage that legislators or the providers who 
argue for such coverage believe we must offer.
    Different consumers will have different preferences for 
insurance coverage and terms. A 25-year-old male may opt for 
very different insurance than a 38-year old father of two. 
Telling a younger man that he must opt for the older man's 
coverage is likely to price him out of the market entirely.
    Creating a viable interstate insurance market will begin 
the vital process of making the marginal cost of regulation 
transparent to uninsured individuals who are in the most need 
of more affordable insurance options. It may also spur 
innovation in insurance products as states compete to offer the 
best combination of cost and coverage terms. This is exactly 
the type of competition that we should be encouraging in health 
care and health insurance markets.
    Objections to the interstate sale of health insurance rest 
on a purported race to the bottom that would supposedly ensue 
if consumers could purchase across state lines. However, under 
legislation like the Health Care Choice Act, products sold in a 
secondary state would also have to be sold within their primary 
state. Policymakers and insurance regulators in the primary 
state would have powerful incentive to ensure that such 
coverage sold to their own residents was not deceptive and of 
high quality.
    Also insurance departments in the secondary state could 
still collect premium taxes at high-risk pool assessments from 
plans sold across state borders, ensuring the financing 
necessary to maintain important consumer protections and 
support state high-risk pools.
    Also, although under McCarran-Ferguson, states have the 
primary responsibility for regulating insurance sold to their 
residents, employers that sell fund health insurance coverage 
under ERISA are not subject to state regulation. More Americans 
receive coverage that is exempt from state regulation, about 90 
million lives, than receive regulation that is subject to both 
Federal and state regulations, about 70 million.
    Insurance regulation under ERISA has been generally light; 
indeed, employers have nearly complete freedom under ERISA to 
design their own insurance coverage, and employees are 
overwhelming happy with the quality of employer-provided 
coverage. Since there has been no race to the bottom in the 
ERISA-protected market, it is unlikely to occur in a national 
market for health insurance.
    Policymakers should also not forget rising health care 
costs are the single greatest barrier to accessing health 
insurance for uninsured individuals regardless of health 
status, and that reducing unsustainable health care cost 
increases is the single most important thing we can do to 
ensure that coverage remains affordable.
    Mandating Cadillac coverage is the only option for 
individuals locked into expensive state markets is the surest 
way to continue the vicious cycle of cost increases, dropped 
coverage, and large and expensive increases in public coverage 
in programs like Medicaid.
    Thank you for the opportunity to comment on this important 
issue, and I look forward to your questions.
    Mr. Pitts. The chair thanks the gentleman.
    [The prepared statement of Mr. Howard follows:]



    Mr. Pitts. Thanks to the panel for your opening statements.
    I will now begin the questioning. I recognize myself for 5 
minutes. Dr. Howard, we will start with you.
    Some of my colleagues on the other side of the aisle have 
argued that imposing individual mandates will lower premiums 
for everyone by promoting larger risk pools and discouraging 
emergency room utilization. Have we seen any evidence of lower 
premiums or decreased our utilization in Massachusetts?
    Mr. Howard. No. What you have seen in Massachusetts is that 
ER use has actually gone up, despite the expansion of coverage 
there to nearly the entire population, and costs have not gone 
down. Massachusetts insurance costs have continued to go up and 
it continues to lead the Nation in health insurance premiums. 
So it is both a highly regulated state and a high-cost state, 
and individuals have not been able to find more affordable 
coverage outside of Massachusetts Commonwealth Care Program, 
which is extraordinarily heavily subsidized insurance. So the 
market has remained very expensive. It is extraordinarily 
costly for both the state and individuals.
    Mr. Pitts. Dr. Parente, do the regulations of guarantee 
issue and community rating penalize people that have been 
responsible and purchased insurance before they were sick?
    Mr. Parente. Absolutely. In our models and from the 
literature that has come out before our study, the biggest 
thing the community rating and guarantee issue do is push up 
the premium cost. It is just automatically what an insurance 
actuary does when they factor in the price. And if someone had 
been on the insurance policy and suddenly they had that mandate 
that comes on and says now they are a community-rated state, 
they are likely to be seeing a premium increase, by no fault of 
their own, of 20 to 25 percent, sometimes as much as 30 
percent, just to in effect spread that risk by the imposition 
of that policy component. If you want to see that illustration, 
go to New York where the individual insurance market has been 
decimated by the combination of community rating and guarantee 
issue over the last 10 years.
    Mr. Pitts. If you would continue, Dr. Parente, would the 
optimum policy goal be to have a system where consumers have 
more choice, are encouraged to buy insurance when they are 
healthy, and provide a safety net with those with preexisting 
conditions, be able to purchase affordable coverage through 
functioning high-risk pools? Would that be a lot cheaper to 
accomplish than PPACA?
    Mr. Parente. That would be the ideal. The logistical 
challenge is to make sure that the folks that are vulnerable 
and don't buy coverage, that lose coverage because of 
preexisting conditions, have that high-risk pool that is 
available to them.
    Minnesota actually has that in place. They have had a high-
risk pool designed very successfully since 1978. It is probably 
associated with about half of what would otherwise be folks who 
are uninsured because of that design. If that type of design 
was available more commonly across the U.S., it could actually 
be quite effective.
    What is nice about the interstate policy is what it does is 
it levels the playing field in terms of letting people shop 
freely across states, potentially electronically; 
ehealthinsurance.com has shown that that can be done quite 
easily. And then for those who may be in a vulnerable 
situation, as long as they are identified, they can essentially 
apply for premium subsidy support and essentially get it either 
through a state high-risk pool design or some other type of 
system.
    Mr. Pitts. Ms. Herrera, you mentioned Georgia. Georgia 
recently enacted a law to allow the purchase of health coverage 
across state lines. Can you give us an idea of how many states 
Georgia residents can now buy more affordable coverage from?
    Ms. Herrera. Absolutely. In the case of Georgia, it shares 
a border with Alabama, which has a relatively low number of 
mandates and a relatively lightly regulated health insurance 
market. Premiums are lower. So for folks in Georgia who are 
uninsured, allowing them to go over to Alabama to buy a more 
affordable policy would be good.
    However, Georgia also shares a border with Florida, which 
has mandate-rich coverage and many consumer protections. Folks 
in Georgia looking for those options could buy from Florida as 
well.
    Mr. Pitts. Could you elaborate on the effects on coverage 
in New York after PPACA-like reforms such as guaranteed issue 
and community rating were adopted?
    Ms. Herrera. I am not familiar with the New York market.
    Mr. Pitts. Dr. Parente, can you elaborate on that?
    Mr. Parente. Actually, Dr. Howard and I did a study that 
came out last year that more or less showed that when that 
legislation was changed in the mid-1990s it pretty much took a 
functioning individual insurance market with a several hundred 
thousand individuals and reduced it now to I think close to 
less than 100,000 people, 50,000 people in the private 
insurance market. There was additional state subsidy components 
that came in place, but the cost to New York to put that 
subsidy program in place ended up being net expensive and 
potentially putting many New Yorkers in a much more vulnerable 
position.
    When we have done simulation models using the same models 
in the study showing what would happen if New Yorkers could buy 
from Pennsylvania and Connecticut, it potentially could reduce 
the uninsured for that population affected by half.
    Mr. Pitts. Thank you. My time has expired.
    The chair recognizes the ranking member for 5 minutes for 
questions, Mr. Pallone.
    Mr. Pallone. Thank you, Mr. Chairman.
    I ask unanimous consent to have Mr. Green participate in 
the questions and answers, Mr. Chairman.
    Mr. Pitts. Without objection, so ordered.
    Mr. Pallone. I wanted to start with Mr. Larsen.
    Mr. Larsen, I would like to discuss with you some of the 
effects that H.R. 371 or a similar proposal might have on state 
governance in the insurance market. You probably know that 
Arizona Governor Jan Brewer recently vetoed legislation that 
would allow out-of-state carriers to sell policies in Arizona.
    Mr. Chairman, I would ask unanimous consent to enter the 
veto message of Governor Brewer into the record. I don't know 
if you have it.
    Mr. Pitts. We have it. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Pallone. Is it your understanding that the proposal 
like H.R. 371 would vacate the state of Arizona's decision and 
in essence overturn the Governor's decision?
    Mr. Larsen. That is my understanding, yes.
    Mr. Pallone. OK. Governor Brewer, when she vetoed the bill 
last month allowing selling insurance across state lines, she 
said in the message--and that was what I just entered into the 
record--she said she ``is concerned about risk to our citizens 
who may be subject to other states' regulatory procedures that 
could leave them with little recourse in the event of 
mistreatment.''
    Recalling your days when you were the insurance 
commissioner for Maryland, did you, for example, have enough 
money in your budget to assist consumers in other states if a 
plan licensed in your state was causing problems for them 
elsewhere?
    Mr. Larsen. It was always a challenge to get funding for 
our department, so it would have been difficult to handle the 
complaints from any number of other states.
    Mr. Pallone. But wouldn't we end up with more sham plans on 
the marketplace and more consumers in trouble, essentially?
    Mr. Larsen. I think it certainly creates that possibility. 
It is very likely, yes.
    Mr. Pallone. Is there anything in your experience at HHS 
that leads you to believe that it would be a good idea for the 
Federal Government to preempt all state insurance laws subject 
to the whims of insurance companies?
    Mr. Larsen. For states or the Federal Government?
    Mr. Pallone. For the Federal Government to preempt all the 
state insurance laws?
    Mr. Larsen. No.
    Mr. Pallone. I will ask you and also Mr. Finan, if I could. 
I am concerned under this legislation, Ms. Blackburn's 
legislation, or something similar, the incentive would be for 
insurance companies to choose to locate in the state with the 
least amount of protections and the least amount of oversight 
of the industry.
    So let me ask Mr. Larsen first, do you believe that 
insurers would rush to sell products from the single state with 
least possible consumer protections and other requirements?
    Mr. Larsen. I do.
    Mr. Pallone. And then, Mr. Finan, how would this affect the 
individual health insurance market in most states? Because you 
know a number of states require insurance companies to offer 
coverage to everyone in their state, the guaranteed issue, and 
some states require insurance companies to offer that coverage 
at one rate, community rating. What effect do you think that 
Ms. Blackburn's bill would have on those in most need of health 
care services in these states, for example, people with cancer?
    Mr. Finan. There is no question that without a level 
playing field, without standardized rules across the market, it 
will be a race to the bottom. states will--excuse me, insurance 
companies will migrate to the least regulated states. And, as I 
said in my testimony, without a guaranteed issue, they will 
cherry-pick, and therefore they will be looking to pick off 
from other states the best risk. They will offer minimal 
benefit packages. The cost will be very low.
    We know today that the consumers, most consumers, the 
consumer literacy about health insurance is extremely low. They 
buy in price. So they see a product across state lines with a 
low price and they say, yes, that is great. But the reality is, 
particularly for cancer patients, is they are not going to be 
able to buy across state lines. Insurers won't accept them. 
They don't have to. And they are going to be left behind in 
their states with smaller risk pools with much higher risks. 
And the costs will be extraordinarily high, where you are going 
to end up with a bifurcated system where the young and healthy 
can do very, very well, but those, once they become sick, wind 
up in high-risk pools where the access to insurance is either 
not available because it is denied or it is beyond their reach.
    But let me just end by saying the reality is that most of 
us sooner or later will get sick. One in two men and one in 
three women will ultimately have cancer. And that means there 
is a good chance, particularly for those in the individual 
market, someday, when they most need it, they are going to be 
without it.
    Mr. Pallone. Let me just ask one more thing. You know, I am 
worried that legislation like Ms. Blackburn's would have a 
disproportionately negative impact on older Americans or near 
elderly. How would this bill affect the near elderly? What do 
you think it would mean?
    Mr. Finan. Again, it benefits the young and healthy. But, 
as you get older, the costs do correlate with age. As we get 
older, the costs rise.
    And in the case of cancer, cancer is a disease of the aged. 
So, therefore, your chances of getting cancer increases as you 
get older. And for people say in their 50s and 60s, pre-
Medicare, this becomes highly problematic, because at that 
point they have no choice, and they don't have the means or 
access to find alternatives. And we see too often many people 
in their 50s and 60s struggling to get through until they can 
get Medicare coverage.
    Mr. Pallone. Thank you.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman; and the chair 
recognizes the gentleman from Illinois, Mr. Shimkus, for 5 
minutes for questions.
    Mr. Shimkus. Thank you, Mr. Chairman.
    I appreciate you all being here today. It is really good to 
sit and listen, because, obviously, there are differing views.
    I would just take issue, Mr. Finan, by saying that what is 
more critical to the individual who has cancer is when they 
have no insurance.
    This whole debate is having quality, accessible, low-cost 
insurance; and the debate is really the mandates on issues that 
may not deal with the catastrophic issues of health care 
delivery. In my opening statement I deal with contraceptive 
coverage. That prices people--if it is 1 percent per mandate 
and you have 30 mandates, you have a 30 percent increase on 
private health insurance.
    I love ALEC, and I appreciate their position. I have got in 
your testimony individual health policies as low as $110.05 in 
Iowa, compared to New York which is $339.60. That is a huge 
difference. Are we saying that the folks in Iowa have sham 
plans? Ms. Herrera, is that a sham plan?
    Ms. Herrera. Absolutely not.
    Mr. Shimkus. You mean the folks in Iowa are not supporting 
sham plans that their constituents--it is not just a payoff to 
the insurance industry? These are quality health insurance 
plans that cover catastrophic issues.
    Ms. Herrera. That is a great point. I think that is the 
beauty of this kind of proposal. As Dr. Parente mentioned in 
his testimony, you not only have your insurance regulator, 
commissioner, looking out for you, but you also have the 
insurance commissioner of the insurer's home state. So we are 
adding up these layers of protection as we open up the market.
    Mr. Shimkus. And Iowa borders my state of Illinois. 
Illinois' individual policy averages about--and this is in your 
testimony--$161.16. This is a monthly. So you multiply that by 
12.
    So the issue is affordable, accessible, quality 
catastrophic coverage, unencumbered by things that you may not 
want to have covered. That is kind of this debate, from my 
perspective. Obviously, other people have different 
perspectives.
    Let me move to----
    Mr. Finan. Congressman, may I----
    Mr. Shimkus. No, I have got 2 minutes and 30 seconds left, 
and I need to get to this. I want to go to Mr. Larsen.
    The Secretary of HHS with your counsel will be charged with 
determining what benefits must be in a health plan purchased by 
my constituents, is that correct?
    Mr. Larsen. There is a requirement in the Affordable Care 
Act that we will define what are called essential health 
benefits.
    Mr. Shimkus. So you will be in this mandate debate, too.
    Mr. Larsen. I am not sure if we call it a mandate debate, 
but----
    Mr. Shimkus. Well, it will be if you determine what is in 
the essential package. That was part of our debate on this 
whole--why a lot of us opposed it. Because if you get into now 
a national standard that adds mandates that the individual 
consumer may now be forced to purchase because of the new 
health care law, we are in the same boat as this entire debate.
    Mr. Larsen. I would say it is different in this respect. 
First, to focus on the terminology, these are essential health 
benefits.
    Mr. Shimkus. Well, I think the state of Illinois has 
decided that contraceptive coverage is an essential health 
benefit, and I would argue that a lot of my constituents do not 
think so, nor do they want to pay for that. So I would be very, 
very careful as you all move forward to make sure that it is 
essential--I would say catastrophic coverage would be 
essential. What you are doing now is part of this mandate 
debate.
    Let me move to another question real quick. Secretary 
Sebelius has stated that the fraud and abuse in our medical 
system increases costs. Do you agree with that assessment?
    Mr. Larsen. I think, yes, we can reduce costs through doing 
an improved job of ferreting out fraud and abuse. Yes.
    Mr. Shimkus. So part of the health care plan is going to 
have a huge focus on ferreting out waste, fraud, and abuse.
    Mr. Larsen. Yes.
    Mr. Shimkus. And with your attention and the Secretary's 
attentive focus on this.
    Mr. Larsen. Yes.
    Mr. Shimkus. Good. Great. Thanks.
    With 30 seconds remaining, you also mention that patients 
in non-grandfathered plans now have greater freedom to choose 
their own doctor. Section 1311(h) of the health care law, page 
78 in the yellow book that is on the table there, authorizes 
HHS to issue regulations that would prohibit health plans from 
contracting with certain physicians, is that correct?
    Mr. Larsen. I apologize, I am not quite sure what you are 
saying.
    Mr. Shimkus. Well, I am done. Maybe one of my colleagues 
will follow up. It is page 78. The health care law is right 
there. You are welcome to grab it. I think your health care law 
will allow HHS to deny individuals access to the doctor of 
their choice.
    I yield back.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the ranking member emeritus, Mr. Dingell, for 5 minutes for 
questions.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy. 
The French have a great saying: The more things change, the 
more they are the same.
    I have seen this before. About 20 years ago, this committee 
went into the matter of mischief rascality in interstate sales 
in insurance, and it was a scandalous thing to behold. And we 
found the state regulatory agencies didn't have the authority 
to address it, that they couldn't address it, and they wouldn't 
address it.
    Beyond that, we found something else. We found that folks 
were traveling around the country with suitcases full of cash 
running off to the Cayman Islands and all kinds of other 
places, that places like Louisiana and Texas, next-door 
neighbors, couldn't deal with their problems of enforcing the 
laws. It was a terrible mess. And insurance ratepayers were 
getting skimmed left and right, and commissioners of insurance 
came into this committee to complain about the fact that this 
was going on.
    So I can see that the insurance companies have been busy, 
and I can see they are looking forward to cutting a fat hog, 
which this bill will permit. So I have a few questions here.
    So, to Director Larsen, please answer yes or no. Section 
2796 of H.R. 371, the Health Care Choices Act of 2011, would 
exempt health insurers in a secondary state from complying with 
any state law regarding fraud and abuse other than those that 
meet the definition in section 2795. I am concerned that the 
definition of fraud and abuse in H.R. 371 is so high states 
would find it nearly impossible to prosecute an insurer for 
fraud and abuse, thereby opening wide the door to fraudulent 
activity. Now, do you agree with that statement, yes or no?
    Mr. Larsen. Yes.
    Mr. Dingell. All right. I happen to believe that H.R. 371 
would increase the opportunity for rascality, particularly due 
to lack of enforcement authority and oversight tools, and, as 
Mr. Pallone has pointed out, money and the capabilities to deal 
with these things that would be available in the secondary 
state. These states would be unable to revoke the license of an 
out-of-state insurer if they were found to be acting 
fraudulently; and, without this type of tool to discourage 
abuse, I am curious how a secondary state could in fact protect 
their constituents.
    Again, as a former insurance commissioner, do you believe 
that a secondary state would be able to audit an insurer's 
license in another state under H.R. 371, yes or no?
    Mr. Larsen. I am sorry, that they would or would not be 
able to audit?
    Mr. Dingell. Say it again?
    Mr. Larsen. Well, let me answer this way: I think that 
provision of the law would give me great pause as a former 
commission in my ability to oversee.
    Mr. Dingell. It would be a wonderful opportunity for 
rascals and rascality.
    Further, if a secondary state found that an insurer acted 
fraudulent in their state, do you believe again that H.R. 371 
would allow a Secretary of a secondary state to prevent the 
insurer that acted fraudulently from operating within their 
boundaries? Yes or no?
    Mr. Larsen. I think it would be difficult, yes.
    Mr. Dingell. Now, Mr. Finan, it is clear that one of the 
side effects of this bill will be a race to the bottom, and 
insurance companies will be huddling up in the states with the 
most lenient regulations. For example, under current law, if a 
constituent of mine suffering from breast cancer has a 
complaint about their insurer not covering the cancer treatment 
recommended by their oncologist, my office could help them 
receive recourse through the Michigan Insurance Commissioner.
    I am curious how my office would handle such requests under 
H.R. 371. If a constituent purchased their inadequate insurance 
in Iowa, am I to expect that the Iowa Insurance Commissioner is 
going to regulate this insurer? I happen to think that this 
puts too much hope and trust in the insurance industry and in a 
ramshackle system of regulation. I previously told my friends 
on this committee this would be like using one pat of butter 
for a whole loaf of bread.
    Is it your opinion, Mr. Finan, that you believe that one 
state or even a small group of states would be equipped to 
handle the concerns and complaints of residents of a 
neighboring state?
    Mr. Finan. We are deeply concerned about the ability of any 
state insurance department to enforce or act across state 
lines.
    Mr. Dingle. Thank you.
    Now, one of the biggest accomplishments of The Affordable 
Care Act is that consumer protections make up what is called 
the Patient's Bill of Rights. H.R. 371 would repeal these 
protections, leaving consumers once again vulnerable to 
lifetime limits, annual limits, discrimination for pre-existing 
coverage, limited health benefits, and rescissions. I tend to 
believe that repealing these protections would enable the 
insurance companies to discourage or prevent those suffering 
from cancer or other illness from entering their pool.
    Do you agree with this assessment, yes or no?
    Mr. Finan. Absolutely.
    Mr. Dingell. Thank you.
    Mr. Chairman, I thank you for your kindness. I think we 
have a bad bill here.
    Mr. Pitts. The chair thanks the gentleman; and the chair 
recognizes the gentleman from Pennsylvania, Dr. Murphy, for 56 
minutes for questions.
    Mr. Murphy. Thank you very much.
    Mr. Larsen, at the end of your testimony--I couldn't find 
your written testimony--you made reference to that if a person 
has to go back to another state because they are having 
problems with their insurance company, you said, basically, it 
was likely their consumer complaints or problems would go 
unresponded to or unheeded. Can you explain that?
    Mr. Larsen. I think the issue is, if there is--I think the 
terminology that this uses is the primary and secondary state. 
If you are a resident of the secondary state, now you are 
essentially beholden to the resources of the insurance 
department in the primary state.
    Mr. Murphy. But how did you word that, though? If you were 
not from that state you felt they weren't going to be 
responsive?
    Mr. Larsen. It is a resource issue, frankly. If you have 
got a company that is selling in 50 states from one primary 
state and that primary state has to address the concerns or 
complaints, which you always get as an insurance commissioner--
--
    Mr. Murphy. So you feel they would be less likely to be 
responsive?
    Mr. Larsen. It is a resource issue. There are only so many 
people----
    Mr. Murphy. OK. Have you ever been to a restaurant where 
you got bad service or bad food?
    Mr. Larsen. Yes, I have.
    Mr. Murphy. Do you go back?
    Mr. Larsen. I try not to.
    Mr. Murphy. Do you tell your friends not to go back?
    The answer is that I think if a person goes to a restaurant 
with bad service, they are about 12 times more likely to tell 
friends about it, but they go to a good restaurant, they tell a 
few. But the point is, word gets out; and that ruins that 
restaurant's reputation.
    Let me ask this: Does Medicare run things well? Because I 
know I have got staff that are always dealing with Medicare and 
Medicaid problems. As a matter of fact, I have introduced a 
bill to deal with some of things that CMS has promised. Yet 
when plaintiffs' attorneys and trial attorneys are trying to 
seek information, just information, from Medicare with regard 
to how much Medicare has paid on a bill, it can take them weeks 
or months to find this out, and oftentimes this is an error.
    Now, my problem is seniors who have this issue, they have 
nowhere else to go. They have no other restaurant they can turn 
to. They have no other car dealer they can turn to. They are in 
a single market here where they have nowhere else to go.
    So, along those lines, one of the things I hope you will 
look into, when an organization has a monopoly on something, 
there is no competition or anything else that anybody can do, 
and that is part of what we are seeking here, is to find 
another way of that. So if a person doesn't like the service 
from one insurance company, they say I am not going to go back, 
and that information does get out.
    So I would ask the other panelists along those lines, what 
mechanisms does someone see in this bill or something that 
should be added to it that, if a person is shopping across 
state lines, that should be available for people to have 
information as to whether or not an insurance company covers 
certain things or they are in effect inefficient.
    Can someone answer that for me?
    Mr. Finan. I would like it address that.
    First of all, health insurance is not like a restaurant. I 
totally agree with you. You get lousy service, you don't go 
back. That is the end of that.
    But what about the cancer patient who is in the middle of a 
treatment, is being denied coverage they think they are 
entitled to under the contract? What is the recourse? They 
can't go to another health insurance plan at that point. That 
is impossible.
    Mr. Murphy. That is a good point. But that is a different--
I understand the point. Look, I don't want anybody to be denied 
coverage. I don't want anybody cut from coverage. That is 
another issue. And I do want to ask you a question about 
cancer.
    But my point is, however, I know in the Pittsburgh market, 
we are basically locked into two companies who cover the 
dominant part of the market and a couple other ones. But people 
don't have any other choice. So even if they say I didn't get 
good service from this insurance carrier and didn't get that 
one, they have got nowhere else to go.
    Ms. Herrera, can you answer that? Is there any mechanism 
you see that states can help demand or provide along these 
lines?
    Ms. Herrera. Well, my expertise is in the area of state 
legislation; and in all of the states that have enacted this 
legislation, the primary state's insurance commissioner, the 
primary state's courts, would adjudicate those views.
    Mr. Murphy. Well, then let me go back to this cancer 
question. Because, Mr. Finan, this is very important for 
cancer. Because I strongly support your concerns here. But do 
you see anything in this bill that prevents us from either--
maybe it should be added to this bill, maybe another bill--that 
would deal with the issue of denial of coverage or denial of 
pre-existing conditions or cutting someone? Do you think that 
is something we still need to make sure that we address as 
Congress, to make sure you still can't deny coverage? 
    Mr. Finan. Yes. The Affordable Care Act, one of the big 
advances from a cancer patient and survivor perspective is that 
there is establishment of clear consumer rights, including, for 
example, the right to appeal and the clarification. This bill, 
as I understand it, would repeal all of those provisions. So, 
therefore, you go back to the old system where there are----
    Mr. Murphy. It would repeal every single provision?
    Mr. Finan. As I understand it, it would repeal title I of 
the Affordable Care Act, which embeds all of those consumer 
rights. So, therefore, you go back to a system where the 
consumer is totally confused. We have seen this very often 
among cancer patients, that they are denied coverage, they 
don't know how to appeal, the rules are convoluted.
    Mr. Murphy. Well, there is something in here on page 22 
about the right to an external appeal process, so maybe we 
should discuss that more and review that, because I would like 
to find out. Thank you.
    I yield back.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentlewoman from California, Mrs. Capps, for 5 minutes for 
questions.
    Mrs. Capps. Thank you. And I appreciate the previous 5 
minutes.
    I don't want to keep you on the hot seat, Mr. Finan, but I 
would like to continue this conversation about chronic 
diseases.
    When most people think about individuals who can't get 
health insurance coverage because they are sick, they do think 
about individuals with catastrophic illnesses like cancer or 
AIDS or multiple sclerosis or any number of debilitating 
progressive conditions. I will give you a little more time to 
amplify it for us, some of the difficulties you have documented 
in cancer patients getting insurance and accessing treatment 
once they have insurance and the challenges that would be posed 
by this bill, as you understand it.
    Mr. Finan. What I stated in my statement and are absolutely 
essential are the common rules. There needs to be guaranteed 
issues, that insurers are not discriminating. That helps level 
the risk and level the cost.
    Insurance is about cost sharing. It is about sharing risk. 
I mean, I have had homeowner's insurance for 30 years and have 
never collected, but I am perfectly fine with that.
    In health insurance, we know that sooner or later most of 
us will experience a serious claim, and so we have to set the 
rules so that cost is spread. It is essential to have essential 
benefits. Because, too often, and we see this increasingly 
often, where patients don't--get in the middle of treatment and 
then they realize they have run out of benefits.
    Mrs. Capps. Right.
    Let me just ask you, because we are faced with two choices. 
We have the law now that the approach, as you understand it 
under the Affordable Care Act, but now the Health Care Choice 
Act, how would you contrast ramifications for people with 
cancer? Do you believe that the protections on access to 
coverage would be eroded under this bill that is before us?
    Mr. Finan. Oh, very quickly. No question.
    Mrs. Capps. Just highlight a couple of the areas, if you 
would.
    Mr. Finan. Well, again, it is a race to the bottom. 
Insurers are going to sell weak benefit plans at a relatively 
low cost to relatively healthy people.
    Mrs. Capps. And if you become sick--because a healthy 
person can have a diagnosis with cancer, and then life changes 
in an instant before their eyes.
    Mr. Finan. And that is correct. And then, all too often, 
insurers engage in practices to force people out. There have 
been rescissions. This committee has done a lot of excellent 
work in that area. And where do they go? Then they wind up in 
pools that are extraordinarily expensive.
    I know of an example of a few years ago of a woman who 
moved from Alabama with insurance, wanted to move to Virginia, 
which is an insurer of last resort, which means the Blue Cross 
there does have to provide insurance, but they can rate based 
on the risk. And a woman with breast cancer that had completed 
her treatment was given a premium of over $60,000 a year. If 
you inflated that to current costs, it is probably more than 
$75,000 to $85,000 a year. That is what will happen to cancer 
patients under this kind of system where you bifurcate the risk 
pools.
    Ms. Kaptur. And cherry-pick----
    Mr. Finan. Cherry-pick. They will get great prices. But 
people with chronic conditions like cancer are going to wind up 
with extraordinarily expensive insurance.
    Mrs. Capps. And, like you say, the reason we have health 
insurance is to protect us if something catastrophic happens.
    Mr. Finan. When you become ill.
    Mrs. Capps. Yes.
    Mr. Larsen, I want to use the rest of the time to talk 
about the difference between-- well, talk about what states' 
rights involve. You highlight in your testimony that this bill 
would create an unlevel playing field where some of your 
constituents are protected by the laws in their states and some 
are not.
    In addition, you note that this bill would undercut the 
authorities of state governors, state legislators, and 
insurance regulators. So states' rights are out the window, 
something that most of our colleagues on the other side of the 
aisle often point to as the reason to block-grant Medicaid or 
to repeal the Affordable Care Act.
    What would this do to consumers? How would it ultimately 
hurt them, if it would?
    Mr. Larsen. Well, I think it would. And it is a huge 
change. I mean, compare the resources that different insurance 
departments have. I think the state of Texas has 20 times the 
staff as a state like Idaho. So if, for example, an insurer 
decided to use as its primary state a lightly regulated state 
with very little staff, it is hard to imagine how that staff 
could handle essentially regulating products that might be sold 
in 50 states.
    Mrs. Capps. How would you imagine a state insurance 
commissioner--that is something you know something about. How 
would that state insurance commissioner punish abusive 
insurance companies that may be located in another state?
    Mr. Larsen. Again, if you don't have the authority over the 
company that is selling to your residents, you----
    Mrs. Capps. You have no control.
    Mr. Larsen. Certainly you can, you know, talk to the other 
insurance commissioner, but, at the end of the day, if they are 
selling products legally under a proposal like this in your 
state and they have only so many resources and so many laws--
because it is not just the resources. It is the consumer 
protection provisions.
    Mrs. Capps. And wouldn't most of the insurance companies 
want to locate in a state that had very few regulations?
    Mr. Larsen. Well, I mean, I think that is the purpose, to 
sell your policies out of a lightly regulated state, both from 
a resource standpoint and certainly from a benefit requirement. 
You going to be selling, you know, thin, light policies in my 
state. My healthy young people will gravitate to these 
policies, and it will essentially destroy the risk pool in my 
state, and I can't do anything about it.
    Mrs. Capps. Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentlelady and recognizes 
the gentlelady from Tennessee, Mrs. Blackburn, for 5 minutes 
for questions.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    I appreciate so much you all are here to talk about this 
issue. This is one we have talked about for a good period of 
time. At the core of it is how do you increase access to 
affordable health care insurance and affordable health care 
delivery for all of our citizens.
    Now, you know, there are a couple of ways that we can go 
about this, but I find it very interesting that there are some 
in this room who seem to believe that individuals can't make 
their own decisions about health insurance, that it is going to 
take the Federal Government, and I find that very sad. I think 
that most people find a product that works for them, and they 
are knowledgeable consumers, and they want to go out and buy 
the best that they can afford. We see it in other sectors of 
the free market system.
    Mr. Finan, did you read the bill?
    Mr. Finan. Yes.
    Mrs. Blackburn. You read the bill.
    Mr. Finan. Yes.
    Mrs. Blackburn. OK. You know, I would encourage you to go 
back and read the portion--and Mr. Parente actually spoke to 
this. You not only have your primary state but your secondary 
state insurance.
    Mr. Parente, would you like to elaborate on that point, 
when it comes to consumer protection?
    Mr. Parente. You have both states having your back, 
basically, which is better than just having one state.
    And, yes, you have the issue of essentially whether the 
state insurance commissioner does have the resources to be able 
to do this. But understand that if insurers start to migrate to 
that state and that insurer pays taxes because they are 
migrating to that state based on their revenue, guess what the 
insurance commissioner office is going to do? Staff up.
    You are going to set up a competition amongst the states on 
who wants to actually have the insurance companies operating 
within their parameters. And to the restaurant comment, do a 
good job.
    So the issue of cancer and chronic conditions, one thing I 
would like to point out that is in this study that we looked at 
that was discussed in the previous committee hearings, if you 
have a chronic condition and you have cancer, you are better 
off under an interstate provision than the status quo. And the 
status quo will take us to 56 million uninsured by 2014.
    This law that is being discussed or things like that 
addresses those people with cancer and chronic conditions 
today, not in 2014. How can you say to somebody 3 years from 
now it is oK for you to die because you can't have insurance 
coverage because we have to wait for the law to come into 
power?
    Mrs. Blackburn. OK, Ms. Herrera, let's talk about state 
insurance commissioners and legislatures. Do you find that they 
evaluate the cost of the mandates before they implement them or 
do they put them in place and then do a review?
    Ms. Herrera. In about 28 states, they have what is called a 
Mandated Benefits Review Act, which requires a cost-benefit 
analysis for proposed state mandates before they take effect.
    Mrs. Blackburn. OK. As a practical matter--and, Mr. Howard, 
let me come to you on this. Because I think that some of the 
research work you all at Manhattan Institute have done--as a 
practical matter, insurers have to offer policies that 
consumers are willing to purchase. We know that. And I believe 
consumers are pretty savvy. Shouldn't they be able to determine 
which type of benefits that they want, that insurers are 
willing to buy, that they can go to one of the states which has 
offered a certain set of mandates, a certain set of benefits, 
and then make those choices, knowing that they are going to 
have that benefit review in that state, find a product that 
fits them, and then be able to move that into the marketplace? 
So shouldn't they have the ability to make that decision?
    Mr. Howard. Absolutely. And I think that what we need to 
think of this is as a dynamic system. So no state is going to 
want to have the reputation of being a fly-by-night state where 
they were allowing terrible or abusive insurance practices. 
They in effect would want to become the Delaware of insurance, 
where they would want to have the reputation for the best 
solvency requirements, the best consumer protection, and the 
most affordable policies. So states would have powerful 
incentives to attract consumers, as Dr. Parente just pointed 
out, for reasons of accruing premium taxes, to have the right 
mix of coverage that was both affordable and----
    Mrs. Blackburn. Thank you for that.
    I have got another question. Mr. Larsen, your testimony 
praises PPACA for supposedly aiding children with pre-existing 
conditions. Yet what we have seen in some surveys since PPACA 
was signed into law is that the carriers are no longer offering 
child-only health policies in 20 states. The so-called 
protection for children with pre-existing conditions has turned 
into a nightmare, an absolute nightmare, where many parents 
cannot find coverage for their children at all. Do you believe 
that that is an acceptable outcome?
    Mr. Larsen. Here is what I would say. We have----
    Mrs. Blackburn. Yes or no?
    Mr. Larsen. We have stopped the process. We tried to stop 
the process of insurance companies not providing coverage to 
sick kids, which they actually agreed to do and then decided 
that they didn't want to do. And we have given them every tool 
possible in terms of open enrollment, rating options, 
everything. And I think----
    Mrs. Blackburn. Do you find it acceptable that premiums 
have increased on young adults 17 percent? AP reported that 
young adult health premiums have increased 17 percent because 
of the new law. Do you find that acceptable?
    Mr. Larsen. Those certainly aren't the numbers that we have 
seen, and I am not familiar with that.
    Mrs. Blackburn. I will be happy to supply you with the 
article.
    I yield back.
    Mr. Pitts. The chair thanks the gentlelady and recognizes 
the ranking member of the full committee, Mr. Waxman, for 5 
minutes for questions.
    Mr. Waxman. Thank you, Mr. Chairman.
    I find this bill like a bad penny--it keeps on coming back. 
And it doesn't make sense now, particularly since we have the 
Affordable Care Act. The Affordable Care Act was supposed to 
deal with the problem of people who have pre-existing--one of 
the big problems. People can't buy insurance, and they can't 
buy insurance in the individual market often because they have 
pre-existing conditions.
    Dr. Howard, would this change the practice for pre-existing 
conditions if an insurance company still wanted to 
discriminate?
    Mr. Howard. You know, in states that have implemented both 
community rating guaranteed issue----
    Mr. Waxman. I am just asking you, is there anything in this 
bill that would prevent denying coverage because of pre-
existing conditions?
    Mr. Howard. It would allow people to buy insurance that was 
more affordable. It would give people more options to buy 
insurance.
    Mr. Waxman. Well, what if the insurance companies didn't 
want to cover them because they had pre-existing conditions?
    Mr. Howard. Insurance companies that didn't offer coverage 
or offered unaffordable coverage should have the option of 
state high-risk pools, federally funded, hopefully, to have 
that option.
    Mr. Waxman. That is not in this bill. That is not existing 
law.
    Now, let me go through, rather than the abstract of some of 
these issues, let me get into some details.
    Dr. Howard, do you believe that insurance companies should 
cover the adopted children of their policyholders?
    Mr. Howard. If they would like to pay for that additional 
coverage. If people want to pay for additional coverage, it 
shouldn't be mandated that everybody has to cover that, which 
just passes costs along to other consumers.
    Mr. Waxman. You don't think it is appropriate for states to 
require coverage of adopted children the same as their other 
natural-born children? In fact, I can't imagine how anybody 
could justify an insurer not covering adopted children in the 
same way they cover other children. The Blackburn bill would 
end that protection that has been adopted by 45 states.
    Dr. Howard, do you believe that insurance companies should 
be required to cover disabled dependents, such as disabled 
adult children living with their parents?
    Mr. Howard. I believe that states that have those 
requirements--the problem is that insurers will offer any 
benefit to consumers----
    Mr. Waxman. You could buy anything if you have the money, 
but there would be no requirement that the insurance companies 
cover disabled adult children. Disabled adult children, often 
unable to work, would have nowhere to turn for their health 
care unless they could be covered under their parents' policy. 
Nowhere, of course, except Medicaid, which the Republicans are 
proposing to destroy. The Blackburn bill would eliminate this 
protection that 42 states have chosen to cover.
    What about coverage for well child care?
    Mr. Howard. states in this market--if we move to an 
interstate insurance market, individual states will decide what 
the best mix of coverage is. So for things such as disabled 
children or covering adopted children, a state would say that 
is a valuable policy. We are going to keep that.
    Mr. Waxman. Can they mandate it? They can't require it. A 
policy approved in Iowa must be sold in the state of Nebraska, 
isn't that right? And if that policy doesn't cover it and other 
policies decide they have to compete with this cheaper policy 
and they stop offering coverage, the state has no ability to 
mandate, is that right?
    Mr. Howard. That is correct. But they have----
    Mr. Waxman. OK. Now what about this coverage for well child 
care? This is now guaranteed by 34 states that help healthy 
babies stay healthy. And that would be eliminated. Thirty-four 
states have required it, and this would be eliminated.
    Do you believe insurers should cover diabetic testing 
supplies to make sure that diabetics can manage their diabetes?
    Mr. Howard. Congressman, I believe what would happen is 
that insurers would look at individual mandates on a case-by-
case basis and say does this add value to the policy and help 
keep our individual policyholders healthy? In many cases, they 
may keep some of those mandates. They are likely to get rid of 
mandates that don't have the right cost-benefit balance.
    Mr. Waxman. Excuse me, the insurance companies will decide 
if they want to cover that, and they won't be told they have 
to, only if they think it is something they think is part of 
the package they want to offer.
    Mr. Howard. That gets consumers to buy their policies.
    Mr. Waxman. Yes. But if consumers don't have a choice of 
any policy that covers it, then they just have to buy whatever 
is available. This particular requirement on diabetic testing 
supplies has been guaranteed by 47 states, and that would be 
eliminated by the Blackburn bill in those states.
    I could keep going. Emergency care is required in 47 
states; alcoholism-substance abuse treatment, 45 states. Maybe 
an insurance company would decide that is too much, and they 
don't want to provide that. Colon-rectal cancer screening, out 
of the munificence of an insurance company, they may decide 
that keeps people from getting colon cancer, but it is cheaper 
to sell a policy that doesn't cover that. Cervical cancer 
screening. And we can go on and on.
    I must say, Mr. Chairman, that I find it amazing when 
people quote the wisdom of Dennis Hastert to say you don't 
force them to buy a Cadillac. If we don't allow people with 
pre-existing conditions to buy anything because there is 
nothing available to them, they won't even be able to buy a 
jalopy. And I am always amazed when I hear people say we are 
going to give people the freedom, give them the freedom to buy 
something that won't be available to them because they can't 
afford it or it is just not even offered.
    So I yield back my time.
    Mr. Pitts. Thank you, Mr. Waxman.
    I yield to the gentleman from Georgia, Dr. Gingrey, for 5 
minutes.
    Dr. Gingrey. Mr. Chairman, thank you very much.
    I am going to turn to Mr. Larsen.
    Mr. Larsen, would you explain to us again what your 
position is within the Center for Medicare and Medicaid 
Services, what your title and responsibilities are?
    Mr. Larsen. Sure. I am the director of the Center for 
Consumer Information and Insurance Oversight, and this Center 
focuses strictly on the private-market health insurance reforms 
with the Affordable Care Act. So exchanges, implementation of 
the MLR provisions, rate review. We do not handle--a different 
Center handles Medicaid and a different Center within CMS 
handles Medicare.
    Dr. Gingrey. Right.
    Mr. Larsen. We are strictly the private market.
    Dr. Gingrey. Thank you for clarifying that.
    In your testimony, you state that because of the Affordable 
Care Act, sometimes referred to as ObamaCare, that most 
insurance companies cannot discriminate against someone because 
of pre-existing conditions; and you go on to state that ``we 
have also prohibited insurance company rescissions, so most 
insurers can no longer cancel coverage when individuals get 
sick just because they may have made a mistake in filling out 
the application and doing the paperwork.''
    In all, you use the phrase ``most''--the word ``most''--
eight times in your testimony when referring to insurance plans 
or companies. I am curious, Mr. Larsen, which insurance plans 
do not fall under the protections you praise for the Affordable 
Care Act? You say most, not all.
    Mr. Larsen. I will go back and look.
    The nutshell version is, for example, rescissions, which is 
one of the provisions that takes effect now, that is in effect 
today, that applies to all insurers. And then when we get to 
the exchanges in 2014, the prohibition on pre-existing 
conditions, exclusions, and exclusions, you know, based on 
health status will disappear.
    Dr. Gingrey. Well, let me interrupt you just for a second. 
Would you say then that maybe one particular plan that is not 
covered is the Medigap plan, the Medigap plan offered by AARP, 
which controls over 30 percent of that market? My reading of 
the bill suggests that they are not really covered. You don't 
have jurisdiction over the Medigap plans that are offered by 
AARP, is that correct?
    Mr. Larsen. Not in my shop, no. There is a different set of 
rules that apply to the Medigap plans and the conditions under 
which they have to be issued. So we don't deal with the Medigap 
in the exchanges.
    Dr. Gingrey. Are the Medigap plans, for which we all know 
in previous testimony that AARP reaps a pretty significant 
profit, royalties they call it, are they subject to these same 
consumer protections that you talked about in regard to----
    Mr. Larsen. There is a whole different set of protections 
and provisions that deal with the Medigap policies. So, for 
example, Medigap isn't part of the private-market reforms we 
are talking about.
    Dr. Gingrey. The fact is, of course, that AARP, the 
American Association of Retired Persons, who promotes and 
markets this Medigap policy for a particular insurance company 
from whom they receive a lot of royalties since it is 30 
percent of the market, that they were granted an exemption from 
a lot of this oversight and regulation. Who knows whether that 
is a political support sort of thing, a reward for endorsing 
ObamaCare.
    But help me understand something else. You are here today 
testifying on behalf of the administration that, without 
ObamaCare's consumer protection, cross-state purchasing is a 
bad idea. Yet seniors under Medigap plans are not afforded 
those same protections. Yes or no?
    Mr. Larsen. Well, I can't really speak to kind of the 
details of the Medigap plan.
    Dr. Gingrey. Well, I can speak yes or no, and the answer is 
no.
    Do you believe that seniors under Medigap plans should 
enjoy the same consumer protection as younger Americans?
    Mr. Larsen. As which Americans?
    Dr. Gingrey. Younger.
    Mr. Larsen. I think anybody in a Medigap plan should have 
the right to consumer protections, and what those are compared 
to what other policies are I can't get into.
    Dr. Gingrey. Can you explain to me why seniors were not 
given the same consumer protection under the Affordable Care 
Act as younger Americans?
    Mr. Larsen. Again, it is a different regime, the Medigap or 
supplemental policies to Medicare, as opposed to policies 
issued in the commercial market.
    Dr. Gingrey. But wouldn't you agree that they deserve the 
same consumer protections as any other Americans?
    Mr. Larsen. They may, and they may get them. I don't know.
    Dr. Gingrey. Mr. Larsen, the Obama administration and the 
congressional Democrats cut over $500 billion out of Medicare 
to help finance ObamaCare. And ObamaCare is not Medicare. It is 
a new entitlement program, maybe an entitlement program for 
younger people. They didn't provide consumer protection for 
seniors that were afforded to every other American.
    It is hard to ignore the fact that this administration 
purposely, purposely, raided Medicare to fund a political 
takeover of health care and quite simply ignored the needs of 
seniors in the process. And now the solution they say is iPad. 
If you think the first rate was bad, what until you see the 
second.
    I yield back.
    Mr. Pitts. The chair thanks the gentleman and yields 5 
minutes to the gentlelady from Illinois, Ms. Schakowsky, for 
questions.
    Ms. Schakowsky. Well, that is interesting, that the 
gentleman is criticizing the Democrats on Medicare, when he and 
all but four other Republicans voted for a plan that 
essentially ends Medicare. It could have a different name, but 
it won't be Medicare-guaranteed benefits for the elderly.
    I wanted to clarify something else, and that is the 
Affordable Care Act, as I understand it, does include a 
provision to allow insurers to sell insurance across state 
lines and only be subject to laws in the issuing states, but 
that there is also a provision known as the health care choice 
compact that includes a number of protections for states and 
for consumers. So insurance companies can sell across state 
lines under the Affordable Care Act, am I right?
    Mr. Larsen. There is a mechanism to do that. The only 
difference is it doesn't result in the preemption of either 
state's laws.
    Ms. Schakowsky. Right. So the state laws that were cited by 
Ms. Herrera--I think you mentioned Georgia, Maine, Wyoming, 
maybe some others--those laws would, under the bill we are 
talking about today, would be preempted. They would be 
eliminated. Am I right?
    Mr. Larsen. That is correct.
    Ms. Schakowsky. Under the Affordable Care Act, those states 
would be able to maintain their laws.
    Mr. Larsen. Right. We get the benefit of interstate sales 
without the problems associated with one state preempting the 
laws of another state.
    Ms. Schakowsky. I really wanted to clarify that, because I 
think we are talking about it as if the Affordable Care Act 
doesn't allow for states to sell policies. We just do it with 
the interest of consumers in mind.
    Mr. Finan, you seem anxious to respond to comments or 
questions that were raised by my colleague from Illinois, and I 
wanted to let you do that. But I wanted also to clarify 
something else.
    Mr. Parente said--and it is true that some of the 
protections of the Affordable Care Act don't go in place for 3 
years. So, you know, he is saying that, right now, cancer 
patients can just die or something. But does this bill really 
protect cancer patients? So if you could say what you wanted to 
say and then also----
    Mr. Finan. I just wanted to go back to the gentleman from 
Illinois, who has left, but he said cancer patients should be 
most concerned about uninsured. We are obviously very concerned 
about that. But the problem of under-insurance is an extremely 
important one, too. And we do see this, and it is becoming 
nefarious, where patients are in the middle of treatment, 
realize their benefits have run out, that they simply can't go 
to the doctor anymore, they can't get more treatment because it 
is not covered.
    Ms. Schakowsky. So it is not like they can pick another 
restaurant.
    Mr. Finan. No. Exactly. That is exactly the point.
    I am sorry, what was your second question?
    Ms. Schakowsky. The second question was that, while it is 
true, and for some people I am sure troubling, that the 
Affordable Care Act's full provisions don't come in for another 
3 years, do the provisions under this bill provide the kind of 
protection that you need?
    Mr. Finan. Well, first of all, some of the provisions of 
the Affordable Care Act have kicked in. We do have extensions 
of dependent coverage. There is no ban on lifetime limits now. 
There are raising of the annual limits. So some of the benefits 
have kicked in. There is a transition.
    But the point is, if we didn't have the Affordable Care Act 
act, we would be in a worse place. We would go back to the pre-
Affordable Care Act where none of those provisions are in 
place. So the Affordable Care Act is moving----
    Ms. Schakowsky. But would this bill----
    Mr. Finan. No, as I understand the bill, it would 
essentially go back to the world of protections we had before 
the Affordable Care Act; and, in fact, it would exacerbate it 
for all of the reasons I said. You wind up with a race to the 
bottom and you wind up with cherry-picking, which makes 
things--ultimately, we would wind up with a worse situation 
than we had before.
    Ms. Schakowsky. Let me just finish with this. As a former 
state legislator, we worked very hard on both sides of the 
aisle to put in the consumer protections that are in our state 
legislation that range from mammograms to all kinds of things 
that we thought should be available in our state. And that is 
true, and Mr. Waxman enumerated many that are so popular that 
40-45 states have those. Those, as I understand it, Mr. Larsen, 
would all be eliminated if there were something from out of 
state.
    Mr. Larsen. Sure. If an insurer picked as its primary state 
a state that didn't have those benefits, and there are a small 
number that don't, then, yes, that would set the standard or 
the ceiling for all other states in which those policies were 
sold and you would not get the benefit of those.
    Ms. Schakowsky. Thank you.
    I yield back.
    Mr. Pitts. The chair thanks the gentlelady and recognizes 
the gentleman from Louisiana, Dr. Cassidy, for 5 minutes for 
question.
    Dr. Cassidy. Folks, I have 5 minutes. If I interrupt you, I 
am not being rude, I am just trying to maximize.
    Dr. Howard, Mr. Pallone spoke glowingly of how New Jersey 
regulates, protects consumers, et cetera, et cetera, and they 
don't want a race to the bottom. What I see, though, from your 
excellent testimony, Ms. Herrera, is that the premiums for 
somebody with an individual policy in New Jersey are about 40 
percent higher than in Pennsylvania. New York, which also has 
banned community rating, I suppose, and guaranteed issue, it is 
more than double.
    What is going to be the impacts upon insurance? What is the 
data? Everybody is talking about how they feel. I want data. 
What are the data about doubling of premium and what that does 
to your rate of uninsured?
    Mr. Howard. I defer to Dr. Parente on the exact numbers.
    Mr. Parente. I mean, basically, if you have premiums that 
are, you know, substantially less, obviously more people are 
going to get coverage. That is the best way to deal with it.
    Dr. Cassidy. If you lower premiums by 50 percent, that 
would have a significant impact on the ability of people to get 
good coverage, correct?
    Mr. Parente. Yes.
    Dr. Cassidy. And data shows that?
    Mr. Parente. Yes. That is what the study shows. That is 
what we are trying to say.
    Dr. Cassidy. Mr. Finan, we actually have empiric data. We 
know that ERISA plans have few mandates. No cancer mandates 
that I know of. And yet we know that they, if you will, can be 
compared to plans which have lots of mandates, including some 
ERISA plans governed by state insurance companies.
    Is there any difference that you know of, data, not 
feelings, but data that you know of, in difference in cancer 
outcomes between those covered by ERISA plans without mandates 
and those covered by plans subject to mandates?
    Mr. Finan. I do not know of any specific data, no.
    Dr. Cassidy. I didn't think so. So, in fact, much of what 
you are saying is kind of an existential anxiety. I am not sure 
you actually have data to show that the mandates improve. Just 
comparing ERISA to non-ERISA, no mandates to mandates, I am not 
sure you have that data.
    Mr. Finan. But the problem is----
    Dr. Cassidy. No, no, no, no, I am sorry. I am really into 
data right now.
    Dr. Parente or Dr. Howard--I am checking for your Ph.D.s, I 
am sorry--Mr. Larsen suggests that the community rating keeps 
the young and healthy in the market. He kind of painted a 
catastrophic, oh my gosh, if we don't keep them in market, 
terrible things happen.
    Can you elaborate--maybe it was you, Dr. Howard--what 
happened in New York state to the rates of uninsured among the 
young when they put in community rating?
    Mr. Howard. The market collapsed.
    Dr. Cassidy. I am sorry. What did the market do?
    Mr. Howard. The market collapsed.
    Dr. Cassidy. And that is not an existential anxiety. That 
is data, correct?
    Mr. Howard. That is correct.
    Dr. Cassidy. Do you want to elaborate a little bit more?
    Mr. Howard. Yes. As recently as 2000, I believe, there were 
over 128,000, 130,000 people in New York's individual direct 
pay market. Today, there are fewer than 30,000 in that market. 
And people have recognized because costs have skyrocketed and 
young and healthy people have had to drop out of the market.
    Dr. Cassidy. So it went to this highly regulated market 
that theoretically is going to provide protections for people. 
You say the market collapsed.
    Mr. Howard. Theoretically, it is supposed to get people to 
stay in the market, but because young people are very cost 
sensitive, they drop out.
    Dr. Cassidy. OK, got you.
    And obviously one thing that was a problem that PPACA had 
to address was the problem of the disproportionate rate of the 
lack of insurance among the young. If you will, we created the 
problem that we then had to cure.
    Dr. Parente, in your data, in your paper, you suggest that 
Alabama would be really at a competitive advantage because they 
have few mandates.
    Mr. Parente. That is correct.
    Dr. Cassidy. I was thinking, Mr. Finan is discussing a 
woman that moved from Alabama to Virginia, had to drop her 
policy apparently because she was no longer allowed to purchase 
that from Alabama and so was faced with a large increase. But 
in your paper you would suppose that Alabama would begin to 
sell. If you will, she would have been able to keep her policy. 
The more robust we have interstate commerce, the more likely 
someone could continue to keep their policy upon which they 
were, correct?
    Mr. Parente. That is correct.
    Dr. Cassidy. OK. That is pretty interesting.
    Now, Mr. Finan, I just see you biting your lip. I know you 
want to respond to me. What would you say, man? And I only have 
59 seconds, so I may cut you off to respond to you.
    Mr. Finan. Going back to your ERISA issue, you are talking 
apples and oranges. For the most part, large employers, whether 
they be self-insured or have commercial insurance, do a very 
good job or a relatively good job of covering serious 
conditions because they can spread the risk. They have a large 
number----
    Dr. Cassidy. If we have somebody who is interstate, 
interstate, we actually have the ability to share risk. Some of 
the concerns you and Mr. Larsen have actually don't pertain to 
this bill. We could easily have an anti-rescission bill in 
here. We could easily have other things that you are 
postulating would be a problem.
    Mr. Finan. But the fundamental difference is in the 
individual market you are selling to individuals. You are not 
selling to large groups. When you sell a plan to a large group 
of 5,000 or 10,000----
    Dr. Cassidy. We could have a guaranteed renewability. I 
mean, that could be added.
    Mr. Finan. But you are not going to sell in the first 
instance. If you are an insurance company, you are looking at 
the individual and his or her risk at the point of enrollment. 
If that person has cancer or a history of cancer, you are--you 
the insurance company--are going to deny coverage.
    Dr. Cassidy. If you look at the experience in Holland, if 
you look at the experience in Holland, there are actually 
companies that specialize in people that are high risk.
    Mr. Finan. I am sorry, which company?
    Dr. Cassidy. In Holland. If you actually look at the 
experience in Holland, there are actually companies that make a 
living specializing in those who at higher risk. The market 
will respond.
    I yield back. I am out of time.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentleman from Texas, Mr. Green, for 5 minutes.
    I am sorry, I am out of order. Mr. Guthrie for 5 minutes.
    Mr. Guthrie. Thank you, Mr. Chairman. I appreciate it very 
much.
    To Mr. Larsen and Mr. Finan, the concern, the major 
concern--there are several concerns you voiced--but the major 
concern you voiced is that if a state with low mandates came 
into Kentucky--Kentucky has 34 mandates, I believe--and offered 
health insurance, and the young, healthy would purchase that 
health insurance, and, therefore, as a matter of fact--to quote 
Mr. Larsen--destroy the risk pool. And that is your major 
concern. So it is acknowledging that people are sharing costs 
as you went forward.
    You also mentioned, Mr. Finan, that you had homeowners 
insurance, which I have as well, and you paid 30 years on it, 
and I paid for quite awhile, because we have the risk of 
something happening. I want to be covered for a calamity.
    However, if I could purchase homeowner's insurance when my 
house is on fire or when it was burning or when a tornado was 
coming, you wouldn't have paid for it for 30 years if you could 
have bought it when you needed it.
    Mr. Finan. Absolutely.
    Mr. Guthrie. So when Mr. Larsen talks about the market 
working with the exchanges, I think you are going to have the 
exact same problem you are talking about here with the Health 
Care Act. If you are 27 years old and healthy and you are going 
to have a list of mandates that your guys are going to 
subscribe, because you are going to have essential health 
benefits, if you call them that, and you are going to have to 
pretty much match the most expensive state. Because if you 
don't, all of the lists that--Ranking Member Waxman listed all 
of those. If a state goes beyond what you offer, the state has 
to pay for it. They have to actually subsidize those coverages. 
So either you are going to sit here and listen to a list that 
he is going to read off about you not covering, you are going 
to cover everything.
    So my point is, I don't see how you can get around the 
premiums are going to increase for anybody because of the 
Health Care Act. It has to. Therefore, if you are young and 
healthy and you get guaranteed issue and you get community 
rating--and we have seen it New York. We have examples of it 
happening, talking about data. What is going to happen to the 
young and healthy? They are going to drop out of the market.
    Now you have the mandate to buy, but if my math is correct, 
I think it is a $600 fine plus 1 percent of your salary. So if 
you are a 27-year-old engineer making $50,000 a year and are 
healthy, you can pay an $1,100 fine--and the most expensive 
state I think is Massachusetts. It is $14,000 a year, health 
insurance. And let's even factor that back down to $10,000. So 
I can pay an $1,100 fine or $10,000 health insurance policy.
    And if I need health insurance--as a matter of fact, I 
think you can tell your anesthesiologist just before he puts 
you out to let you make one last phone call to your health 
insurance company to buy health insurance. But I think that 
would actually be allowed in the law.
    And I don't see how this whole argument about this bill 
destroying the risk pool, how does the Health Care Act not 
destroy the risk pool under that scenario?
    Mr. Larsen. Well, you are still going to have coverage 
options with the various levels within the exchanges for 
individuals. You are going to expand the risk pool, which is a 
good thing. The problem with these proposals is the risk 
segmentation that we get into.
    Mr. Guthrie. Well, why would a young, healthy person 
purchase health insurance with guaranteed issue? In New York, 
you have seen it. You have seen it. Why would a young, healthy 
person under PPACA purchase health insurance when the fine is 
$1,100?
    Mr. Larsen. People are going to have the opportunity to get 
comprehensive, affordable care in the exchanges. Even the CBO 
estimates that the exchanges are going to reduce administrative 
costs for insurers because they are not going to have to spend 
the time and the money and the resources underwriting people 
and setting up rating rules to exclude sick people. So it is 
going to be an attractive option.
    Mr. Guthrie. But if the premium is not somewhere close to 
the fine, or $1,100 a year under my scenario of $50,000 a year 
for a 27-year-old, if the premium is not somewhere close to 
that and you can get it when you need it, why would you buy it?
    Mr. Larsen. I think people want comprehensive health care.
    Mr. Guthrie. But they can get it if they need it, as 
opposed to paying $10,000 a year. I mean, why would somebody 
under that scenario laid out in health care buy health 
insurance if they are a young person? I mean, that is the major 
problem with the law. The guaranteed issue, the mandate to buy 
is covered by if you don't buy it, you have to pay a fine.
    But I don't understand--if the market is going to work as 
you have seen in New York--I don't know if New York has a fine, 
but people can drop out of the market and pay the fine. I don't 
understand why you are not going to have the same problem under 
the Health Care Act on a national scale that you are talking 
about having by letting people having mandate-like benefits to 
purchase. Why that is not going to happen. I mean, I just don't 
see how that is not going to happen.
    Mr. Larsen. I think you are going to see people that want 
to get comprehensive coverage through the exchanges.
    Mr. Guthrie. But I believe they can buy it--but the 
guaranteed issue, why would they do it? That is my point. Why 
would a healthy person, young, do it?
    Mr. Larsen. There is a lot of people that can't get their 
coverage today. I mean, that is the issue that we are dealing 
with today, which is the broken market.
    Mr. Guthrie. But it is still going to have a different risk 
pool. Because if you are young and healthy and drop out, then 
it is going to be more expensive; and, therefore, more young 
and health will drop out and it will become more expensive.
    I yield back.
    Mr. Pitts. The chair thanks the gentleman and recognizes 
the gentleman from New York, Mr. Weiner, for 5 minutes for 
questions.
    Mr. Weiner. Thank you, Mr. Chairman.
    I think actually this is an interesting conversation about 
whether or not you should have insurance regulated by states. I 
think you can make a pretty good argument that maybe this 
should be something that should be governed nationally.
    Now I would be interested in knowing whether my Republican 
friends would be interested in the repeal of the provision that 
essentially permits insurance companies to operate outside many 
of the antitrust laws because they share information. The 
argument always was, let them share information because it is 
important for their business model to be able to do it.
    But I actually think that most citizens when you ask them, 
do they want, if they live in Tennessee, to have Blue Cross of 
Utah covering them, there is a practical reason why that 
doesn't happen, right? If you are Blue Cross of Utah, you have 
to hire a bunch--or get a lot of people in your program that 
are Tennessee doctors. You don't want to go to a doctor in 
Utah. You are shaking your head no, Dr. Parente?
    Mr. Parente. Yes.
    Mr. Weiner. You think that patients in Tennessee would like 
to have a doctor in Utah?
    Mr. Parente. I am saying if they are in the ERISA plan, or 
more than likely if they are a Federal employee that is living 
in Tennessee, they are already working through United Health 
Care, GEHA, Blue Cross/Blue Shield National Association, 
getting a national provider----
    Mr. Weiner. But Blue Cross of Utah--let's assume for a 
moment I am in Tennessee, let's say Chattanooga, and I have a 
doctor in Provost and I am sick. So it is a long flight. I 
think it is going to be a pretty long flight, so I am probably 
going to want a doctor in Tennessee.
    So Provost, the firm in Utah, is going to have to set up 
some kind of a plan for Tennessee. They have to serve some 
doctors, right?
    Mr. Parente. No, they are going to have a reciprocity 
agreement with the----
    Mr. Weiner. So, frankly, you do want to have some level of 
state regulation on where people are going to be operating, but 
I do think that if you really want to have interstate--ability 
of people to buy interstate, then you definitely like what you 
saw in ObamaCare, because by establishing basic standards that 
allow a foundation that we can all kind of compare--which is 
the fundamental notion here--is that we should be able to 
compare these products. We should have access to them. 
Interstate compacts could be formed, maybe even someday a 
national compact, although I think that would be offensive to 
the sensibilities of many of my Republican friends. And, 
frankly, you are much closer to having this. But the real 
objective has to be it has to be something that someone in New 
Jersey wants from someone in Tennessee.
    And the effect of the law, if this were to become law, is 
that basically you are saying to a citizen, you are going to 
outsource your rulemaking and your regulatory structure to 
another state. Why even have the states? Why have the states be 
involved in the insurance market at all then, at that point? 
Why not just get them out of it completely and just regulate it 
nationally? I mean, is that the position of the panel? I guess 
it would be an intellectually consistent position to say to do 
that. Why do the states have to be involved here at all?
    The reason the states are historically, is because it is 
thought that you needed some consumer protection be done at a 
state level, that you be able to call your local state attorney 
general or your state insurance commissioner and say, ``I've 
got a beef with this insurance company and how they are 
treating me.''
    Under this law that we are considering today, this bill 
that we are considering today, it is my understanding that what 
will happen is you are going to have some authority of the 
local guy to call Tennessee and say, ``Hey, stop violating my 
citizen's rights.'' But that is really it; you are not going to 
really be able to march into Tennessee and be able to--I guess 
you can sue them in Tennessee court if you want.
    But this is another instance where my friends want to 
take--they did this last week with their tort proposal--they 
want to remove the state's authority to govern this stuff, to 
govern their own citizens. It is a strange place that that they 
argue. They always talk about the needs, the rights of states. 
And what you are doing now is not only taking rights away from 
states and giving them to the Federal Government, which they 
did last week with the tort reform proposal, but now they are 
saying give it from one state to another state. I think that is 
truly problematic.
    But if you do believe in the idea, and I kind of in a 
general sense I believe in the idea, like having more ability 
of people to purchase products that are more advantageous to 
them. But I don't believe that I should outsource New York's 
authority to govern insurance to Texas or to New Jersey.
    And I think my state legislature, for all its weaknesses 
and flaws, I want to vote for them, and I want them to have the 
power to pass laws. My state insurance commissioner is 
appointed by my Governor. I don't think that is outside the 
realm of what is practical.
    What it really comes down to is my Republican friends, they 
don't have a consistent thrust on what they don't like about 
health care reform. They just know they don't like anything 
that is being done presently by the people who are trying to 
fix it, and I think that's evident here today..
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Texas, Mr. Green, for 5 minutes 
of questions.
    Mr. Green. Thank you, Mr. Chairman. Thank you and the 
ranking member for allowing me to waive on.
    Mr. Finan, I know we were discussing Congresswoman 
Blackburn's bill. There is an old saying that an ounce of 
prevention is worth a pound of cure. And I am concerned this 
proposal may actually raise health care costs overall as many 
individuals who need preventative care don't get it.
    A good example: Some cancers can be treated early if 
detected early, with better results for the patient's health 
and lower costs.
    Colorectal cancer is one of the examples. According to the 
CDC, nine out of every ten people whose colorectal cancer is 
found early and treated are still alive 5 years later. If 
everyone age 55 or over had regular screenings and all 
precancerous polyps were removed, as many as 60 percent of the 
deaths from colorectal cancer could be prevented.
    Could you please comment on how this legislation will 
worsen health care outcomes for individuals with cancer and 
raise health care costs overall?
    Mr. Finan. Yes, thank you, Congressman. That is an 
extremely good and important question. The health care system 
today, or up until today, has given way too little attention to 
prevention and screening. We, the American Cancer Society and 
the Cancer Society Action Network, have fought vigorously to 
expand mandates in states on mammograms and colonoscopies, for 
example, because they are proven--they are cost-effective in 
reducing cancer. If people get screened properly and according 
to guidelines, they are much more likely to be detected at an 
earlier stage, and therefore they are likely to get better 
treatment.
    But as I understand the way this bill would work, 
interstate sales would not be required to cover those 
screenings, so we would be taking a huge step backward in terms 
of addressing chronic illness. And chronic illness is the major 
driver of health care costs in this country.
    Mr. Green. My other question is for the whole panel. Mr. 
Finan, of the problems you mentioned is those who are uninsured 
and receiving a diagnosis of cancer. You also mention that even 
insured people, 25 million face major struggles paying their 
bills now. How is it that people with insurance are not able to 
cover their health care costs? And I know there are lots of 
different products out there that you can buy a $25,000 plan. 
And if you have cancer, $25,000 may not even cover your first 
surgery.
    Can you talk about how folks who have insurance are not 
covered by that insurance for their treatment, particularly in 
cancer?
    Mr. Finan. Well, because today there is no such thing as an 
essential benefits package, insurers can offer a wide variety 
of sources, and some will argue that that provides choice. But 
the reality that we have seen all too often is that cancer 
patients who get in the middle of treatment all of a sudden 
discover there are limits within their plans. They can only go 
to the doctor X number of times, or there is no coverage for 
anesthesiologists or something in network.
    And one of the very serious problems we have is the lack of 
transparency in insurance. Most consumers buy insurance because 
of the cost, but they don't have any understanding of what is 
in the benefits package. They don't know how well it will cover 
them if they get a chronic disease like cancer or heart 
disease.
    One of the great advantages of the Affordable Care Act is 
much more requirements to increase transparency, to force 
insurers to disclose more information, and to provide consumers 
with more information.
    Mr. Green. Well, and I understand, because up until the 
Affordable Care Act, typically insurance was a state product, 
except for ERISA. And I have a lot of companies who come under 
Federal laws, no essential benefits under ERISA either. And 
there have been problems in some of my large industries, but 
most states make up for that by having a mandated benefit.
    I have to admit I was in the state legislature in Texas for 
20 years, and we started out really well, because my first term 
we actually required insurance companies as mandated benefits 
that covered children from the time they were born, and not 
wait until they survived 30 days from birth before they would 
provide health care. That was great.
    But then I saw over the rest of the years, and even maybe 
now, the laundry list got so big it was almost 
incomprehensible.
    Now, I know Alabama has a very small list, but I would 
compare some states that had such huge mandated benefits, it is 
really difficult. And I would like the panel to talk about that 
at least in the last 20 seconds that I have.
    Mr. Parente. Just a quick comment. I am a professor of 
finance and insurance. There is technically not a term called 
``underinsurance'' in theory in insurance law. It is a term 
that has been popularized by Karen Davis at the Commonwealth 
Fund to basically talk about the cost hardships associated with 
just living. And insurance is part of just living in a western 
industrialized society.
    The point is this law, this policy, will reduce the premium 
cost on average for all Americans, and that will enable them to 
buy insurance easier and faster.
    Mr. Green. You are talking about the Affordable Care Act?
    Mr. Parente. No, I am talking about letting people buy 
insurance across state lines. Anything the Affordable Care Act 
is going to do is hypothetical and 3 years in the future, other 
than the provisions passed already that have provided some 
protections that are there.
    To be very clear I applaud some of the things that are in 
the exchanges. And my idea, the exchange is a bipartisan idea 
that actually has a lot of potential and is consistent with the 
interstate components.
    Mr. Green. You surprise me because typically everything 
bad--everything that is in the law is bad. Although there are a 
lot of things in there that we worked on very bipartisan, you 
are right.
    Mr. Parente. Yes, well, I am speaking from the value of 
tenure.
    So what I am trying to say is that this thing that we are 
discussing, interstate commerce of sales of health insurance, 
could reduce, and actually from our research, shows would 
reduce the number of people who cannot buy coverage because the 
price points are too high from the mandates.
    And what I want to know is how can the human physiology be 
so different across states that the mandates have such wide 
swings? Or is it the true difference is simply a difference in 
lobbying skill across the states in conjunction with insurance 
commissioners?
    Mr. Pitts. The chair thanks the gentleman and yields to the 
gentleman from New York, Mr. Engel, for 5 minutes for 
questions.
    Mr. Engel. Thank you very much, Mr. Chairman. I appreciate 
it.
    I would like to start by saying I am very concerned that we 
are holding this hearing today to discuss H.R. 371, legislation 
that would facilitate the purchase of insurance coverage across 
state lines. And my concern is the fact that H.R. 371 preempts 
state consumer protections that are critical to the quality of 
care and health of a patient. And in addition, this legislation 
repeals all insurance reforms and patient protections that were 
included in the Affordable Care Act. I think it is throwing the 
baby out with the bath water.
    I find it aggravating, disappointing, and frustrating that 
this committee has continuously done nothing but take up 
legislation that would repeal the Affordable Care Act, punish 
patients, and put the insurance companies back in control of 
our health system.
    I would like to direct my question to Mr. Larsen. Mr. 
Larsen, many states have spent years developing standards for 
insurance plans that they believe not only provide adequate 
minimum coverage for beneficiaries, but also make sure that 
providers will be adequately reimbursed for services rendered. 
If we allow the purchase of insurance policies across state 
lines, why wouldn't employers look to purchase insurance on the 
basis of the least cost to them and not on the basis of whether 
it will adequately provide coverage or payments to providers? I 
would call it a race to the bottom; would you?
    Mr. Larsen. I think that is exactly right. You are going to 
see companies, both the insurers and the companies, looking for 
the market that has the thinnest and therefore cheapest 
coverage. And, of course, everyone wants inexpensive coverage 
until they get sick, and then they want comprehensive coverage. 
That is why we have got to get a comprehensive benefit package 
that is available to everyone, that is still affordable.
    But when you go down this route, you end up segregating the 
market, and the young people get peeled off and the healthy 
people get peeled off, and what you have left in a market is 
sicker people who get sicker and more expensive, and you are 
not solving the problem. The only savings you are getting is 
from peeling off the healthy.
    Mr. Engel. That is why we have the individual mandate in 
the Affordable Health Care Act, because if everybody is 
insured, then everybody has the good coverage and you don't 
cherry-pick or, as you say, have a situation where everybody 
wants to pay a minimum and then wants maximum coverage when 
they do get sick.
    You know, when you are 26 or 27--my kids are around that 
age--you think you are never getting sick. And then suddenly 
there is an accident or whatever, and then you find out that 
you are sick. And if you are uninsured, where do you go? You go 
right to the emergency room, which is the most expensive health 
care for everybody, and we are all paying for it.
    Now a number of states, including my home state of New 
York, have developed programs that assure that if a given 
insurer in their state were to go under, that the state would 
step in and pay the bills, assuring that the affected customers 
would have access to care and providers are paid.
    So let me ask you this: As a former insurance commissioner, 
can you tell me if we allow interstate purchase of insurance, 
how would individual states protect their citizens and 
providers from the insolvency of an insurer?
    Mr. Larsen. And with all the talk about health care reform, 
you know, that is one of the critical functions of what states 
do, is make sure that the companies are there when the claims 
need to be paid. So solvency regulation is critical. And if you 
lose your ability to ensure the solvency of companies that are 
selling policies to people in your state, that is a huge loss.
    Mr. Engel. Thank you.
    Dr. Parente, I saw you shaking--nodding your head, so I was 
wondering if you have any comment.
    Mr. Parente. No, I agree. What we are talking about in 
these laws doesn't get rid of insurance commissioners' 
functions at all. It lets the insurance commissioners basically 
be accountable to lobbyists, that the stuff comes in for the 
individual mandates and say, Do you realize by putting that 
mandate into place, you have now priced out somebody that 
otherwise really needs this care from being able to afford it, 
and basically makes that more of a dynamic economy about 
understanding the pros and cons of having that lobbying 
function.
    It is great to have protections, but they don't come 
without cost, because at the end of the day an actuary will 
look at anything that you add, and put ``This will now add cost 
to it.'' It has already happened with ACA, even though people 
didn't think that would happen when it was first developed.
    Mr. Engel. Thank you. Mr. Chairman, I yield back. Thank 
you.
    Mr. Pitts. The chair thanks the gentleman. That concludes 
our questioning.
    This was an excellent panel. I want to thank all the 
witnesses and members for their participation. I remind members 
that they have 10 business days to submit questions for the 
record, and I ask that the witnesses all agree to respond 
promptly to those questions.
    Mr. Pitts. This subcommittee is now adjourned.
    [Whereupon, at 12:19 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                Prepared statement of Hon. Leonard Lance

    I want to thank Chairman Pitts for scheduling a hearing on 
this very important subject.
    Mr. Chairman, many experts agree that the high cost of 
health care is a key contributing factor to the high number of 
uninsured Americans. A survey done by the Employee Benefit 
Research Institute found that 85 percent of uninsured workers 
reported that they did not have coverage because it was either, 
``too expensive or they could not afford it.''
    The cost of health care is rising rapidly. It is imperative 
that Congress enact innovative solutions to make health 
insurance coverage more affordable for individuals and small 
businesses alike. Allowing the purchase of health care coverage 
across state lines will increase competition and choice, drive 
down prices and could dramatically reduce the number of 
uninsured.
    I look forward to hearing this morning's testimony and am 
ready to work in a bipartisan capacity to promote interstate 
purchase of health coverage and expand the number of affordable 
health care options for all Americans.
                              ----------                              


               Prepared statement of Hon. John D. Dingell

    Thank you Mr. Chairman.
    Today's hearing focuses on a topic that should be familiar 
to some Members of this Committee. H.R. 371, the Health Care 
Choices Act of 2011, is strikingly similar to H.R. 2355, the 
Health Care Choices Act of 2005. Although as we have seen in 
the 112th Congress, my colleagues would not dare miss an 
opportunity to strike away at the heart of the Affordable Care 
Act, and have included in H.R. 371 language to repeal the 
consumer protections that make up the Patients Bill of Rights.
    Now I know that good legislating is a difficult process, 
but continually reaching back to the arsenal of old legislation 
does nothing to help move our debate and discussion around 
improving our health care system forward.
    Quite frankly Mr. Chairman, this is legislation that is not 
needed. states can already pass laws to allow for the sale of 
health insurance across state lines. Further, the Affordable 
Care Act, which my colleagues on the other side profess to hate 
so much, would allow for states to band together to enter into 
a health care choice compact that would allow for the sale of 
insurance across state lines while also maintaining the 
critical consumer protections.
    Allowing such a reckless piece of legislation to move 
forward would be a race to the bottom--for our health care 
system and for our nation's health.
    We will see insurance companies fleeing for whatever state 
will either let the industry write the regulations or ensure 
the least amount of oversight and restrictions on their 
practices, guaranteeing overwhelming profits for their coffers, 
and drastic cuts in the coverage available to those most in 
need of health insurance. This will harm the sick, the elderly, 
and the disabled--all of whom already pay high costs for their 
medical care.
    This should not be a surprise to my colleagues as we have 
seen this exact situation play out in the credit card industry.
    My colleagues point out that this legislation will help to 
lower premiums, and highlight the differences in premiums 
between New York and Iowa. If a New York family is able 
purchase their insurance in Iowa they may see lower premiums, 
but this will not the lower the cost of a medical service in 
New York. If I was a smart businessman in Iowa, why would I 
choose to cover a New York family knowing the high cost of 
medical services there?
    Reduced insurance premiums for some people are little 
consolation for the consumers who, under H.R. 371, would be 
left without coverage or would no longer have coverage for 
critically needed benefit such as diabetes care or maternity 
care or cancer treatment.
    Insurance companies would be empowered to avoid caring for 
the sick people who cut into their profit margin and would 
instead look for the young and healthy who afford them the 
greatest opportunity for profit and the least opportunity for 
payoff and payout.
    I hope that today's hearing will be a useful one for my 
colleagues, and I hope that this hearing will help to show that 
the solution proposed in the Health Care Choice Act will not 
help to protect our people from serious wrongdoing and will 
instead allow the rascals who have been able to exploit the 
weakness of the current system to achieve great economic 
success.
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